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Get Phone Cos. A Fed Warning
WASHINGTON, D.C.--Last week, Federal regulators warned so-called "dial-around" long-distance phone companies to clean up their ad practices or face penalties.
The reprimand came last Thursday at a joint public forum held by the Federal Communications Commission and the Federal Trade Commission. Regulators expressed alarm at the sharp increase in complaints about these services, known as "10-10" numbers. The FCC received 3,000 complaints in the first six months of 1999, over 250 from July to December 1998. 10-10 numbers account for about $3 million in calls per year.
Some consumers alleged the ads prominently tout savings but bury other costs in small print. "My hope is [that] putting a spotlight on the issue will solve the problem," said FTC chairman Robert Pitofsky. "If not, we will turn to guidelines, rules and case-by-case enforcement. Companies will have to be more responsible or they will face challenges in court."
FCC chairman William Kennard said misleading ads are "unjust and unreasonable practices" under the 1934 Communications Act. The FCC is examining certain cases but would not name the companies; it may fine advertisers up to $1.1 million for each ad deemed false or misleading.
Samuel Simon, chairman of consumer group Telecommunications Research and Action Center here, said ads for MCI WorldCom's 10-10-321 service are confusing, as customers only get the 8-cents-a-minute rate if talking for 10 minutes or more. The information is not clear in the ads, he said, adding that he suspects MCI of deliberately counting on customers to talk less than 10 minutes, which he called "unfair."
Robert Rodrigues, MCI's senior litigation counsel, said dial-around companies cannot afford to alienate consumers with such ads. "Truthful advertising is critical to success," he said. "If a customer feels duped, the choices in the marketplace assures you will lose that consumer. Screw up the deal and you, as the carrier, can be banned for life in that consumer's mind." K