The Federal Trade Commission has claimed during court proceedings that AT&T should pay $3.95 billion to settle a false-advertising lawsuit filed against DirecTV, the satellite TV subsidiary, back in 2015. The FTC says that DirecTV pulled a common trick, advertising one rate without making it clear that consumers were signing up for a two-year contract, with significant price hikes in the second year.
The FTC claims that between 2007 and 2015, DirecTV didn’t properly disclose the terms and conditions to 33 million customers who signed up for its satellite TV service. Specifically, DirecTV advertised a discounted 12-month pay-TV plan, but the package actually required a two-year contract, with prices increasing by up to $45 per month in the second year. The early termination fee — $480! — and charges for premium channels were also not properly disclosed.
DirecTV was acquired for nearly $50 billion by AT&T in 2015, shortly after the FTC filed its complaint. The two sides were reportedly close to a settlement in March of this year, but it appears that a deal may have fallen through, as the trial opened this week.
The $3.95 billion that the FTC is demanding AT&T pay isn’t just an arbitrary amount of money, either: it’s calculated based on the profit the FTC estimates DirecTV made thanks to the false advertising. The amount of damages — and whether really small print counts as misleading advertising — is going to be front and center in this trial. If the FTC wins, it’s not just a big financial punishment; it’ll open the door to all manner of misleading ads and dubious charges becoming verboten.
AT&T, for its part, contends that many of the customers who originally signed up through the ad remained customers well after the two-year contract ended. That would show that they weren’t deceived, it argued.