Consumer Watchdog – Fact Sheet on the Cingular-AT&T Merger Lawsuit

Who is the lawsuit against? The defendants are Cingular Wireless Corporation, a national cell phone company, and AT&T Wireless Services, a cell phone company that Cingular acquired in a $41 billion deal in October, 2004.

Prior to the acquisition, AT&T Wireless was the second largest provider of wireless communications services in the United States based on revenues.  AT&T Wireless had 22 million customers as of December 31, 2003, and reported $16.7 billion in revenues for 2003.  

Before it bought AT&T, Cingular was the second largest provider of wireless communications services in the United States measured by the number of subscribers.  Cingular had 24 million customers as of December 31, 2003, and reported $15.5 billion in revenues for 2003.

After the merger, Cingular has since changed its name to AT&T.

What does the lawsuit say?  The lawsuit alleges that:

1. Prior to the merger, Cingular promised that AT&T Wireless customers would “continue to enjoy the benefits of their current phones, rate plans and features, without any service interruption” and “it’s only going to get better from here….” Cingular’s chief marketing executive said, ‘The most tangible example of how Cingular is ‘Raising the Bar’ is the newly combined network – the largest digital voice and data network in the United States.”
2. After the merger, Cingular implemented a deliberate scheme to dismantle the AT&T Wireless network in order to degrade the service provided to AT&T Wireless customers and induce them to “transfer” to the Cingular network.  Cingular effectively ceased maintaining the AT&T Wireless network facilities, as was noted in trade publications.
3. After the merger, AT&T Wireless customers complained of increasing dropped calls, and poor or no reception.
4. Dissatisfied AT&T Wireless customers were given the option to “upgrade” to Cingular by (a) paying an $18 “transfer fee” or “upgrade fee” to Cingular, (b) purchasing new handsets from Cingular, (c) entering into new service contracts with Cingular that are often less favorable to the customer than the customer’s existing contract with AT&T Wireless, and (d) charging the customer an additional $18 for the SIM chip which enables the handset to operate.  
5. AT&T customers who do not agree to such an “upgrade” are left with the choice of fulfilling their contract term with AT&T despite degraded or non-existent service (and possibly being charged an extra monthly fee of $4.99), or paying an early termination fee of $175 to cancel service before the expiration of the 12- or 24-month contract term.

The lawsuit charges that Cingular engaged in false advertising, breached the contracts with AT&T customers, and violated the consumer protection laws of each of the fifty states.

What is the purpose of the lawsuit?  The purpose of the lawsuit is to stop the company from continuing its practices; force Cingular to repay, with interest, the amounts that its customers had to pay as a result of Cingular’s misconduct, including the “early termination fees,” any “upgrade” or “transfer” fees, and punitive damages; and require Cingular to engage in “corrective advertising.”

When and where was the lawsuit filed? The lawsuit was filed on July 6, 2006, in U.S. District Court in Seattle, Washington.

Who is covered by the lawsuit? The lawsuit is a nationwide class action suit that covers all AT&T Wireless customers who were customers as of October 26, 2004.

Who brought the lawsuit?  The lawsuit is based on an investigation of numerous complaints received by the non-profit Consumer Watchdog (formerly known as the Foundation for Taxpayer and Consumer Rights), a California-based crusader for consumer rights.

To prosecute the case, Consumer Watchdog’s lawyers have joined with the Los Angeles-based law firm of Pearson, Simon, Warshaw and Penny; Stritmatter, Kessler, Whelan and Coluccio; and Public Justice, a non-profit legal advocacy organization based in Washington, D.C.

What is the status of the case?  Shortly after the case was filed, the defendants asked the court to dismiss it on the grounds that their customers signed an “arbitration agreement” barring their right to bring a class action lawsuit in court. On May 26, 2009, the Federal District Court in Seattle rejected the defendants’ request and ruled that the arbitration agreement was invalid.   

Where can I get a copy of the lawsuit and other documents?  Download the latest version of the complaint in the case here. The May 26th Federal Court ruling denying AT&T's motion for arbitration can be downloaded here. Other documents related to this and other Consumer Watchdog cases are posted at www.consumerwatchdog.org/courts. 

Who do I contact for more information? Those who would like to follow the progress of the case may sign up for Consumer Watchdog’s “legal updates” at www.consumerwatchdog.org. Consumers with cell phone or other complaints may email to: cellphones@consumerwatchdog.org.