AT&T will pay US$105 million to settle complaints from the U.S. Federal Communications Commission, the Federal Trade Commission and 51 state-level governments that it made millions of dollars through unauthorized third-party charges on customers' mobile-phone bills.
The settlement, announced Wednesday by the two agencies and 51 state attorneys general, includes $80 million for consumer refunds and $25 million in penalties, the agencies said. AT&T knew of potential problems with premium text-messaging services for years and sought in 2011 to reassure third-party billers by saying it would limit refunds to two months, FTC Chairwoman Edith Ramirez said during a press conference.
"This should have, and in fact did, ring alarm bells at AT&T," she said. "Instead of acting to stop the practice, AT&T continued to make hundreds of millions of dollars from the practice."
The $9.99-per-month third-party charges included horoscope, ringtones and celebrity gossip, the agencies said.
AT&T said in a statement that it has in the past allowed its mobile customers to purchases services like ringtones from third paries using PSMS (Premium Short Messaging Services). "We would put those charges on their bills," a spokesman said. "While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services."
The settlement resolves complaints that some of AT&T's mobile customers were billed for charges they did not authorize, the spokesman said by email. "This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund."
The settlement is the largest in FCC enforcement history and the first joint enforcement action brought by the FCC, FTC and state attorneys general.
AT&T has stopped premium text billing and as part of the settlement will put "rigorous" checks in place to police third-party billing, FCC Chairman Tom Wheeler said. Some third-party billing continues at U.S. carriers, the agencies said.
The two federal agencies brought similar complaints of third-party mobile bill "cramming" against T-Mobile earlier this year.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is [email protected]