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AT&T Mobility Rebate Case Moves Forward

A federal court in California ruled a class-action suit accusing Cingular Wireless L.L.C.-now AT&T Mobility-of false and misleading advertising can go forward.

The complaint, brought under state consumer protection laws, involves a promotion in which Cingular advertised a cash rebate as an enticement to prospective subscribers. Instead, individuals that subsequently signed up with Cingular received something other than a rebate.

"In their intense marketing for cellular services, cell-phone companies make price the paramount focus,'' said Foundation for Taxpayer and Consumer Rights' Harvey Rosenfield, one of the lawyers in the case. "Cingular told consumers that they would ultimately pay a discounted price, once the rebate was received. In some cases, consumers were led to believe the phone would be 'free'-that it would end up costing them nothing after the rebate. But instead of getting money back, consumers get a VISA Reward card. Purchasers never got the promised discount. None of this was made clear to consumers. This deceitful practice hurts consumers and other cell-phone companies that advertise honestly.''

The case began in state court before AT&T Mobility removed the action to federal court. The FTCR said AT&T Mobility modified its advertising after the suit was filed in June 2006, but added that doing so does not let the carrier off the hook.

U.S. District Judge Marilyn Hall Patel stated: "The court finds that a reasonable consumer, upon seeing an advertisement that promises a 'rebate' of a certain amount, would generally understand that advertisement to mean that the amount will be returned to the consumer in cash, check or its equivalent... The more terms, conditions and restrictions that are placed upon the form of tender, the less equivalent it becomes to cash or check.''

On a related front, the Washington state supreme court recently struck down AT&T Mobility's arbitration clause in consumer litigation against the No. 1 cellular carrier.

"We are still studying the court's ruling. It is important to note that the ruling does not address the plaintiff's claims, but rather, only the arbitration clause,'' said Walt Sharp, an AT&T Mobility spokesman.

"We continue to believe that a consumer is better off pursuing a claim under our arbitration clause, rather than pursuing a class action. In fact, a year ago, we changed our arbitration clause to make it even more consumer friendly. Our current arbitration clause calls for the company-if it does not settle a consumer
complaint and loses arbitration-to pay the greater of amount of either the arbitration or the state's statutory definition of a small claim. Also, if the consumer has used a lawyer in winning an arbitration case, the company would pay two times the lawyer's fee. In addition, we pay the entire costs of the arbitration.''