Reseller Pays $1M In Landmark Slamming CaseTelecommunications reseller Minimum Rate Pricing Inc., Bloomfield, NJ, was fined $1 million last week in a 19-state judgment in which it was accused of changing consumers' long-distance carriers without their permission. The penalty is the largest ever levied against a slamming operation.
The decision against MRP, a subsidiary of National Tele-Communications, Cedar Grove, NJ, which does business as Parcel Consultants Inc., comes three months after the company withdrew hundreds of thousands of hours from at least 10 service agencies, including Apac Teleservices and TeleSpectrum Worldwide, saying NTC couldn't continue doing business until issues pertaining to the company and its subsidiaries were resolved.
According to the latest report available on the company, 68 million telemarketing calls were made in 1996. "It is quite an astounding figure," said David Corvette, a spokesman for New York State Attorney General Dennis C. Vacco, who led the investigation.
The New York state Assembly recently passed a law making telecommunications companies responsible for all acts of their sales agents, even if the agents are employees of an independent company, said William E. Raney, an attorney for Copilevitz & Canter, P.C., Kansas City, MO, which serves the direct marketing industry.
"This law is a specific warning to telecommunications companies to keep close control over their solicitations," Raney said.
Apac said NTC pulled out in July because of slamming-related issues that had nothing to do with Apac.
"Apac was contracted with NTC only to identify consumers who were interested," said John Calk, vice president of marketing and business development at Apac. "As reseller, it is their obligation to personally communicate with each consumer and verify their intention to contract with a new long-distance provider prior to switching their service. Although the pull-out affected only 5 percent of the outbound work that we were doing, no one wants to lose that kind of account."
TeleSpectrum Worldwide Inc., King of Prussia, PA, lost 10 percent of its revenues in the second quarter ended June 30 when NTC pulled out.
Although some companies would not confirm involvement, vendors affected included about 90 call centers, one source said. According to another source, some companies were concerned about not being paid for services already rendered.
"NTC withdrew, giving no explanation and no promise of payment," the source said. "They tried to push the blame on telemarketing vendors."
According to Vacco, whose office led the multi-state investigation, MRP misled consumers into switching their long-distance carriers. Once consumers realized MRP's claims were false and attempted to switch to another carrier, "MRP held them hostage by 're-slamming' them."
The agreement requires MRP to cease its allegedly misleading business practices, pay restitution to consumers and divide the $1 million penalty among the states equally. Other states involved are Arizona, Arkansas, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas, Vermont, Virginia and Washington.
Hundreds of consumers across the country complained that MRP's telemarketing misled them about available discounts, failed to disclose that MRP was a telecommunications company and neglected to inform consumers that they were being asked to change their long-distance carrier to MRP. In one particular case, MRP was said to have secured authorization from a man who had been dead for several years.
MRP's alleged practices violated the Federal Communications Commission's rules that encourage long-distance competition by allowing consumers to switch carriers freely.
"I have made the prosecution of long-distance telephone slammers a top priority. We have a zero-tolerance policy toward slamming New York consumers, and the $1 million penalty against MRP sends a strong deterrent message." Vacco said in a prepared statement.
The agreement further requires MRP to tell consumers who switched to MRP before Jan. 1, 1998, that they are entitled to have their charges re-rated to the price they would have paid with their prior carrier. MRP also must refund all switching fees that consumers incurred. Consumers who were switched to MRP after Jan. 1 have until Jan. 31 to file complaints with their state's Attorney General's office requesting that MRP re-rate their calls and refund any switching fees.