The Federal Trade Commission has charged DirecTV (NASDAQ: DTV) with deceptive advertising, alleging that the satellite TV operator has been luring prospective customers with 12-month promotional rates but not properly explaining to them the implications of the two-year contract these deals entail.
The FTC, which is seeking "many millions of dollars" for those affected by DirecTV's marketing practices, also accuses the company of misleading customers regarding free three-month trials of premium channels such as HBO and Showtime. DirecTV, the agency says, isn't telling its customers that they'll be automatically charged subscription fees once that free trial period ends.
"DirecTV misled consumers about the cost of its satellite television services and cancellation fees [and] sought to lock customers into longer and more expensive contracts and premium packages that were not adequately disclosed," FTC Chairwoman Edith Ramirez said. "It's a bedrock principle that the key terms of an offer to a consumer must be clear and conspicuous, not hidden in fine print."
According to the FTC, consumers are being caught unaware that their DirecTV bill can increase up to $45 a month after their 12-month promotional rate expires. The agency says DirecTV is also not doing enough to explain that opting out of the two-year contract can cost consumers up to $480, depending on the stage at which they drop out.
In 2010, the states' attorneys general accused DirecTV of very much the same things, winning a $13.25 million settlement from the El Segundo, Calif.-based company.
DirecTV responded with this statement: "The FTC's decision is flat-out wrong and we will vigorously defend ourselves, for as long as it takes. We go above and beyond to ensure that every new customer receives all the information they need, multiple times, to make informed and intelligent decisions. For us to do anything less just doesn't make sense."
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