In 2011, the FCC was extremely active in the prepaid calling card area, proposing $25 million in fines and investigating several other prepaid card providers. While the FCC has exclusive jurisdiction over prepaid cards when provided by common carriers, the Federal Trade Commission also has jurisdiction over non-carrier marketers of prepaid calling cards. This case is a reminder of the shared jurisdiction between the agencies.
The FTC case was initiated in May of 2011 against Millennium Telecard, Inc. and related entities. The FTC complaint alleged that Millennium made inaccurate claims about the number of minutes calling cards provided to a wide range of international locations, including Argentina, Brazil, the Dominican Republic, Ecuador, Mexico, Pakistan, Poland, Vietnam, Ghana, Nigeria, and El Salvador. But the FTC alleged that consumers didn’t receive the number of minutes advertised. Much of the FTC’s case was based on test calls made by the agency, which, it claimed, showed that consumers received only 45% of the advertised minutes.
The FTC asserted that Millennium violated the FTC act by failing to provide the advertised minutes and (in a claim similar to that made by the FCC in its section 201(b) cases) that Millennium failed to adequately disclose the fees applicable to the cards. The FTC complaint did not explain in detail the failure to disclose claim, but its discussion of Millennium posters and cards suggested that the statements of fees were in fonts that were too small and were not prominently placed.
In the settlement agreement, Millennium agrees to two injunctive provisions that require it to clearly and conspicuously disclose all material fees. It also agrees to pay a fine of $2.32 million to resolve the case. However, Millennium pays only a $500,000 installment now, and is obligated to pay the remaining $1.82 million over ten years, in ten annual installments (plus interest). The ten year installment is quite unusual, as is the defendants’ grant of a lien on property as collateral for the installment payment.
This case serves as a reminder that prepaid calling card providers and marketers should closely review their marketing practices to ensure that all material terms are clearly and conspicuously disclosed in their marketing materials.