Cable Giant Charter Fined $19 Million For Lying About Competitors Going Out Of Business

from the just-another-day-in-US-telecom dept

When last we checked in on cable giant Charter Communications (Spectrum), the company was busy using the Boys and Girl's Club of America as a prop to try and kill helpful conditions affixed to its megamerger with Time Warner Cable. This week, the company's under fire after it circulated advertising telling customers (falsely) that one of its competitors (Windstream Communications) was going out of business. While Windstream had filed for Chapter 11 bankruptcy protection, it very much remains in business. Yet Charter's advertising to customers informed them the company would likely be shuttering its doors soon.

This week Judge Robert Drain of US Bankruptcy Court for the Southern District of New York ruled (pdf) that Charter must now pay Windstream $19 million for spreading false claims about the company:

"Charter's goal with the mailings "was to induce the Debtors' customers to terminate their contracts and switch to Charter by sending them literally false and intentionally misleading information about the Debtors' bankruptcy cases and financial wherewithal," the ruling said. Charter premised its ad campaign "on false assertions regarding the Debtors' bankruptcy cases," the ruling said."

Charter's lawyers had, as they do every time they're in court, tried to argue that lying about a competitor was protected speech, something the Judge didn't look to kindly on:

"Charter claimed that punishment for its "literally false and intentionally misleading advertising campaign would violate their First Amendment right to free speech," the judge wrote. But First Amendment rights are not absolute and do not protect Charter's false statements about Windstream's bankruptcy proceedings and financial wherewithal, he wrote. "Such commercial speech is properly curtailed by precluding such wrongful conduct," he wrote."

All of that said, Charter, hand in hand with Comcast, is securing itself an ever larger monopoly over broadband access in countless US markets, especially at faster speeds. Cable giants now enjoy a 70% market share and growing over fixed broadband access, thanks in large part to regional phone companies that were too lazy, cheap, or heavily indebted (usually from "growth for growth's sake" megamergers) to actually upgrade aging DSL lines. In fact, many of these companies are literally just letting their networks fall apart and refusing to repair customer lines on a timely basis.

As such the irony is that Charter didn't really even need to lie, since most frustrated telco DSL subscribers likely would have eventually headed their direction anyway. But when you're a natural monopoly in a market that's neither competitive nor competently or consistently regulated, you tend to operate as if there's no repercussions for your actions -- because there usually aren't.

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Filed Under: broadband, competition, false advertising, truth in advertising
Companies: charter communications, charter spectrum, windstream


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  • identicon
    Bobvious, 14 Apr 2021 @ 5:36am

    $19 Million. Piffle

    That will get buried on page 197 of the Annual Report, in Appendix F, without explicit mention, along with all the other fines, as Aggregated Miscellaneous Costs Of Defending against Competition.

    reply to this | link to this | view in chronology ]

  • icon
    DannyB (profile), 14 Apr 2021 @ 6:02am

    As long as it put competitor out of business, it's a success!

    In 1982, my then boss told me a story about one of the many monopolist tactics.

    Xerox had designed this new office copier. Another large business machines company who knew nothing about copiers got one, took it apart, designed their own based on it. On the strength of their huge sales force who already had established contacts with large numbers of business customers, they were able to sell their own cloned copier and take bulk of the market.

    Xerox sues (patent infringement would be my guess). Xerox wins. Judgement $100 Million. Cheap at the price for the big business machines company who now had the market, and one more line of income servicing these machines they had just sold.

    So I'm sure Charter is delighted at a mere $19 Million fine if it puts their competitor out of business.

    (Hope I remembered the key details correctly.)

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 14 Apr 2021 @ 7:10am

      Re: As long as it put competitor out of business, it's a success

      I have absolutely no idea what you're referring to. Xerox is (and was) the "big company" in office copiers, I can't find any time when they were seriously threatened in that market. Certainly not before the 1980s, when Xerox easily dominated the market.

