California Fines Cingular $12 Million

September 27, 2004
California has fined Cingular Wireless a record $12.14 million for charging customers early termination fees and for heavily marketing its service at a time when the company was plagued by network problems.

The California Public Utilities Commission (PUC) also ordered the company to reimburse customers who paid termination fees to end their contracts between January 2000 and May 2002. The PUC began investigating began investigations on Cingular's business practices in June 2002.

The ruling was in response to actions brought by UCAN, the not-for-profit Utility Consumers’ Action Network and PUC staff on behalf of Cingular customers.

The reimbursements could cost Cingular $40 million to $70 million, said Michael Shames, executive director of UCAN, as Cingular will have to give hundreds of thousands of Cingular customers refunds of $150 to $450.

Cingular said it was "extremely disappointed" by the Commission's decision and said it would "vigorously pursue all options available." Cingular is the second largest wireless provider and is poised to become the largest when it completes its purchase of AT&T Wireless.

The joint venture of SBC Communications Inc. (SBC) and BellSouth Corp. (BLS) also said "this type of unreasonable, out-of-touch regulation makes doing business in California and meeting the needs of our customers far more difficult than virtually any other state."

“This decision shows that consumers can fight the unfair practices of a wireless company,” Shames said. “And it puts any other cellular bullies on notice that they have to treat customers in California fairly if they want to do business here.”

Cingular argued that during the period at issue, California didn't mandate a grace period on wireless carriers, and there was no evidence that Cingular's network was inferior to its competitors.

Cingular admitted at PUC hearings that testing wireless service by using the phone is the best way for a customer to decide whether the service meets his or her needs.

The Commission went further to comment that during 2001, Cingular's corporate policy became "even more egregious" for consumers because the company didn't disclose known network problems and continued to aggressively advertise its service.

Cingular now gives subscribers a 15-day trial period during which they can try out the service and cancel the contract without incurring cancellation fees.

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