The Federal Trade Commission (FTC) announced that TracFone will pay $40 million to settle charges that it “deceived millions of consumers with hollow promises of ‘unlimited’ data service.”
The FTC alleges TracFone advertised unlimited data for $45 per month under its brands including Straight Talk and Net10 but “drastically” throttled customers after they exceeded a data cap during a 30-day billing cycle. According to the complaint, TracFone subscribers experienced 60 percent or sometimes 90 percent slower data speeds. In some cases, TracFone cut off all services.
The complaint alleges throttling occurred generally after one to three gigabytes were used and data services were cut off after four to five gigabytes were used.
The FTC says TracFone had no technical reason for slowing data speeds and points to an internal memo saying throttling policies were meant to ease the costs related to providing the unlimited data services Tracfone had promised.
“The issue here is simple: when you promise consumers ‘unlimited,’ that means unlimited,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement. “This settlement means that Straight Talk, Net10, Simple Mobile, and Telcel America customers will be able to get money back from the company for services the company promised but didn’t deliver.”
The FTC today starts accepting claims from TracFone customers who had an unlimited plan before Jan. 15, 2015. Customers who aren’t sure if their service was throttled are still encouraged to file a complaint in order to find out for sure. All validated claims are eligible for refunds.
In addition to paying out $40 million to cover refunds, TracFone brands have been barred from any further deceptive advertising and must clearly disclose any data limits.
As the FTC settles this case with TracFone it is still in litigation with AT&T over similar throttling claims. The FTC filed suit against AT&T in October 2014. In January, AT&T responded by saying the FTC does not have jurisdiction over it because of the AT&T is a common carrier, placing it under the supervision of the Federal Communications Commission.
Filed Under: Industry regulations