The Federal Trade Commission (FTC), a U.S. regulatory agency, filed a complaint on Tuesday against T-Mobile, alleging that the U.S. operator placed “bogus” charges for third-party or “premium” SMS subscriptions on customers’ bills, earning hundreds of millions of dollars of revenue in the process. The FTC claims that the charges—for services including “flirting tips, horoscope information or celebrity gossip”—in many cases were billed without the customers’ consent or knowledge, a practice known as “cramming.” The FTC further alleges that the premium SMS charges, typically US $9.99 per month (of which the operator received 35 to 40 percent), were included on difficult-to-understand bills that were up to 50 pages long. Other elements of the FTC complaint include that when consumers who claimed the charges were unauthorized sought refunds, T-Mobile failed to refund their money or told them to seek refunds directly from the third parties, without providing the customers with the necessary contact information. FTC Chairwoman Edith Ramirez said in a statement, “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”
Considering that T-Mobile’s “Un-carrier” campaign to take business away from Verizon, AT&T and Sprint is based on the idea that it is more customer-friendly than its competitors, these charges from the FTC are potentially very damaging. A swift and aggressive response is strategically sound in such circumstances, and T-Mobile CEO John Legere issued one immediately: “We have seen the complaint filed today by the FTC and find it to be unfounded and without merit. In fact T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want.” On June 10 the operator stated that it “would no longer allow third-parties to bill customers for Premium SMS services through T-Mobile,” adding that such services were “waning in popularity with our customers.”
Regardless of the particulars of the present case, third-party billing has been under attack in the U.S. for some time now. In late November 2013, AT&T, T-Mobile and Sprint entered into an agreement with 45 U.S. states to end the practice, and Verizon separately said that it would also stop billing for premium SMS. Making these intentions correspond with the reality on customers’ phone bills may still be a work in progress. As for T-Mobile, it of course remains to be seen whether it will end up having to repay its customers for third-party SMS charges.