Last week, Vonage reached a global settlement with the Attorneys General of 32 states over allegations that the Delaware-based voice over internet protocol (VOIP) service failed to clearly disclose to customers the material terms and conditions of subscriber agreements. Led by Montana, the coordinated AGs claimed, among other things, that Vonage did not give adequate notice that the company required its subscribers to purchase certain equipment in order to utilize promotional services advertised as “free” and that Vonage misled consumers by representing that it was possible to cancel the service but then failing to accept cancellations (and in some cases, allegedly continuing to charge customers for service even after they had attempted to cancel) through a tactic called “saving” the customer.
Under the broad terms of the settlement, Vonage will pay $3 million in fines to the 32 states, provide refunds to certain customers and will amend its consumer advertising and marketing materials, so as to “clearly and conspicuously” disclose certain terms and conditions regarding its equipment and services. In addition to requiring Vonage to reimburse eligible consumers who complain of certain unauthorized charges, the settlement also requires that Vonage retrain its customer service and telemarketing representatives, and that the company modify all of its training and call center “script” materials to comply with the terms of the settlement.
Of particular interest to business is the breadth of the settlement and the detailed and specific requirements contained in the consent order related, for example, to the extent and timing of disclosures and that any representation of “award winning service” must be based on a genuine award from an independent third-party received no more than a year from the date of the representation. While there can be some comfort to companies in deciding to end an investigation by signing a consent order to have a clear statement of the enforcer’s expectations on a going forward basis, such specific injunctive relief, even if by agreement, can make it difficult for settling companies to keep up with the changing competitive tide particularly in dynamic markets. By no means a new issue, how companies advertise free offers and money back guarantees has received considerable focus from both federal and state enforcers in recent years and any company offering such enticements to potential customers to sample a product or service should take great care at looking at how such a program is advertised from top to bottom, including in traditional advertising and also as communicated by third-party marketing on the Internet and by customer service representatives.
- Taja-Nia Henderson and Amy Mudge
