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Prepaid Mobile Provider to Pay $40 Million to Settle Charges It Deceived Consumers About ‘Unlimited’ Data Plans

Mobile provider settles with FTC for deceptive advertising claims about its data plans.

In January 2015, TracFone settled charges with the Federal Trade Commission that the company mislead consumers about the “unlimited” data plans.

The FTC’s complaint alleges that TracFone advertised prepaid monthly mobile plans for about $45 per month with “unlimited” data under various brands. Although the company's ads emphasized unlimited data in its advertisements, TracFone drastically slowed or cut off consumers’ mobile data after they used more than certain fixed limits in a 30-day period.

Specifically, the FTC’s complaint alleges that TracFone marketed “unlimited” plans through lots of different media, including but not limited to television and radio commercials, print advertisements, and in-store displays. The complaint alleges that TracFone did not provide "unlimited" plans to customers as promised. The company regularly either slowed down consumers’ data speeds – known as throttling – or cut off their data entirely when they used more than certain fixed amounts of data in a 30-day period. TracFone even terminated all the services of some consumers, including basic and fundamental services such as talking and texting. Throttled customers often experienced slow-downs of at least 60% and sometimes even 90%, which made it nearly impossible to engage in online activities like streaming video. There was no technical reason for TracFone to limit data but rather the company did it to “reduce the high costs associated” with providing the unlimited data that was promised.

In 2013, TracFone attempted to provide consumers disclosures on this issue. Beginning in September 2013, TracFone began to make some disclosure of its throttling practices for its “unlimited” programs, but those disclosures were often not clear and conspicuous, according to the FTC’s complaint. In many cases, the disclosures were in very small print or on the back of packages or cards where consumers were likely to miss them. Ensuring disclosures are conspicuously provided has been a top priority of the FTC as shown recently by Operation ‘Full Disclosure’ which the FTC announced in September 2014. Operation ‘Full Disclosure’ focused on disclosures that were in fine print or were otherwise easy to miss or hard to read, yet contained important information needed to avoid misleading consumers

Under the settlement, TracFone must pay $40 million in consumer refunds. In addition TracFone is prohibited from making further deceptive advertising claims about its mobile data plans, and must clearly and conspicuously disclose any limits on the speed or quantity of its data service.

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