MCI Sues AT&T;, Claims Its Ads Are Misleading
MCI Communications Corp. filed suit Tuesday against American Telephone & Telegraph Co., claiming that AT&T; was trying to protect its eroding share of the long-distance market through maliciously false and deceptive advertising.
AT&T; said later it will file a countersuit.
The U.S. District Court suit charges that beginning in January, AT&T; launched a counterattack against its competitors to regain market share, and in July began targeting MCI’s new Prime Time, cut-rate long-distance calling plan.
The suit said AT&T; advertising “maliciously attacked MCI’s honesty and the value of MCI’s competing services by falsely and deceptively representing that AT&T; was superior to its competitors in general, and MCI in particular, in terms of trustworthiness, quality and price.”
Outspent Heavily on Ads
MCI Chairman William G. McGowan said AT&T; is losing 100,000 customers a week, and “they are panicking about it.”
He told a news conference that AT&T; is using “blatantly false and defamatory” ads to “staunch the flood of customers who are switching to MCI and other companies.”
MCI itself is known for aggressive advertising, such as showing people fainting when they see their non-MCI long-distance phone bills. But McGowan said MCI now is being outspent 8 to 1 by AT&T; in advertising.
McGowan labeled various AT&T; ads as “sleazy” and “ridiculous.” He said he could not estimate the losses MCI had suffered as a result of AT&T; ads, but he said “it’s substantial.”
AT&T; spokesman Herb Linnen said: “We welcome the opportunity to discuss who is misleading whom and will do so in a countersuit. We have been concerned about MCI’s sometimes misleading print and broadcast advertising and have complained about it directly to MCI.”
He cited MCI commercials “that compare MCI Prime Time prices with our basic long-distance prices instead of our Reach Out America prices.”
Ongoing Battle
“AT&T; stands behind its advertising,” Linnen added.
As for claims that AT&T; is losing customers, Linnen said “If anyone . . . chooses a brief moment in time on which to base figures they are going to mislead, and we are not going to play that game.”
Linnen said AT&T;’s lawyers had written the four commercial television networks earlier this month to complain that an MCI ad promising that its ad promising that MCI “always saves you money over AT&T;” was false in that MCI, in certain calling patterns, was sometimes more expensive.
The MCI suit said some AT&T; ads featured “alleged research” by AT&T; Bell Laboratories on the effectiveness of MCI’s services.
“AT&T; knowingly gambled Bell Laboratories’ reputation for scientific integrity in a desperate attempt to obtain credibility for AT&T;’s crass commercial defamation of MCI.”
The suit is the latest chapter in MCI’s long battle with AT&T;, which began in the 1970s when MCI successfully broke AT&T;’s long-distance monopoly. The two companies have contested each other in the courts and at the Federal Communications Commission, which authorizes rates, ever since.
AT&T; says it has about 70% of the long-distance market, measured by interstate and intrastate revenues, or 66%, according to Federal Communications Commission estimates of the proportion of minutes in all interstate calls handled by AT&T.; MCI is No. 2 with more than 10%.
MCI’s suit suit cites AT&T; ads that assert that MCI’s rate are cheaper than AT&T;’s only when calls are made over 900 miles away and after 7 p.m., or that MCI customers “might have had better luck calling Mars” than trying to reach MCI representatives for an explanation of their bills.
The ads, the suit claims, also claim non-AT&T; companies provide slow telephone connections, that other companies don’t operate worldwide like AT&T; and that competing 800, facsimile and WATS services are inferior.
The suit says AT&T; “has wrongfully profited and MCI has been damaged by being wrongfully thwarted from maximizing its sales potential.”
It asks the court to enjoin AT&T; “from making false or deceptive representations that any AT&T; service is materially superior to any competing MCI service in terms of quality or lower cost, or that MCI has misrepresented its services or rates to consumers.”
It also asks that AT&T;, for a period of 12 months, stop advertising and promoting its products unless “such information clearly and conspicuously discloses a court-approved corrective notice that mitigates the lingering effects of the misrepresentations described therein.”
Additionally, it asks for profits “wrongfully amassed by AT&T; on the sale of its products or services during the period in question,” plus interest and legal fees.
