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Class Action Charges Vonage Deceived Consumers

Case Disputes Vonage's "Money-Back Guarantee" and "30-Day Free Trial" Advertising Claims

By Truman Lewis
ConsumerAffairs.com

March 26, 2007

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A consumer class action filed in U.S. District Court in California charges that Vonage, the nation's largest Internet telephone provider, misled consumers about the quality and reliability of its service and engaged in false advertising and deceptive business practices.

In the suit, plaintiff Kai Porter of Inglewood, California, alleges that she signed up for the Vonage service on November 18, 2006 and asked that her existing landline number be transferred to her new Vonage account.

When the service did not work as promised, Porter canceled within 30 days of activating her account, expecting to receive a full refund under the company's widely-advertised "Money-Back Guarantee." She learned on December 27 that Vonage had not closed her account and did not intend to honor the guarantee.

Vonage promotes its service as an alternative to traditional telephone service. It spent more than $500 million on advertising in 2005 and the first nine months of 2006, making it one of the largest advertisers on the Internet, the suit alleges.

In its advertising, the company promises "higher quality" but, in fact, the suit charges, the quality and reliability of the service is inferior to traditional telephone service, with problems ranging from dropped calls to service outages and equipment conflicts. "Vonage knows about these problems but conceals them from consumers," the suit alleges.

Porter also alleges that:

• Vonage touts its customer service when in fact, consumers trying to call for assistance encounter long hold times, hang ups, multiple transfers and representatives who merely read from scripts;

• Vonage advertises "no annual contracts" but invokes a 12-page "terms of service" when customers try to cancel;

• Vonage charges consumers who cancel within two years of account activation a "disconnect fee" of $39.99 -- in effect, an early-termination fee;

• Vonage drags its feet when processing cancellations and continues to charge consumers' credit cards in the meantime;

• Vonage advertises a "Money-Back Guarantee" and "One Month FREE," stating on its website, "There's no risk to trying Vonage service. Our hassle-free Money-Back Guarantee policy guarantees your satisfaction." Vonage's website states that a consumer is eligible for the Money-Back Guarantee if she cancels her service "within 30 days of account activation." But consumers who try to cancel the service within 30 days of beginning to use the VoIP service learn that Vonage does not consider the 30-day "free" period to begin when the customer is first able to use the service, but rather much earlier -- the moment the customer contacts Vonage to sign up for the VoIP service. At that time, the customer has not even received the equipment needed to use the service, which Vonage states it will ship "within 5 days."

• In addition, one of Vonage's key selling points is that consumers can keep their current telephone number (either landline or cell) when they switch to Vonage's VoIP service, but Vonage's website states that it will take "a minimum of 20 days" to transfer the telephone number. A Vonage consumer will thus have 10 days or less to evaluate the service and decide whether to cancel and attempt to invoke the Money-Back Guarantee.

• When Vonage determines that a consumer canceled after the 30-day Money-Back Guarantee period expired, Vonage penalizes the consumer by charging not only the activation fee and a monthly service fee, but the $39.99 disconnect fee as well. Vonage will also charge the consumer for the amount of any "instant rebate" she received on the cost of the equipment required to use the service, which can total $50 or more.

The lawsuit also charges that the mandatory arbitration clause in Vonage's terms of service is unconscionable and unenforceable and that Vonage's terms of service violate California's Consumers Legal Remedies Act.

The case seeks damages and reimbursement for all California consumers affected by Vonage's actions.

Representing Porter are attorneys Daniel Girard of Girard Gibbs LLP, San Francisco, and Richard Doherty of Horwitz, Horwitz & Associates, Chicago.

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