T-Mobile looks to settle FTC lawsuit over premium SMS charges

T-Mobile US (NYSE:TMUS) is looking to settle a lawsuit filed against it by the Federal Trade Commission that alleges the carrier netted hundreds of millions of dollars by knowingly charging customers for purported "premium" SMS subscriptions that, in many cases, were "bogus charges" subscribers never authorized.

After the original FTC lawsuit was filed in July, T-Mobile CEO John Legere accused the agency of "sensationalizing" the lawsuit, and the company vehemently denied the charges, calling the complaint "unfounded and without merit."

Now, the carrier seems to be changing its tune. Both parties are seeking for the lawsuit to be put on hold for 90 days while they discuss a settlement, according to papers filed yesterday in Seattle federal court. "The parties are engaged in substantive settlement talks that they believe would resolve this matter and eliminate the need for further litigation," lawyers for T-Mobile and the FTC said in the filing. The judge in the case has not yet decided whether to pause the lawsuit.

"Our top priority is doing what's right for our customers," T-Mobile spokeswoman Anne Marshall told Bloomberg in a statement. "T-Mobile and the FTC jointly filed for a continuance as a matter of ordinary course. We are actively processing refunds through our proactive refund program."

That's noticeably different from the defiant tone Legere struck shortly after the lawsuit was announced. "While I love our democracy, I hate the way D.C. works some times [sic], and I just could not sit still and let them get away with it," Legere wrote in a company blog post in July blasting the lawsuit.

Since then, the FCC and FTC reached a settlement with AT&T Mobility (NYSE: T) over similar charges. AT&T agreed to pay a $105 million penalty to settle an FCC investigation that concluded the carrier billed customers millions of dollars in unauthorized third-party subscriptions and premium text messaging services. The FCC settlement is the largest enforcement action in its history.

In its lawsuit against T-Mobile, the FTC claims the carrier received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions for content that included flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. Such content generally is offered by third parties. The FTC further alleges that T-Mobile continued to bill some customers for the services years after becoming aware of signs that the charges were fraudulent.

The FTC lawsuit came a few weeks after T-Mobile launched a program to proactively reach out to customers who were billed for premium SMS messages they received from third-party services to give them the opportunity to request a refund for any unauthorized charges.

In November 2013, AT&T, Sprint (NYSE: S) and T-Mobile entered into an agreement with 45 states to stop billing customers for premium SMS messages they receive. Verizon Wireless (NYSE: VZ) was not part of the settlement but said that it would also discontinue the practice. The carriers continue to support text-to-donate for charitable programs and text-to-contribute for political campaigns.

For more:
- see this Bloomberg article
- see this Politico article

Related Articles:
AT&T to pay record $105M settlement related to unauthorized premium SMS billing
T-Mobile's Legere accuses FTC of 'sensationalizing' premium SMS lawsuit
FTC: T-Mobile netted 'hundreds of millions of dollars' in fraudulent premium SMS charges
T-Mobile jogs customers' memories, reminds them about refunds for premium SMS
AT&T, Sprint, T-Mobile agree to stop billing for premium SMS messages

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