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Financial Services Law Insights and Observations

Internet provider and states agree to nearly $12.5 million for false advertising, hidden fees

State Issues Courts State Attorney General Consumer Protection Settlement Advertisement Fees Enforcement

State Issues

On December 19, the Colorado attorney general announced that an internet service provider (ISP) agreed to pay nearly $8.5 million in order to resolve allegations that it “unfairly and deceptively charg[ed] hidden fees, falsely advertis[ed] guaranteed locked prices, and fail[ed] to provide discounts and refunds it promised” to Colorado consumers in violation of the Colorado Consumer Protection Act. According to the announcement, in 2017 the AG’s office investigated the ISP and compiled information that the ISP had “systematically and deceptively overcharged consumers for services” since 2014 (see the complaint filed by the AG here). In the settlement, the ISP agreed to an order that requires it, among other things, to (i) refrain from making false and misleading statements to consumers in the marketing, advertising and sale of its products and services; (ii) accurately communicate monthly base charges as well as one-time fees, taxes, and other fees and surcharges to consumers; (iii) disclose any “internet cost recovery fee” or “broadband recovery fee” to consumers being charged the fees and allow the affected consumers to switch to different services if they wish to avoid the fees; (iv) refrain from charging an “internet or broadband cost recovery fee” on new orders; and (v) provide refunds to customers who were overcharged for services and to those customers who did not previously receive discounts that the ISP promised.

In a separate action, on December 31, the Oregon attorney general’s office announced that it entered into a $4 million Assurance of Voluntary Compliance with the same ISP to resolve similar claims of deceptive acts and practices in the advertising, sale, and billing of the ISP’s internet, telephone and cable services in violation of the Oregon Unlawful Trade Practices Act. According to the announcement, the Oregon DOJ started an investigation of the ISP in 2014 for allegedly “misrepresenting the price of services, failing to inform consumers of terms and conditions that could affect the price, and billing consumers for services they never received.” The ISP agreed to requirements that are very similar to those in the Colorado settlement. The announcement notes that the “Oregon DOJ will continue to lead a separate securities class action lawsuit arising from the same conduct.”

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