Utah-based Defendants to Pay $40,000 for Alleged Violations of FTC Act and Pay-Per-Call Rule
On behalf of the Federal Trade Commission, the U.S. Department of Justice (DOJ) today filed a complaint and consent order against several Utah-based defendants settling Commission charges that they deceived approximately 25,000 consumers who were trying to call the popular television show “American Idol” to vote for their favorite performer during the 2002 and 2003 seasons.
According to the FTC’s complaint, the defendants took advantage of callers who inadvertently misdialed the “American Idol” phone numbers by buying numbers that were very close to – but not the same as – the correct numbers (i.e., an 800 prefix instead of the 866 prefix or a switch in two of the digits (1-866-463-5701 instead of 1-866-436-5701)) and that routed the callers to the defendants’ own toll-free lines. The callers were then allegedly led to believe that they had to call a 900 number to place their vote, and that they had to pay a fee ranging from $1.99 to $2.97 per call.
The callers were unable to place their votes through the 900 number, as the defendants were not affiliated in any way with the “American Idol” program. All that defendants provided when the consumer dialed the 900 number was a recitation of the same toll-free numbers that consumers could have called directly to reach the actual “American Idol” voting lines. Under the consent order announced today, the defendants are barred from engaging in similar deceptive conduct in the future in connection with “American Idol” or any other program, are prohibited from violating the FTC’s Pay-Per-Call Rule, and will pay a civil penalty of $40,000.
The FTC filed the complaint and order announced today against: Telemarketing, Inc., a Utah corporation, also doing business as Univoxx; Apex Investments, LLC, a Utah corporation, d.b.a Operator Directory Service and Northwestern Atlantic; Universal Innovations, LLC, a Utah corporation; Thomas Gregory Parrish, individually and as an officer of Telemarketing, Inc.; Sean K. Angeletti, individually and as an officer of Telemarketing, Inc.; and John P. Starrs, individually.
“These defendants tried to mislead fans of ‘American Idol,’ but found they got harsh reviews from the FTC,” said Howard Beales, Director of the FTC’s Bureau of Consumer Protection. “If you find suspicious pay-per-call charges on your phone bill, report it to the FTC. We are not fans of deceptive behavior.”
The Commission’s Complaint
According to the FTC’s complaint, the defendants deceptively took advantage of consumers who were attempting to call “American Idol” to cast their vote for a particular contestant. Each night of the competition, toll-free numbers for the official “American Idol” voting lines appeared on-screen and were announced during the program. To vote properly, a caller would dial the American Idol toll-free number, choosing the last one or two digits assigned to the favored contestant.
Although the numbers were announced during the show, callers could dial in to vote only after the
program had ended. Because of the time gap between when the numbers were announced and the voting began, consumers had to rely on memory or written notes to vote correctly. If the consumer misdialed, he or she could inadvertently call defendants’ toll-free “copycat” numbers rather than the American Idol voting lines.
Consumers who accidentally called the defendants’ copycat toll-free lines during “American Idol’s” 2002 and 2003 seasons heard one of four distinct recorded messages. Three of the four urged them to call a 900-number to reach “voting lines” or “favorite contestants.” Those who called the 900 number as instructed did not, however, reach a “voting line.” Instead, they merely were provided with the correct “American Idol” phone number associated with their favorite contestant. The consumer was never directly connected to the actual voting line and had to hang up and redial the correct number to cast a vote. A fourth version of the toll-free message omitted explicit reference to voting lines, but retained language implying that calling the 900-number was necessary to be sure their call would be completed and that the caller would correctly reach the party he or she was calling — inevitably, “American Idol.”
The FTC contends that the toll-free messages were deceptive, given their reference to “voting lines” and “favorite contestant(s)” and their failure to warn consumers that they had not reached the “American Idol” show as expected. Specifically, the complaint alleges the defendants violated the FTC Act by misrepresenting: 1) that consumers calling the toll-free lines needed to call a 900 number to reach the “American Idol” voting lines; 2) that callers to the toll-free lines had reached “American Idol” or an affiliated organization, and that they had to pay a 900-number service to be sure their call would reach the intended party; 3) that callers had to pay a fee to an “operator directory” organization to be sure their call to “American Idol” was completed; and
4) that the defendants’ 900-number lines actually were voting lines for “American Idol.”
The FTC complaint further contends that the defendants failed to disclose properly that callers to their lines had reached a wrong number, that the defendants were not affiliated with “American Idol,” and that the defendants’ pay-per-call lines were not voting lines but that they merely provided callers with the publicly-available toll-free “American Idol” telephone numbers.
In addition, the FTC alleges that the defendants violated the Commission’s Pay-Per-Call Rule on many occasions. Under this rule, any provider charging more than $2.00 must include a “preamble” in the service message providing certain relevant disclosures. While the defendants charged only $1.99 per call to consumers who reached their pay-per-call service during the 2002 season of “American Idol,” this charge jumped to $2.97 per call in 2003, triggering the preamble requirement. During this time, the FTC contends, the defendants failed to identify who was providing the pay-per-call service, as well as what the service itself comprised. Despite these alleged violations, the defendants billed consumers for their services – itself an additional violation of the Rule. In addition, the FTC alleges that the defendants violated the Rule when, in connection with a copycat 900-number service not relating to “American Idol,” the defendants failed to inform callers as to when charges for their call would begin, or to tell callers that they could avoid charges if they terminated the call three seconds after a signal indicating the end of the preamble.
Terms of the Order
The consent order filed today settles the Commission’s charges. It prohibits the defendants from making all specific “American Idol” false claims and deceptive omissions alleged in the FTC’s complaint, as well as similar claims for any other copycat telephone or Internet program. The order also requires the defendants to make specific disclosures in connection with any copycat plan in any medium, including: 1) that callers have failed to reach their intended party; 2) the true identity of their business and affiliation with the intended party; and 3) a description of the service in sufficient detail to clarify that it is not related to the intended party’s business. Further, the order prohibits the defendants from assisting anyone else to engage in the barred conduct and requires certain disclosures when the defendants, as part of a copycat program, use the “operator directory service” trade name to describe simple directory assistance. The defendants must disclose clearly that the service they are providing is simple directory assistance and is not a means to complete directly the original transaction or communication.
The defendants also must adhere to the FTC’s Pay-Per-Call Rule in the future, as well as identify the service provider, describe the service being provided, and notify the caller how to avoid being charged, even for calls that are $2.00 or less which normally would be exempt under the Rule. Finally, the order requires the defendants to pay $40,000 in civil penalties.
The Commission vote to request that the DOJ file the complaint was 5-0. The DOJ filed the complaint on behalf of the FTC in the U.S. District Court for the Northern District of California, in San Francisco, on March 18, 2004.
NOTE: The Commission issues or files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the named parties have violated the law.
Copies of the Commission’s complaint and order for settlement of the court action are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(FTC File No. 032-3104)
(Civ. No. C 04 1083 JCS)
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