Hidden Charges? Nothing Some Earbuds Can't Fix
A few weeks ago I found out I was eligible to benefit from a recently settled class action lawsuit. The suit alleged the cellphone service provider used deceptive advertising and got away with collecting hidden charges.
I received two vouchers. I can sign up for only one choice on each voucher.
Let's take a look at the goodies being offered, shall we?
Voucher No. 1:
* A $15 credit in return for renewing my contract for a year.
* A $30 credit in return for renewing my contract for two years.
* Continuing $3 service credits every three months beginning the seventh month after redemption of this voucher up to and including the 28th month, or until I enter a new contract, whichever comes first. (Say that ten times fast.)
* A 25 percent discount on a wireless telephone accessory, not including wireless telephone handsets or devices, up to a maximum discount of $15.
* 250 free domestic text messages each month for six months; a 25 percent discount on a wireless telephone accessory, or a continuing service credit of $3 every 3 months for 21 months. Unused text messages will not carry over into the next billing cycle. (Of course.)
* a 120-minute long distance calling card usable over 6 months.
Voucher No. 2:
* Another voucher, this time for a hands-free ear bud with a retail value of $15. (Limit one per class action settlement participant.)
* A voucher for a $15 credit toward a hands-free accessory other than the ear bud available under the previous option.
You can receive more benefits if you're one of a smaller number of really aggrieved folks who paid more than $50 because of delayed roaming charges, or you were hit with an early termination fee even though your contract didn't mention the fact that the company could charge you one.
My first reaction to the settlement: The choices read like prizes on a bad game show. Granted, Verizon Wireless was not found guilty of any of the practices it was accused of. But having been a subscriber for several years, I find it hard to believe the company overcharged me by only $30 -- the maximum face value of most of the benefits, if I choose one from each voucher.
The fact that two of the benefits are redeemable only by locking me into an even longer contract also struck me as especially audacious because it means more business for Verizon Wireless.
As we all know, if I wanted to get out of the contract at a future date, I would have to pay an early termination fee of $175. (In June, Verizon said it would prorate ETFs from now on, but I would be eligible for that only if I sign a new contract. Do we sense a theme here?)
This particular case, the Campbell Class Action approved in May stemmed from consumer complaints that Verizon Wireless misled customers by promoting a nationwide network when it didn't have one. Where it had gaps, it either had dead zones or rented service from outside companies without revealing to customers where those were located. The suit alleged the company then charged consumers when they made calls on rented networks, sometimes as long as two months after the calls were made. The result is that consumers were hit with bills higher than the promised monthly rate that Verizon Wireless so heavily promoted.
The class consists of customers of Verizon Wireless and certain partners between Jan. 1, 1991, and Nov. 2, 2003.
More after the jump...
Consumer advocates worry that class action settlements don't always benefit consumers and end up generating more business for the defendant companies. Some groups, such as Trial Lawyers for Public Justice have even intervened in settlements to get better deals for consumers.
When asked about the settlement, Verizon Wireless spokeman John Johnson wrote via e-mail: "We are complying with a court order. The terms of the order were agreed to by a judge, consumer groups and Verizon Wireless."
According to Pam Gilbert, a consumer protection attorney with Cuneo Gilbert & LaDuca, the settlement is not as bad as it appeared at first blush to me.
The No. 1 goal of a class action lawsuit, of course, is to get the company to stop whatever it was doing. Beyond that, a settlement is a balancing act between the need to compensate the lawyers and the class members without bankrupting the company.
Gilbert reckons that a minimum benefit of $15 per customer, multiplied by the millions of potential class members, is financial disincentive enough for Verizon to address the substance of the suit's complaints. Service discounts and vouchers for ear buds is also more practical for the company to implement than sending everyone a $15 or a $30 check, which would require a big cash outlay.
I hope she's right that class actions make a difference because Verizon Wireless doesn't seem to be hurting for cash or customers. Its revenue increased during the third quarter of 2006, compared with the third quarter of 2005, by 18.2 percent, making it the largest U.S. wireless company by revenue. It also added 1.9 million customers during the third quarter, an increase of 15.1 percent compared with the same period a year earlier, bringing the grand total to 56.7 million customers.
As for me, I think I'll sign up for the long distance calling card and some ear buds.
Do you think calling cards, $15 discounts and free ear buds are a good outcome for consumers in this case?
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