      There were two different anti-trust cases brought against Xerox (one by SCM, the other by Van Dyk Research). The Van Dyk lawsuit alleged that Xerox had created a culture of renting (rather than buying) copiers, which was anti-competitive because Van Dyk couldn't afford to manufacture copiers for rent. SCM claimed that Xerox's refusal to grant SCM a license to its patents violated the Sherman and Clayton acts.

      Both resulted in legal victories by Xerox, rather than a legal loss followed by a financial victory.

      reply to this | link to this | view in chronology ]

      • icon
        DannyB (profile), 14 Apr 2021 @ 10:00am

        Re: Re: As long as it put competitor out of business, it's a suc

        I could be mis-remembering the year by a couple years. I remember hearing the story. It is possible the story is not true.

        reply to this | link to this | view in chronology ]

  • icon
    Scary Devil Monastery (profile), 14 Apr 2021 @ 6:12am

    I swear, the more I hear...

    ...the less I think of the US "markets".

    Honestly, when did the US switch to an economy built out of graft, bad faith and conmanship?
    I'm pretty sure this isn't what Adam Smith had in mind.

    reply to this | link to this | view in chronology ]

    • icon
      sumgai (profile), 14 Apr 2021 @ 6:49am

      Re: I swear, the more I hear...

      Honestly, when did the US switch to an economy built out of graft, bad faith and conmanship?

      Right about the time that we graduated from school more lawyers than we needed to defend the accused in courts of the land. The "overstock" became corporate lawyers, and I think you can guess where this is going.....

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 14 Apr 2021 @ 6:53am

      Re: I swear...

      Are there now any US corporattions that you trust? Why?

      Are there any US legislative bodies that you trust? Why?

      What should the US economy be based upon?

      reply to this | link to this | view in chronology ]

      • icon
        Scary Devil Monastery (profile), 14 Apr 2021 @ 7:57am

        Re: Re: I swear...

        "Are there now any US corporattions that you trust? Why?"

        I trust them to do anything at all they think they can get away with to grow 6% from last quarter. When Pfizer screamed about "compulsive licensing" over Africa finally getting AIDS medicine and India getting vaccinations or when Shkreli decided dying people were the ones to gouge with a 5000% price hike - that's when I saw the lower bar on US corporations. I trust them to utterly ignore longterm planning if it gets them a good return for this fiscal year. I trust them to addict people by putting cocaine in the coka-cola and extra nocotine in tobacco. I trust them to buy judges, scientists and politicians.

        "Are there any US legislative bodies that you trust? Why?"

        None. in the US of today the body politic is bought and sold. And the ones with the deepest pockets are the corporations. Current US politics is not a compromise between the voters choice, it's a pick between which corporate sock puppet the voters prefer.

        "What should the US economy be based upon?"

        An actual market with sufficient regulatory oversight by government to ensure the playing field is level. Rather than, as is now, a "consumer's choice" of twenty different flavors of vaguely poisonous or subpar bullshit, most of whom are in the end produced by the monopoly megacorp owning all the manufacturers of the product.

        Ironically today the european market is far more free than the US, despite a million times more strictly enforced regulation.
        Less effective, to be sure, but at least when I buy beef patties at the local grocer I know the meat isn't diluted with pink slime and heat-sterilized downers.

        reply to this | link to this | view in chronology ]

        • icon
          crade (profile), 14 Apr 2021 @ 9:12am

          Re: Re: Re: I swear...

          Corporations are a double edged sword, and their harm is also their benefit. The rules need to be set up to structure their motivations correctly. Corporations are like robots, if you have bad rules, you will get bad actions from corporations.

          Of course, if you allow the few people running the corps to influence the rule making disproportionately in any way other than the few votes they should be getting compared to other voters then you will have rules made to benefit those few individuals instead of democratic ones, then you get bad rules and therefore bad actions from the corporations. You shouldn't allow that sort of thing.

          reply to this | link to this | view in chronology ]

          • icon
            crade (profile), 14 Apr 2021 @ 9:30am

            Re: Re: Re: Re: I swear...

