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FTC Alleges DirecTV Ads Misled Consumers; Former DirecTV Executive Admits Wrongdoing

Have you ever noticed your cable or phone bill skyrocket in price after a poorly-advertised “promotional pricing” period unexpectedly ended? Well, the Federal Trade Commission (“FTC”) has noticed too, saying that certain DirecTV ads misled customers – and now, they’re suing one of the worst offenders to fix it.

In March of 2015, while DirecTV was launching a memorable ad campaign starring Rob Lowe, the FTC charged the company with engaging in deceptive advertising practices concerning its promotional pricing structures. The complaint revolves around two components of DirecTV’s marketing practices: a deceptive promotion for reduced monthly rates for a period of a year, and a misleading advertisement for a free trial of premium channels.

In the first instance, DirecTV advertised special rates of $10 off per month for 12 months to new customers (e.g. reducing a $29.99 per month “standard” package to $19.99 per month). However, in advertisements, DirecTV did not clearly explain that consumers were required to commit to 24-month contracts, and rates were hiked for these customers by about 50-70% after the first year. DirecTV customers who tried to leave their contracts after the promotional period ended found themselves hit with large termination fees.

In the second instance, DirecTV engaged in a so-called “negative option” promotion for premium channels, wherein sales associates typically enrolled people automatically in a special package that gave them free access to these channels for three months before beginning to charge an average of $48 extra, unless consumers took it upon themselves to cancel the service before the “free” period ended. The FTC claims that this practice of automatic enrollment violates the 2010 Restore Online Shoppers’ Confidence Act (“ROSCA”), as it is illegal to charge consumers for services sold through negative options unless the company has the consumer’s express informed consent before making the charge, and the company provides an easy way to stop recurring charges.

The trial began Monday of this week in Oakland, CA, and former chief sales and marketing officer for DirecTV from 2005 to 2015, Paul Guyardo, gave some interesting testimony yesterday. The FTC presented an email showing Guyardo telling his team to bury a disclosure about the limited duration of promotional pricing at the bottom of an ad, as opposed to having it next to the promotional price itself. His staff reported concerns about moving the disclosure, but he replied to “just do it.” During the trial, Guyardo testified that the focus “needed to be primarily on the promotional price.”

Let’s hope that Mr. Guyardo’s testimony helps clarify DirecTV’s culpability for these misleading ads.

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