Santa Monica, CA — A lawsuit charging that Cingular (now AT&T) engages in false and misleading advertising when offering “rebates” on cell phones may proceed, a federal court has ruled.
The suit, brought under California’s consumer protection laws, states that the cell phone company promised to pay rebates to people who bought cell phones, and advertised discounted prices that reflected the promised rebate. But instead of getting a rebate check, purchasers received a “VISA Reward card” that can only be used under numerous restrictions and for a limited period of time. By the time consumers found out they were not getting a rebate check, it was too late to cancel Cingular’s wireless service without paying an Early Termination Fee of $175.
“In their intense marketing for cellular services, cell phone companies make price the paramount focus,” said Foundation for Taxpayer and Consumer Rights’ Harvey Rosenfield, one of the lawyers in the case.
“Cingular told consumers that they would ultimately pay a discounted price, once the rebate was received. In some cases, consumers were led to believe the phone would be ‘free’ — that it would end up costing them nothing after the rebate. But instead of getting money back, consumers get a VISA Reward card. Purchasers never got the promised discount. None of this was made clear to consumers. This deceitful practice hurts consumers and other cell phone companies that advertise honestly.”
Court Rejects Cingular’s Move to Stop Case
The case was filed in California state court on behalf of all affected consumers in June 2006, but Cingular transferred the case to federal court in San Francisco. In May, Cingular asked the federal court to dismiss the suit, arguing that consumers were not harmed or misled and that California’s consumer protection laws do not prevent the company from engaging in the practice. Last week, the court rejected Cingular’s motion, allowing the case to proceed. The court’s ruling states:
“The court finds that a reasonable consumer, upon seeing an advertisement that promises a ‘rebate’ of a certain amount, would generally understand that advertisement to mean that the amount will be returned to the consumer in cash, check or its equivalent… . The more terms, conditions and restrictions that are placed upon the form of tender, the less equivalent it becomes to cash or check… .” The “numerous terms and conditions” of the VISA Reward Card “raise an issue of fact about whether the VISA cards could be reasonably interpreted as equivalent to cash or check.”
Ads Changed After Suit, But Still Mislead
After the suit was filed, the company, now called AT&T after its merger with Cingular, modified some of its ads to state, in fine print, that the advertised price was “after debit card.” However, the company’s web site still refers to a “mail-in rebate card.” Consumer advocates contend the new language remains misleading.
The lawsuit asks the court to order the company to stop the practice, and to provide refunds to consumers.