IDT Suit Against Prepaid Providers
On March 8, 2007 IDT filed a lawsuit in a federal district court against
twelve companies involved in providing prepaid calling card services and their officers and directors, alleging a “massive
and systematic scheme” to mislead consumers under the Lanham Act’s prohibition of deceptive trade practices and
other state false advertising laws. IDT is claiming the defendants promised more
minutes than they delivered to consumers, unlawfully drawing customers away from IDT’s products and decreasing IDT’s
profits. This suit comes less than two months after a court granted preliminary
approval to an unprecedented class action settlement in which IDT will refund over twenty million dollars to IDT customers
for its own insufficient rate disclosures. For other prepaid providers, this
suit serves as a warning that the consequences for inaccurate or insufficient claims made in advertising can originate not
only from customers and regulators, but also competing prepaid providers.
According to IDT’s
complaint, defendants deliver fewer minutes than promised in their advertising campaigns.
The named defendants are as follows: CVT Prepaid Solutions, Inc.; Dollar Phone Services, Inc.; Dollar Phone Enterprises,
Inc.; Dollar Phone Corp.; Dollar Phone Access Inc.; Epana networks, Inc.; Locus Telecommunications, Inc.; STI Phone Card,
Inc.; Telco Group, Inc.; VoIP Enterprises, Inc.; Find & Focus Abilities, Ink.; and Total Call International, Inc. IDT asserts that these providers overstate the amount of minutes left on the card
in advertisements and on an automated voice prompt at the beginning of each call. This
voice prompt is an important source of information to consumers and, according to IDT, is a major factor when consumers decide
which calling card product to purchase.
IDT claims to have
tested competitor’s cards by making a single call that would use up all the balance of the product. IDT compared the voice prompt and minutes advertised with the actual call time of the single call and found
that there was substantially less time on the card than the advertisements or voice prompt indicated. The results of this test show that actual talk time ranged from 55% to 70% of the talk to time advertised,
from defendant CVT’s cards and STI’s cards respectively. The average
talk time on cards from all defendants only gave consumers 60% of the talk time promised.
IDT, on the other hand, claims to fully provide the potential minutes advertised.
IDT is asking the
court for a preliminary and permanent injunction preventing the defendants and their officers, employees, attorneys, and those
in privity with defendants from advertising calling card products with false or misleading materials, voice prompts, and other
methods of promotion. In addition, IDT has requested the court to order a recall
of all misleading advertising materials and to require defendants to provide notice to all distributors of their products
of the false advertisements. IDT also is seeking to recover three times
their lost profits and exemplary damages.
Please
feel free to contact us if you have any questions or we can be of any assistance to you.
March 2007
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