TracFone Hit With $40 Million FTC Fine For Shady Business Practices, Throttling ‘Unlimited’ Plans

As we’ve shown in the past, the FTC doesn’t take too kindly to “unlimited” data plans that are anything but. Companies like AT&T and Verizon Wireless still honor grandfather unlimited data plans, and in the past have throttled customers once they reached a certain threshold (5GB in the case of customers on AT&T’s wireless network). However, prepaid carrier TracFone has caught the wrath of the FTC for not only throttling customers on plans that were marketed as unlimited, but also not making it plainly clear that customers would be throttled for going over certain fixed limits within a billing cycle. 

TracFone offered its unlimited talk, text, and data services — priced at $45 per month — through a number of its brands including Straight Talk Wireless, Net10 Wireless, Simple Mobile, and Telcel America. However, customers were not made aware that their unlimited data service wasn’t truly “unlimited.” And customers were not made aware of the fixed limits that would bring about data throttling. The FTC would later determine that throttling took place at 3GB; while data service would be completely nixed after 4 to 5GB of data was used. 

The FTC notes that customers saw their data speeds throttled by 60 to 90 percent for crossing the aforementioned 3GB limit, and some customers even had their data service cut off completely. The FTC also states that TracFone would give customers the runaround when confronted over data throttling or service interruptions. TracFone would lecture customers via an automated message, saying that excessive data usage violated its Terms and Conditions. However, TracFone’s Terms and Conditions failed to properly disclose the practice of data throttling. 

TracFone gave a half-hearted attempt to disclose its throttling practices in Fall 2013, but even then, it buried the information within the fine print, far away from its bold advertising for unlimited data service. 

As a result of TracFone’s shady business practices, it will be forced to provide $40 million in refunds to its customers that were affected by service interruptions. It is also barred from “making further deceptive advertising claims about its mobile data plans, and must clearly and conspicuously disclose any limits on the speed or quantity of its data service.” You can read about the refund program on a special site that the FTC has setup here.

Here’s one last takeaway from this throttling fiasco. Unlike AT&T and Verizon Wireless’ claims that “data hogs” were hampering network performance, the FTC secured internal TracFone documents which found that the throttling was all about the mighty green in an effort “to control excessive data usage and reduce the high costs related to it.” 

Bottom line: if you can’t afford to provide unlimited data to customers, don’t advertise it as such. And certainly don’t try to obfuscate throttling practices from customers.