AT&T has had quite the September so far. From a near-miss carriage dispute of some kind with ESPN to announcing a projected increase in subscriber losses to being targeted by an activist investor looking to shake up the executive team and force a DirecTV sale, it’s tough to look at the entertainment side of the company as being in anything but turmoil.
So the news that AT&T is being hit with a class-action lawsuit that alleges they were creating fake DirecTV Now accounts in order to artificially inflate subscriber numbers certainly isn’t going to help.
AT&T Inc. pressured employees to create fake accounts for its DirecTV Now streaming television service to boost subscriber numbers ahead of its 2018 merger with Time Warner Inc., according to a lawsuit accusing the telecommunications giant of misleading investors.
The company taught and encouraged employees across the country to secretly add the product to the accounts of existing customers without their knowledge, according to an amended complaint filed Friday.
It’s a pretty shocking allegation, that could have plenty of ramifications going forward for both AT&T and DirecTV, as well as their subscribers. If you’re wondering how this fraud was alleged to have taken place, it was the old standby of just rolling people into services without their knowledge.
One way employees did that was by pretending to waive a $35 fee that customers paid to upgrade their mobile phones while actually charging the fee and creating as many as three fake DirecTV Now accounts, investors, including the Steamfitters Local 449 Pension Plan, said in the lawsuit, initially filed in Manhattan federal court in April.
AT&T is denying the claims, which is obvious; admitting to them would put them on the hook for massive problems. If true, it’s reminiscent in some ways of the Wells Fargo scandal from a few years ago, where customers were enrolled in accounts without their knowledge as a way to meet unrealistic sales targets placed upon Wells Fargo staff. As Variety notes, unrealistic sales expectations are a part of this suit as well:
AT&T also pressured staffers to sell as many subscriptions to DirecTV Now as possible with unrealistic sales quotas, the lawsuit claims. As the lawsuit notes, AT&T ended the $35-per-month special introductory pricing for a package with more than 100 channels less than six weeks after it launched DirecTV Now in 2016.
“Given the heavy promotional activity, intense sales pressure, and prevalence of fake accounts, it is unsurprising that many DirecTV Now accounts were not being used and were promptly cancelled,” the lawsuit says.
It’s potentially even more complex than the Wells Fargo situation when you consider that AT&T agreed to a Time Warner deal which it sold to shareholders as a win for synergy in part because of the allegedly fake success of DirecTV Now. That’s a lot of layers! If the suit holds up, expect plenty of fallout.