FCC, FTC chairmen: 'We will take action'

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In unusually blunt language, the chairmen of the Federal Communications Commission and Federal Trade Commission publicly accused long-distance phone marketers of deceiving consumers in their advertising.

At a joint FCC/FTC workshop last week, the officials warned the companies to shape up fast--or else.

"I have the feeling that the companies think it is a free-fire-zone and no one is watching. This is not true," said FTC Chairman Robert Pitofsky.


FCC Chairman Bill Kennard, citing growing consumer complaints, said his office's past reluctance to look at phone ads--the FCC traditionally has focused on rate tariffs--is about to change.

"Consumers are bombarded with TV ads promising big savings that all too often don't disclose everything they need [to know]," said Mr. Kennard. "We will take action."

The chairmen didn't mention specific ads, but officials of both commissions said the biggest concerns are per-minute ads for long-distance and so-called dial-around services. An FCC official said an investigation is already under way into some ads and sanctions may result.

"Our ads are clear and consumer friendly," said Robert Rodrigues, senior litigation counsel for MCI WorldCom. "But we want to take into account any concerns [the federal agencies] may have."

At the workshop, consumer-group representatives and state utility commissioners complained that the industry's ads frequently mislead. Ads that feature low national per-minute rates often don't mention that consumers will pay more for calls within a state, they noted. They also said ads often list restrictions on the per-minute rate, as well as monthly fees, in small type.

Dial-around long-distance services were accused of prominently advertising 20-minute call rates but often not clearly explaining charges for shorter or longer calls.

"If the advertising for 10-10-220 is `all calls for 20 minutes are 99¢,' but the business plan is based on making money from calls that are five minutes or less, isn't that a scheme?" said Sam Simon, board chairman of Telecommunications Research & Action Center, a consumer group.


FCC Commissioner Susan Ness acknowledged the workshop was intended to warn to marketers that the void in consumer regulation--which developed as deregulation encouraged competition--is over.

"We are working to make sure that long-distance advertising doesn't fall through the regulatory cracks," she said.

Mr. Kennard said he's particularly concerned about dial-around services, which have grown to 7.5% of the long-distance market. He asked marketers to fix their ads, adding that the FCC is prepared to act.

Mr. Pitofsky said he hopes putting the spotlight on the ads will produce changes. "We'd like to see a rise to the top as opposed to a rush to the bottom [that] appears to be taking place," he said.

Copyright November 1999, Crain Communications Inc.

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