FTC Says T-Mobile Making Millions With 'Bogus Charges' On Users' Phone Bills

The U.S. Federal Trade Commission is suing T-Mobile for allegedly raking in "hundreds of millions of dollars" by adding bogus charges to its subscribers' phone bills.

In a complaint filed Tuesday with a U.S. District Court in Seattle, the FTC claimed that T-Mobile has been charging users for third-party services, such as ringtones, wallpapers, horoscopes and celebrity gossip reports, even when those services were not ordered or authorized by users.

According to the filing, T-Mobile has been including these unauthorized charges on users' bills -- a practice known as "cramming" -- since at least December 2013. The FTC alleged that the Bellevue, Wash.-based carrier had been burying these unauthorized charges in its phone bills, making it "nearly impossible" for customers to discover them.

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The FTC said it suspects T-Mobile has made "hundreds of millions of dollars" off these hidden charges by pocketing between 35 percent and 40 percent of what customers paid for them.

T-Mobile CEO John Legere is denying the charges. In a tweet Tuesday, he pointed customers to a T-Mobile blog post, urging them to "get all the facts" before getting "carried away with all these sensational headlines."

In the blog post, Legere called the FTC's filing "unfounded and without merit."

"In fact T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want," Legere wrote. "T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors."

The FTC filing comes as T-Mobile stages a bullish campaign to position itself as an "uncarrier" and a more attractive alternative to market leaders Verizon and AT&T. Last year, T-Mobile rolled out a new pricing structure that eliminated the need for customers to sign an up-front annual contract when buying a new phone, allowing them instead to pay on a monthly basis.

Earlier this year, T-Mobile said it would start paying customers' early termination fees if they jumped ship from Verizon, Sprint or AT&T to its own network.

The FTC lawsuit also comes as T-Mobile reportedly explores a merger with Sprint. Reports of a merger started to swirl last year, but The New York Times, citing sources familiar with the matter, reported in June that the two carriers have settled on the terms of a $32 billion deal expected to be unveiled this summer.

According to the report, Sprint would acquire T-Mobile for about $40 a share in cash and stock. The Times noted, though, that talks are still incomplete and the deal could fall through.

PUBLISHED JULY 2, 2014