March 18th, 2015
The Federal Trade Commission (FTC) has formally charged DIRECTV with deceptively advertising a discounted 12-month programming package because it fails to clearly disclose that the package requires a two-year contract.
The main squeeze of the debate, according to the FTC, is that DIRECTV does not clearly disclose that the cost of the package will increase by up to $45 more per month in the customer’s second year, and that an early cancellation fee of up to $480 can apply if consumers cancel the package before the end of the two-year period.
The FTC approved the complaint in a 5-0 vote, a rare unity, and consumers haven’t been too happy about it either.
DIRECTV also fails to let customers in on a secret that its offer of free premium channels for 3 months is in fact a “negative option continuity plan” which means that customers are basically charged after this period is over unless they continue to actively try to cancel it. The FTC alleges this is in direct contradiction with the way DirecTV describes their deals.
Of course, companies “pretty up” their services all the time, but the FTC is arguing this crosses the line into outright deception.
â€œDIRECTV misled consumers about the cost of its satellite television services and cancellation fees,â€ said FTC Chairwoman Edith Ramirez. â€œDIRECTV sought to lock customers into longer and more expensive contracts and premium packages that were not adequately disclosed. Itâ€™s a bedrock principle that the key terms of an offer to a consumer must be clear and conspicuous, not hidden in fine print.â€
The issue goes back years. According to the FTCâ€™s complaint, in many instances since 2007, DIRECTV has violated the FTC Act by making deceptive claims or omissions of material facts in advertisements and on its website for its satellite television subscription service. Specifically, the FTC claims:
1) DIRECTV promotes its television service and programming package prices â€œfor 12 months,â€ without clearly and prominently disclosing that these deals require consumers to sign a two-year contract (with a substantial early cancellation fee) and that the cost of the programming packages jumps $25 to $45 a month in the second year of the contract; and
2) DIRECTV represents that consumers will receive premium channels, such as HBO and Showtime, â€œfree for 3 months,â€ without adequately disclosing that: 1) consumers will be enrolled in a negative option continuity plan that charges for the premium channels after the trial period; 2) consumers must contact DIRECTV to cancel the plan before the trial period ends to avoid incurring the charges; 3) DIRECTV will use consumersâ€™ credit or debit card information to charge them after the trial period ends; and 4) there are specific costs associated with the negative option continuity plan.
DIRECTV is a national provider of direct-to-home satellite television services, based in El Segundo, California. With more than 20 million subscribers across the United States, the company is the largest provider of such multi-channel video programming distribution in the nation. The company offers its services to consumers through subscriptions, and typically requires users to agree to a 24-month contract that includes a programming package, satellite dish, other necessary equipment, and installation and support services.
Categories: DISH & TV news