The FTC says T- Mobile made hundreds of millions of dollars from bogus charges on consumers phone bills. The charges were from third parties, but T-Mobile’s cut was allegedly as much as 40 percent.
"These were charges for things like flirting tips, dating tips, horoscopes, and other things that the consumer didn’t want," says FTC attorney Malini Mithal. "This is a practice called mobile cramming."
And it’s not something that T-Mobile invented. "It’s been going on for years—decades even," says David Butler, a spokesman for Consumers Union. "Long before the popularity of wireless phones, landline phone users were getting hit by cramming charges."
A Senate Commerce Committee investigation from 2011 estimated the costs to consumers across the industry in the billions. The committee report details just how consumers end up getting stuck with these charges:
1. 100 Percent, straight-up scamming. Billers just submit customer phone numbers to telecoms.
That includes unpublished numbers that nobody actually uses for phone calls.
"Numerous businesses and government agencies told Committee staff they have incurred crammed charges on telephone lines that are dedicated to alarm systems, elevators, modems, and other lines that are not assigned to any employees," says the report. Many of the numbers were completely unpublished. A fax line got billed for music downloads. An ATM line got billed for "Internet services."
A man in Connecticut fought charges from "Talent & More," which was charging his mother-in-law for hosting an online profile marketed to casting agents. "My mother-in-law us 82 years old, does not have internet access, and would not know how to use a website," he wrote to the state attorney general.
2. Dummy calls to get bogus "authorization"
Business owners told the Senate committee staff that when they tried to fight bogus charges, they were told there was a recording of them giving authorization. The committee got some of those recordings, which "show telemarkets quickly reading through long scripts, while employees answer 'yes' or 'okay' to questions they clearly do not understand."
3. Soliciting business via text... and not taking "no" for an answer
One company allegedly sent text messages offering horoscopes, dating tips and other services, and (according to the complaint in a class-action lawsuit) started charging people even if they replied "STOP" or called to say they didn't want the service.
4. With telecoms generally turning a blind eye — and sharing the profits
The Senate committee estimated that phone companies, which take a cut from third-party transactions, made more than a billion dollars from the practice over a ten-year period, and found that telecom companies did little to help their customers fight charges, or to check out companies that were obvious scammers.
Which is pretty much what the FTC is charging in T-Mobile’s case. The FTC says the company ignored signs that charges were bogus. And that the company buried those charges deep inside phone bills.
For its part, T-Mobile doesn’t dispute that stuff like this happened. But the company says it stopped billing for these services in late 2013.
For further reading: Our friends at Ars Technica have been covering the cramming story for years, starting with an account by editor Nate Anderson of his own experience getting crammed in 2008.
Here's an example the FTC says comes from a T-Mobile bill:
Train hopping, or the act of getting on freight trains without permission and riding them from depot to depot, is illegal and dangerous. It's also something that is, for many, a romantic endeavor, capturing the American spirit of adventure and travel.
Ted Conover did some train hopping in his youth, later writing a book about the experience entitled, "Rolling Nowhere: Riding the Rails with America's Hoboes." When his son Asa read his book, he felt the impulse to go train hopping himself. So Ted and Asa took a trip together, discovering along the way that new technology had changed the game.
In Ted’s experience, one of the hardest things used to be knowing where one was geographically while riding on a train; less of an issue today in an age of GPS-enabled phones.
Smartphones also allowed Asa an advantage over his father's earlier train-hopping days: the ability to document the experience in greater detail.
“I was on the trip to see what riding trains was like, rather than what being a hobo was like,” Asa said.
In addition to keeping them abreast of their location, the smartphones they were using let them contact home, document the trip through photos, and download a digital copy of an older guide to riding the rails, which the pair used often during the trip.
But even with digital enhancement, Ted believes the basic spirit of the endeavor has remained the same:
“One of the things that hasn’t changed is that your ability to get from point A to B on the rails is 100% determined by your own ingenuity and what you bring to the table.”
In Jerusalem, violence follows the discovery of a body believed to be that of an abducted Palestinian teen. The crime is being seen as a possible act of retribution for the deaths of three Israelis.
It's got big iron teeth and a powerful jaw. When it finds a 30-foot tree it goes to the top, opens its mouth and — watch this.
More on the lawsuit filed against Goldman Sachs that highlights alleged gender discrimination at the banking firm. Plus, the US Marshals' auction of bitcoin may have had an unintentional positive side-effect for the digital currency. Also, a look into why some companies are trying to offer healthier products without any prompting from government or legislation.
For five years, Derek Yach pushed to make PepsiCo – the brand behind munchies like Lays and Cheetos – a producer of healthier, lower sodium, lower sugar foods and beverages.
The responses were both sweet and salty.
“There are parts of a company where the support and awareness of the needs to change are very high,” Yach reflects. “But of course there were many who isolated me.”
Yach is attending this year's Aspen Ideas Festival in Colorado as corporate insiders reflect on their role in creating a healthy society. He was brought on by PepsiCo’s CEO, Indra Nooyi. Yach says she saw the potential of a multinational to influence public health with different products.
“While I was there, I saw the growth of hummus, the launch of dairy products for the first time, yogurt, and we saw a range of other healthier products being tested," says Yach.
Still, the company wasn’t willing to invest as much into research and new products as Yach had hoped. He's now with a health research group called The Vitality Institute, but says unlikely companies are coming together with an interest in health and prevention.
“They include companies like Samsung, Microsoft, General Electric, small startups,” he says. “They’re looking of a root to profitability through new products to promote better health, whether it's devices or smart phones, or alerts, or adherence. And they’re looking at how it’s going to benefit the bottom line, and people’s personal health.”
Power From Behind The Counter
Rather than wait for consensus, or for the government to make the first move, drugstore chain CVS is trying to make the products behind its counters healthier. In October, CVS will stop selling tobacco products altogether, wiping out an estimated $2 billion a year in sales.
Dr. Troy Brennan, Chief Medical Officer and Executive Vice President of CVS, says it will be only a short-term loss.
“If you’re creative, you’ll be creative to the bottom line,” Brennan says. “Taking two billion out now, long-term that’s going to be a smart decision.”
He admits a lot of people were holding their breath before the announcement, expecting the stock to drop. Instead, Brennan says, it went up.
“We’re beginning to know we have to do something to take better care of ourselves. Companies that do those sorts of things, I think consumers are attracted to that and that’s the business interest.”
Across the pond, supermarket chain Tesco is also trying to nudge customers towards healthier decisions. By the end of the year, Tesco will remove displays of chocolates and candies at the checkouts in grocery and convenience stores.
Many more corporations are turning inwards and focusing first on wellness among employees. Yach says whether companies are changing products in stores or implementing health programs for workers, evaluation by a third-party will be key to understanding what works.
“The win will come through seeing whether the companies who do the right thing will see the uplift on the share price over the long term,” he says.