Verizon takes the legal route
Verizon says T-Mobile’s claims about savings are misleading.
BBB National Programs is a non-government, self-regulatory body, and companies are not legally bound to comply with its decisions. In late January, NARB found that T-Mobile had failed to comply with its recommendation to discontinue its claims about how much AT&T and Verizon customers can save by switching to it.
T-Mobile implies that customers can achieve the advertised savings through cost plans alone. Its disclaimer about the value of savings, factoring in the perks and benefits that other carriers don’t offer, has been dismissed by NARB as being insufficient to clearly communicate to customers that the price comparison included built-in benefits beyond plan price.
NARB wanted to refer the matter to the Federal Trade Commission (FTC), but T-Mobile bought time by claiming it had new evidence to support its claims about compliance.
Tired of the back and forth, Verizon sued T-Mobile on Wednesday for false advertising that promised consumers over $1,000 in annual savings if they switched to it, per Reuters.
Verizon claims that T-Mobile exaggerated savings by as much as 100 percent by comparing its temporary promotional pricing with Verizon‘s standard non-discounted rates. Verizon also alleges that T-Mobile inflates the value of satellite connectivity, streaming, and other benefits. The company also understated the savings that Verizon offers by bundling digital perks. Verizon also says that T-Mobile doubled down on essentially the same saving claims that NARB flagged as misleading.
Verizon wants T-Mobile to stop the misleading ads and seeks damages for false advertising and harming competition.
Verizon wants to maintain its lead
As of December 31, Verizon was the largest carrier in the US with 146.9 million subscribers, but T-Mobile has been encroaching on its lead. The company had 139.9 million customers as of September 30. AT&T is third with 120.1 million subscribers as of December 31.
After three straight quarters of customer losses due to price hikes, Verizon finally grew its customer base by 616,000 in Q4, but that came at the cost of weak financial performance.
While the company has announced plans to improve the value proposition for customers, it has ruled out the possibility of a price war. In such circumstances, T-Mobile‘s marketing campaign about savings can derail its turnaround efforts.
The era of implied value
No carrier wants to offer outright savings to customers, as that would mean taking a hit on margins. Including the value of optional extras that customers may not necessarily want to overstate savings help carriers suggest that they are the cheaper option. While T-Mobile may be acting in good faith by wanting customers to take advantage of the perks that their carriers don’t offer, it has so far failed to demonstrate that.
