According to a Federal Communications Commission official who spoke to the Wall Street Journal this week, the FCC is planning to fine Sprint Corporation (NYSE:S) $105 million regarding claims the company charged consumers for text message alerts and similar services without their consent.
The unnamed FCC official confirmed that the FCC will fine Sprint for billing customers for text message alerts, horoscopes, sports scores, ring tones and other unrequested services. The practice is known in the industry as cramming. AT&T paid the same fine in settling similar charges earlier this year. The twin $105 million fines are the largest in FCC history.
Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS
Michael Mauboussin's notes from his presentation at the 2020 Morningstar Investment Conference, held on September 16th and 17th. Q2 2020 hedge fund letters, conferences and more Michael Mauboussin: Challenges and Opportunities in Active Management Michael Mauboussin is Head of Consilient Research at Counterpoint Global in New York. Previously, he was Director of Research BlueMountain Capital, Read More
Analysts note the FCC also has an open investigation of cramming complaints against T-Mobile US. The FTC also filed a cramming complaint against T-Mobile in a U.S. District Court in Washington this summer.
Under pressure from many state attorneys general, AT&T, T-Mobile, Sprint and Verizon Communications all agreed last month to stop billing customers for third-party services.
FCC spokesman Neil Grace had no comment. A Sprint spokeswoman noted the company does not comment on speculation.
More on Sprint’s cramming
Federal regulators have targeted a number of mobile carriers for cramming back in late 2013. Consumers who have been overcharged by Sprint would be eligible for monetary compensation once the fine is approved and paid, according to the FCC official. The total amount of the fine was determined by estimating the total amount Sprint overcharged consumers.
The FCC investigation involved a three month period from August to October 2013, during which regulators noted Sprint received almost 35,000 complaints from consumers regarding unwanted charges. The FCC is claiming Sprint Corporation (NYSE:S)’s actions were a willful violation of the law, and says the company forfeit $105 million as a penalty to end the investigation.
The WSJ source notes that three of the five sitting FCC Commissioners have said they will vote in favor of the fine. It is not clear whether Sprint is actively engaged in settlement talks with the agency. The FCC official also noted that the investigation was undertaken together with the Consumer Financial Protection Bureau and several state attorneys general.