Feb. 25, 2015

Consumer Watchdog today urged the Federal Communications Commission (FCC) to reject AT&T's proposed purchase of the satellite television company DIRECTV unless the company agrees to eliminate DIRECTV's anti-consumer policy of charging massive Early Termination Fees, often taken directly from a customer's bank account or credit card without notice.

Citing AT&T's broken promises in a previous wireless merger, which led to higher charges for consumers and costly equipment upgrades, the non-profit group also called for an explicit five year freeze on DIRECTV's rates and a guarantee that DIRECTV customers would not be required to pay for equipment upgrades during that time.

"AT&T's proposed $49 billion purchase of DIRECTV offers no substantial benefits to American consumers, and will lead to higher prices, less competition and an expansion of the notorious anti-consumer practices that DIRECTV currently imposes on its customers," said Consumer Watchdog founder Harvey Rosenfield in the letter to the FCC.

"These mega-mergers rarely benefit anyone other than the executives of the companies involved, the corporate-funded academics and experts who provide cover for the glib promises and projections that perennially accompany such applications, and the Wall Street firms that will reap hundreds of millions in fees for doing the paperwork," wrote Consumer Watchdog.

"The Commission should ignore the lofty pronouncements of those who have a direct financial interest in the proposed merger and focus instead on the practical impact upon the companies' customers and the average American family."

Focus on Costly, Unfair DIRECTV Policies that Led to Consumer Lawsuits

The letter points out that DIRECTV imposes a mandatory service term of eighteen to twenty four months; few customers are aware of this condition prior to signing up. The company routinely extends this "contractual obligation" by another year or two if malfunctioning equipment needs to be replaced, or the customer decides to make a change to programming or other services.

Customers who terminate service are charged an "early cancellation fee" of up to $480, regardless of the reason, plus a "deactivation fee." Customers are forced to pay these penalties even if their equipment could not be installed, they moved and DIRECTV service isn't available in the new location, or the equipment stopped working.

Worse, DIRECTV often charges these cancellation fees directly to their customers' credit cards, or even takes the funds out of their checking accounts, without the knowledge or approval of the customer. Many customers who were victimized by this practice incurred substantial additional bank fees as a result.

In response to complaints from DIRECTV customers, Consumer Watchdog lawyers filed a lawsuit in California in 2008 challenging these practices on their behalf. (Imburgia and Greiner v. DIRECTV, Los Angeles Superior Court No. BC 398295). Seven years later, DIRECTV is still fighting the case in the courts, arguing that its customers are bound by an arbitration clause barring lawsuits against the company. The U.S. Supreme Court is expected to rule on DIRECTV's petition for review in the next few weeks.

Problems After Last AT&T Merger Shows FCC Must Order "Citizen-Enforceable" Protections

Consumer Watchdog urged the FCC to reject AT&T's rosy projections and vague promises of consumer benefits from the proposed merger. The company made virtually identical promises to the FCC in 2004 when it sought to merge with Cingular. Once that 2004 merger was approved, however, the company forced AT&T customers to buy new phones and costlier plans--or be slapped with large "early termination fees."

The letter provides a side-by-side comparison of the company's promises in 2004 – later broken – and its nearly identical promises today.

Noting that AT&T is once again mounting a multi-million dollar lobbying and public relations campaign to win approval of the merger, Rosenfield said, "Nothing in the present merger application – including its vague, loophole ridden "assurances" – provides any concrete, objective, measurable and citizen-enforceable assurances that the combined company will not raise prices or utilize some version of the tactics it employed after the merger with Cingular in order to impose additional, unnecessary and improper charges on DIRECTV customers."

Consumer Watchdog called upon the Commission to impose the following conditions if it is inclined to approve the merger:

1. Discontinue the imposition of Early Termination Fees or similar charges;
2. Cease debiting customers' bank or credit card accounts for non-recurring charges or fees;
3. Eliminate and cease enforcement of arbitration clauses;
4. Maintain the rate structure currently in place for programming for a period of at least five years, unless the Commission expressly authorizes a change;
5. Maintain consumer access to programming with existing technology, without any charges for equipment or other upgrades – or provide any required equipment upgrades to customers at no charge – for a period of five years.