PacBell Ordered to Pay $44 Million in Sales Case
In one of the largest penalties ever against a California telephone company, state regulators have ordered Pacific Bell to pay more than $44 million for using misleading and illegal marketing practices to boost sales.
The ruling released Wednesday by the California Public Utilities Commission is a stinging rebuke of the stepped-up sales efforts that were launched at PacBell after it was purchased by San Antonio, Texas-based SBC Communications Inc. nearly three years ago.
The penalty, which includes fines of up to $20 million plus refunds and money for customer education programs, will become final in 30 days if there is no appeal or alternate proposed. However, PacBell has vowed to file an appeal with the Commission.
Nonetheless, consumer groups cheered the decision.
“The commission has sent a very strong message to PacBell that their marketing practices are unethical and illegal,” said Charles Carbone, telecommunications analyst at the Utility Consumers’ Action Network, a San Diego-based consumer advocacy group. “This says to California that the phone is not your friend, because the phone company will use it to market you and to mislead you.”
PacBell, the state’s largest phone company with more than 10 million residential customers, criticized the PUC ruling. “We think this is a pretty outrageous decision,” said PacBell spokesman John Britton.
Under SBC, PacBell began an aggressive campaign to increase sales of its highly profitable add-on features by packaging and selling them under names such as “The Basics” or “The Works.” Almost immediately, consumer advocates complained that the company was pushing the extra services on consumers through high-pressure sales pitches on all customer calls and by rewarding employees with prizes and bonuses for ringing up the most sales.
In its strongly worded decision, the PUC said PacBell is guilty of not informing customers about their number blocking options (related to caller ID), not explaining the difference between various service packages or the options for inside wire maintenance plans, or clearly informing them about lower-priced packages until they had turned down more expensive offerings.
The complaints mirrored those that cropped up in an earlier PacBell sales abuse case, which in 1986 resulted in a so-called cease and desist order from the PUC, as well as stiff fines and the suspension of sales incentive programs at the phone company. The restrictions were lifted in 1990.
PacBell has said that its new sales approach is designed to make sure customers know about new products and services and the latest discounts offered by the phone company. The company has vehemently denied that any of its methods are illegal.
“The findings in this decision are unwarranted and irresponsible, and unfairly singles out Pacific Bell for sales and service practices that are common in our industry and many others,” said PacBell spokesman Britton.
Under the ruling, PacBell must pay a fine of $20 million, although $10 million of that will be stayed temporarily and waived altogether if the company complies satisfactorily with the PUC’s decision. The company must pay the other $10 million, plus contribute $24 million to a customer education fund to the state General Fund within 180 days.
In addition, PacBell must take steps to ensure that its customers want the add-on services currently on their bills, and to issue refunds where warranted. The refunds, details of which were left to be worked out later, could substantially increase the total penalty.
