FTC allegations against DirecTV latest use of ROSCA to stop deceptive ad practices
11 March 2015.
The Federal Trade Commission's allegations on Wednesday that DirecTV scammed subscribers into paying more money partially rely on a relatively new law that the agency increasingly is using to go after deceptive online advertising.
Congress passed the Restore Online Shoppers' Confidence Act, or ROSCA, in 2010 to require website operators to provide clear disclosure of charges and obtain consumers' explicit consent while making it easier for consumers to stop recurring charges.
The FTC said DirecTV, the largest US satellite-television provider, violated ROSCA by not letting consumers know they had to notify the company before recurring charges for service would stop. The agency cited Section 5 of the law in making similar allegations about notification violations and accusing DirecTV of additional deceptive tactics in its advertising.
ROSCA has become an important statute the FTC uses to go after companies that repeatedly charge an unknowing customer unless the customer specifically asks not to be charged, a billing practice known as the "negative option." In November, the agency pressured credit-monitoring services MyCreditHealth and ScoreSense to abandon their practice of not telling consumers they would incur
monthly charges unless they canceled the service.
A month earlier, the FTC relied on ROSCA to justify a fine against JDI Dating for allegedly ambushing consumers with hidden charges. Also in October, the agency filed a ROSCA complaint against Simple Pure, a provider of dietary supplements, for collecting credit-card information for "free" trials and then charging consumers monthly.
Under ROSCA, "a company has to get specific express and informed consent before charging consumers' credit or debit card for the item that's offered for the negative option," Ray McKown, an FTC staff attorney involved in the DirecTV case, told MLex. Section 5 is a more general prohibition against deceptive acts that the FTC sees as broadly covering the negative option.
Through its website, DirecTV offered premium channels such as HBO, Starz, Showtime and Cinemax, but inadequately informed consumers that after a free period, usually three months, the satellite-TV company would start charging for access to the channels, according to the FTC's complaint, which was filed in the
US District Court for the Northern District of California.
DirecTV violated Section 5 by failing to disclose the mandatory two-year contract for service and the increase of $25 to $45 monthly in the second year of service, the complaint said.
The FTC's commissioners voted 5-0 for the complaint.
"It's a bedrock principle that the key terms of an offer to a consumer must be clear and conspicuous, not hidden in fine print," FTC Chairwoman Edith Ramirez said in a statement.
A DirecTV spokeswoman didn't immediately respond to a request for comment. The company and the FTC have been at loggerheads before over DirecTV's treatment of consumers. DirecTV has paid more than $7 million in fines for allegedly breaking do-not-call telemarketing rules, among the highest ever paid for such violations.
In January, a federal judge granted a partial summary judgment against Dish Network, DirecTV's biggest satellite-TV rival, for alleged do-not-call violations. The Department of Justice filed the case on behalf of the FTC.