            In other words, if you don't want coke to get people addicted to cocaine you just need to set up the rules to say they can't do that and they will happily go about making money in less destructive and more productive ways

            reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 14 Apr 2021 @ 8:26am

      Re: I swear, the more I hear...

      Adam smith is a much misunderstood man. He was actually a social justice activist, who lived in an era when much trade was regulated by government fiat and handed to favoured merchants, resulting in the trapping of most of Scotland in perpetual poverty from which there was no hope of escape. His free market philosophy was a very practical attempt to improve the lot of the poor in his native land which, by and large, worked to some degree. He didn't trust businesses or businessmen in the slightest, but had the insight that, if forced to compete with each other, they could better the lot of the common man.

      Too many these days see the ills of rampant and rapacious monopolistic capitalism and espouse a retreat to market management not too different from the kind Smith opposed, not seeing that it would make matters worse, not better. Worse still are the market ideologues who see "free market" as only meaning free for government, not understanding that, without competition, markets are not free and operate solely for the benefit of the monopolists. Adam Smith would oppose both, which unfortunately seem to comprise the majority of the political discourse in this day and age.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 14 Apr 2021 @ 6:56am

    considering the amount Charter probably made from this 'SCAM' and let's face it, it is definitely a SCAM, perpetrated by a giant company that should no better and showing the lengths it and others will go to to preserve it's market position and income, $19M is nothing! it will happen again and others will probably follow. until there is serious punishment given, ie, jail time, just as would be and is given to ordinary individuals for doing even minor 'offences', no changes are made! this is typical punishment because so many of the politicians and law makers get kick backs from this behaviour, that's why when the laws are made, they are to the benefit of companies, not ordinary people.

    reply to this | link to this | view in chronology ]

  • icon
    freakanatcha (profile), 14 Apr 2021 @ 8:12am

    If Congress would just look under the sofa...

    They'd find all kinds of monopolies that harm consumers and reduce competition.

    Instead of getting a case of the vapours over Twitter & FB, be nice if the folks in charge would unwind Comcast's monopolies to end the constant rate hikes, lousy speeds, & crappy support.

    reply to this | link to this | view in chronology ]

  • icon
    TheResidentSkeptic (profile), 14 Apr 2021 @ 8:51am

    The math works.

    Take in $100M in scam charges.
    Donate $10M to campaigns.
    Get fined $20M.

    $70M Profit. Sounds like a normal business plan to me.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 14 Apr 2021 @ 10:52am

    Where's the lie?

    This week, the company's under fire after it circulated advertising telling customers (falsely) that one of its competitors (Windstream Communications) was going out of business. … Yet Charter's advertising to customers informed them the company would likely be shuttering its doors soon.

    I'm not seeing what part of the ad is false. The parts quoted by Ars don't say Windstream's going out of business or say anything's "likely", but merely imply the possibility of service discontinuation. The actual claim is "uncertainty", which is true though incredibly misleading. There's a lot of uncertainty for Windstream's creditors—not likety to include many residential customers—and some uncertainty about whether residential accounts would be sold to another ISP.

    But on what basis did the court rule it was "untrue"? That seems like something that could be easily turned around on appeal. It would've been more appropriate to claim the ad was misleading or unfair, not false.

    reply to this | link to this | view in chronology ]

  • icon
    That One Guy (profile), 14 Apr 2021 @ 2:31pm

    If that's their argument...

    "Charter claimed that punishment for its "literally false and intentionally misleading advertising campaign would violate their First Amendment right to free speech," the judge wrote.

    You know your position is indefensible when you're reduced to arguing that there should be no penalties for intentionally and knowingly lying about your competitors in an attempt to trick people into switching to you.

    That said certainly sounds like Charter's lawyers just argued that the company and those that run it are defamation-proof since any attempt to punish speech against them would fly in the face of the speaker's first amendment rights, a position I'm sure they'll be honest and consistent in applying should any of their competitors give them the same treatment they tried to hand out.

    reply to this | link to this | view in chronology ]


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