FTC To Ask Court For $4B From DirecTV

(Satellite Business News) — The Federal Trade Commission plans to ask a federal court in San Francisco to order AT&T’s DirecTV unit to pay almost $4 billion if a judge rules in favor of the government in the case filed against the DBS service over its sales and marketing practices.

The FTC revealed the amount in a proposed order it filed with the court this week in advance of a trial now slated to begin Aug. 14 in the government’s case against the DBS service. Federal Judge Haywood Gilliam Jr. will decide the case in a bench trial.

As reported, the FTC filed the lawsuit in March 2015, alleging DirecTV deceived potential customers over how much they would have to pay in the second year of a two-year programming commitment after they subscribed based on advertised discount prices. Terms for a settlement in the case had been agreed upon by DirecTV and the FTC, and the sides headed to court April 4 to ask Gilliam to approve the settlement.

But one of two sitting FTC commissioners, Terrell McSweeny, a Democrat, surprised Gilliam, the FTC staff and DirecTV that day when she filed a letter with the court saying she could not support the settlement because she wanted DirecTV to pay more money and be required to make more extensive changes to its marketing practices. That effectively killed the settlement.

In most instances, the side which filed a lawsuit presents its proposed order in what some refer to as a legal “wish list” that rarely is accepted by the court in its entirely. In its proposed order, the FTC said that DirecTV should be required to put $3.95 billion into an account within five days of the order being signed “to create a fund” that would “be used to provide redress to eligible customers.” The FTC did not indicate how much each impacted DirecTV subscriber should receive.

The government will also ask the court to force DirecTV to “remit to the Federal Trade Commission any funds remaining after the distribution to eligible customers is completed.” That money, the FTC said, will be used for such things as an education campaign to inform consumers about DirecTV’s marketing programs.

In its proposed order against DirecTV, the FTC said the money DirecTV would have to pay would be for “restitution for the company’s wrongful and knowing participation in the deceptive marketing of satellite television subscription services.”

The court, the FTC also said, should rule the DBS service is “liable for the deceptive and unfair marketing of satellite television subscription services in violation of [federal laws]” and the court should find “a permanent injunction against [DirecTV] is appropriate because there is a cognizable danger that the company will repeat the deceptive and unfair marketing tactics.”

Both sides also filed their lists of potential witnesses they might call during the trial, with several former high-ranking DirecTV executives on both lists. Indeed, the potential witness lists read like a roster of those who were widely credited with turning DirecTV into a marketing and advertising powerhouse before AT&T bought the company two years ago this month.

They include Paul Guyardo, DirecTV’s former executive vice president of revenue and marketing, who is now a senior executive at Discovery Communications, and Jon Gieselman, the former senior vice president of advertising and public relations, who now holds a senior position at Apple. Guyardo and Gieselman are the duo who were viewed as the key drivers of DirecTV’s entire sales, marketing, and advertising operations.

Also listed is Brad Bentley, a former protege of Guyardo and Gieselman, who is now running part of DirecTV’s marketing operations. Also on the lists are former DirecTV executives Karen Leever, Ellen Filipiak, Shannon Campain, and Rasesh Patel. Patel now works for AT&T as a regional chief.

All of the former DirecTV executives — as well as the current AT&T hands — are described on the FTC’s list as being an “adverse witness.”

The FTC’s proposed injunction against DirecTV would permanently” bar company employees “from misrepresenting or assisting others in misrepresenting, expressly or by implication, any material fact” related to, among other things, “the term length of any such service contract…the cost or price of such service … the existence or amount of any early cancellation fee associated with such service … the availability of such service at the advertised cost or price … [and] the extent to which the price, cost, programming, or any other material term of such service is subject to change.”

The FTC would seek to force DirecTV to change its practices regarding the so-called “negative option,” a widely used move employed by many companies under which consumers will be charged for future services unless they proactively cancel by a certain date.

Under the FTC’s proposed order, DirecTV would also be required to launch training and monitoring programs according to the government’s terms. For eight years, the FTC argued, DirecTV should be required to file “a compliance report” with the agency and keep certain sales records for at least four years.

The FTC and DirecTV also submitted 250 pages outlining their exhibits and other items they plan to use during the trial.

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