By Kate Tummarello - 07/26/14 02:52 PM EDT
Major companies are coming into conflict with federal regulators over the charges made on cellphones, tablets and other devices.
In both cases, the companies have fired back in public, claiming that the FTC is blaming them for problems that they either never had or have already fixed.
In the case against T-Mobile, the FTC accused the company of adding unauthorized charges for third-party services like daily horoscopes via text message to customers’ cellphone bills. The practice has come to be known as “mobile cramming.”
Regulators allege T-Mobile buried the charges in the phone bills and made it difficult to contest them. The FTC has pledged to get back the “hundreds of millions” of dollars it says T-Mobile had made from the crammed charges
While the FTC has gone after other companies in the mobile cramming space, the T-Mobile case is its first against a wireless company.
In its case against Amazon, the agency said the online retail giant let young Kindle users make in-app purchases on their parents’ accounts without permission.
According to the agency, Amazon realized it was creating the opportunity for unauthorized charges on parents’ accounts — totalling “millions” of dollars — and, for years, only made incremental improvements while inadequately refunding the unauthorized purchases.
Both T-Mobile and Amazon have fought back.
In a letter to the FTC, Amazon defended its “responsible, customer-focused and lawful” platform and accused the agency of trying to shoehorn Amazon into a deal similar to the one the agency struck with Apple over unauthorized in-app purchases earlier this year.
In a blog post, T-Mobile CEO John Legere criticized the agency’s “sensationalized legal action” and pointed to the company’s work over the last year to combat mobile cramming.
The agency, led by Chairwoman Edith Ramirez, defended its actions as an extension of consumer protection principles in the mobile payment space.
“These cases are about basic principles of consumer protection that apply to companies of all kinds — from brick-and-mortar stores to large technology companies like Amazon and T-Mobile," Ramirez said in a statement to The Hill.
"We look forward to arguing for full redress for consumers in these cases, as well as orders ensuring that consumers have the same protections when using their mobile devices that they would have in other contexts.”
FTC Commissioner Julie Brill — who declined to comment on the specifics of any case in front of the agency — said the agency always sees pushback as it enters a technologically new space. In this case, it's payments through a mobile device or bill.
“We are focusing on some very important issues, important to consumers, important to companies, and that is how payments be made in a mobile system,” she said in an interview with The Hill.
“Some of what you’re seeing is company reaction to our movement into these very important areas,” she continued, pointing to “the newness of the technology” that allows companies to bill customers through their mobile devices.
“These questions of how to apply theses fundamental consumer protection principles are things that are fact intensive, and … people can dispute the best way to effectuate these fundamental consumer protection principles,” she said.
But some worry that the agency is setting unrealistic standards that tech companies like Amazon will never be able to meet.
“There’s no perfect product design,” according to Berin Szoka, president of TechFreedom.
“You’re never going to get to the point where there’s no risk of unauthorized purchases.”
Szoka the FTC is asking for more and more transparency, hurting the companies’ reputations in the process.
“Companies work really hard to design their products in a way that consumers like, and the FTC intervenes and says they know better,” he said.
Szoka said the public and legal challenges to FTC authority would ultimately help the agency and the industry.
“We’re finally going to get some judicial development of doctrine,” he said.
Jeff Chester, executive director of the Center for Digital Democracy, noted the “unusual” public backlash from the companies but applauded the agency’s aggression in the face of companies who prefer court battles to settlements.
He praised Ramirez’s “visionary leadership” to expand the agency’s consumer protection into new areas.
“For too long, the industry has been happy with a docile FTC,” he said.
“They’re afraid of an agency that is putting the interest of consumers above corporate interests.”
Brill said no one should expect the agency to back down.
“We look very hard at all of the facts, and if we, at the end of the day continue to find a major problem, we will pursue,” she said.
“And we’ll pursue it aggressively.”