MCI’s Parent Will Pay as Much as $88 Million to Settle Lawsuit
WorldCom Inc. has agreed to pay up to $88 million to settle a class-action lawsuit over the long-distance company’s practice of charging some customers substantially higher rates without their knowledge.
The cash settlement, approved Friday by both sides, is one of the largest ever in a consumer telecommunications dispute, and it far exceeds the typical penalty amounts paid by phone companies disciplined by federal or state regulators.
WorldCom denied any wrongdoing in the case. However, the company agreed to pay refunds to millions of customers of its MCI long-distance subsidiary who were unilaterally designated as “casual callers” and billed higher, nonsubscriber prices and surcharges between February 1996 and October 2000.
More than 5 million MCI customers will be notified of the settlement, and many of them are expected to qualify for compensation, according to Daniel Girard, one of the attorneys who brought the case against MCI.
The size of the WorldCom settlement is encouraging, according to Regina Costa, research director at The Utility Reform Network, a San Francisco consumer group.
“This is much more [money] than what would have come out of a regulatory commission,” Costa said. “It sends a message to the long-distance companies and to the telecommunications industry in general, that they have to treat their customers fairly or they could get socked with some pretty heavy-duty payments.”
WorldCom, through its MCI unit, is the nation’s second-largest long-distance carrier behind AT&T; Corp. A spokesman for the Clinton, Miss.-based phone company said that WorldCom believes the practices at the heart of the case are lawful but that the company “decided to resolve the matter promptly rather than press forward with what likely would be protracted and resource-draining litigation.”
MCI regularly ranks near the top of consumer complaint lists, both nationally and in California.
In June, the company agreed to pay the federal government a record $3.5 million to settle complaints that MCI changed consumers’ long-distance carriers without authorization, an illegal practice known as “slamming.”
A month later, California and five other states filed suit against WorldCom, accusing the company’s MCI unit of deceptive advertising and other fraudulent long-distance sales methods.
The settlement on Friday involves a case filed in late 1999 in southern Illinois federal court to consolidate several individual suits. The lawsuit accused MCI of charging consumers inflated rates and surcharges if they left or were removed from its traditional subscription rate plans.
Girard said customers often unwittingly paid high “casual calling” prices in cases where MCI made mistakes in processing orders, or when customers canceled service with MCI directly but did not also change their carrier listing with the local phone company.
In such instances, customers who would normally pay an average of 20 cents per minute were charged “nonsubscriber” surcharges of more than $3 per call on top of rates that topped 50 cents per minute, Girard said.
Since the prices are not described on bills as “nonsubscriber” rates, many customers may never have recognized the problem, he said.
Girard’s law firm has a similar case pending against Sprint, the nation’s No. 3 long-distance company.