Commentary

FTC Sues TracFone For Throttling Mobile Users

On the heels of its lawsuit against AT&T, the Federal Trade Commission has taken action against another mobile company that allegedly offered “unlimited” data and then throttled customers who exceeded an unadvertised data cap.

The newest case is against TracFone, which allegedly sold $45-a-month pre-paid “unlimited” data plans to around 6.25 million customers. The FTC says that TracFone slowed down the broadband connections of those people, if they exceeded caps ranging from 1 GB to 3 GB. In many cases, the throttled service was too slow for customers to use apps like Netflix or Skype, the FTC alleged. 

“With the increasing popularity of online mobile activities, TracFone sought to benefit from marketing its mobile data service as 'unlimited,' while at the same time protecting its profit margins by throttling or suspending consumers’ mobile data service,” the FTC alleged in a complaint filed in U.S. District Court for the Northern District of California.

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The Miami-based TracFone -- which sells phones and service plans under brands including Straight Talk, Net10 and Telcel America -- agreed to settle the charges by issuing refunds of $40 million.

The FTC alleged in its complaint that between 2009 and September of 2013, TracFone often didn't disclose its throttling policies. After September of 2013, the company began telling customers that they could be slowed down if they consumed too much data, but the disclosures weren't “clear and conspicuous,” the FTC alleged.

“TracFone’s post-September 2013 product packaging and activation cards for its most popular 'unlimited' brand, Straight Talk, typically included this information in small font on the backside of the package or card,” the FTC alleged. “Because these product packaging and activation cards are frequently locked on display racks, consumers often cannot even turn to the backside without the assistance of a store employee.”

In October, the agency sued AT&T for slowing down the broadband speeds of mobile users who have unlimited data plans. AT&T is fighting that case, which is still pending

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