DirecTV turns tide in $4B FTC suit, may get false advertising beef tossed

gavel
A federal judge in California has paused a trial in which the FTC is seeking $4 billion from AT&T and will allow the telecom to file for a partial judgment. 

A federal judge in California has paused a trial in which the FTC is seeking $4 billion from AT&T and will allow the telecom to file for a partial judgment. 

U.S. District Judge Haywood S. Gilliam Jr. said there is a “substantial issue” in regard to the FTC’s calculations of its $4 billion “unjust gains” calculation. The judge gave AT&T attorneys two weeks to file briefings, further poking holes in that math. 

The trial over the Federal Trade Commissions lawsuit began two weeks ago in Oakland, California. The agency filed suit against DirecTV in 2015, before AT&T closed on its purchase of the satellite TV operator. The FTC alleges that from 2007 to 2015, as 33 million customers signed up for satellite service, DirecTV didn't adequately disclose that a discounted 12-month video package requires a 2-year contract, and the monthly bill increases by as much as $45 in the second year of the agreement. DirecTV is also accused of not informing customers that they’d be subject to a $480 fine if they broke their contract, or that charges for premium channels would kick in after three months.

At issue are the calculations that led the FTC to conclude that AT&T owes $4 billion. According to subscription legal news platform Law360, University of San Francisco economics professor Daniel Rascher took the stand on the 10th day of the trial last week. Rascher is the fellow enlisted by the FCC to come up with the “unjust gains” calculations. And his rigorous cross-examination by AT&T attorneys appears to have influenced the judge into considering AT&T’s motion for a partial judgment. 

RELATED: AT&T liable for $4B in deceptive DirecTV ad suit, FTC says

Specifically, Rascher had to explain to the court how he determined what portion of DirecTV’s $30 billion in revenue from 33.5 million customers came from unjust gains made through false advertising. 

According to Law360, AT&T attorney Pete Marketos repeatedly questioned the professor on whether he surveyed actual customers or did any kind of analysis to determine if and how those customers were deceived by the ads.

“I’m not into interpreting ads,” Rascher responded. “I’m not a marketing professor.”

The trial attorney also sought to pin the professor down on what portion of the $4 billion unjust gains calculation was directly attributable to customers who misinterpreted advertising. Rascher said he hadn’t yet made those calculations because he hadn’t been asked to do so. 

"But when would that occur?” the judge asked Rascher. “The trial is about to be over. When would that analysis be done, if it hasn’t been done yet?”

AT&T said in a statement that the company has always believed that the FTC suit was without merit.

"We continue to feel that way today," the company stated. 

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