FTC Gives MoviePass Execs A Wrist Slap For Changing Passwords So Users Couldn't Watch Movies

from the wrist-slaps dept

Originally, the MoviePass business model seemed like a semi-sensible idea, though we were quick to wonder if it would ever actually make a profit. Under the model, users paid $30 (eventually $10) a month in exchange for unlimited movie tickets at participating theaters, provided they signed up for a full year of service. There were, of course, caveats: you could only buy a ticket per day, and could only buy one ticket per movie. It also prohibited users from viewing 3D, IMAX, or XD films. Still, the proposal was widely heralded by some as a savior for the traditional, brick and mortar, sticky floor movie industry.

It wound up....not being that.

In 2019, a four-month investigation by Business Insider (paywalled) found that the company had been bleeding money for years, and misleading investors for much of that time. Not only was the idea never really profitable, the company couldn't even manage to acquire enough plastic to keep up with membership card demand. Showcasing the width and depth of the dodgy effort, at one point executives genuinely thought it would be a good idea to actually change user passwords so they couldn't use the service, thinking this would let them get their head above water.

Needless to say, this behavior was so extreme it finally got the attention of the under-funded and over-extended FTC, which finally announced it had struck a settlement with MoviePass. The settlement isn't much to look at: because the companies involved are bankrupt there's no financial penalty, but the executives behind the effort are barred from “misrepresenting their business and data security practices" and "must implement comprehensive information security programs." (Execs did have to shell out $400,000 in penalties to select California counties in a different agreement).

The full FTC complaint (pdf) indicated that the company's not-so-clever password changing efforts impacted roughly 75,000 subscribers in total. Those users were first blocked from using the service, then when they inquired why they couldn't login they were falsely told they were the victim of fraud:

"Under Respondents’ password disruption program, Respondents invalidated the passwords of the 75,000 subscribers who used the service most frequently while claiming that “we have detected suspicious activity or potential fraud” on the affected subscribers’ accounts."

The full complaint is worth a read, and includes details in several other bizarre efforts execs engaged in to prevent customers from actually using a service they paid for. From the FTC press release:

"MoviePass and its executives went to great lengths to deny consumers access to the service they paid for while also failing to secure their personal information,” said Daniel Kaufman, the FTC’s Acting Director of the Bureau of Consumer Protection. “The FTC will continue working to protect consumers from deception and to ensure that businesses deliver on their promises."

It's not clear that a light wrist slap for executives years after it matters genuinely "protects consumers from deception," but in a country where a regulator like the FTC is routinely under-funded, under-staffed, and demonized, you get what you ask and pay for.

Filed Under: fraud, ftc, movies, passwords, wrist slap
Companies: moviepass

Washington State AG Fines Frontier Communications A Pittance For Its Bullshit Fees

from the 'completely-fraudulent-surcharge' dept

In telecom policy circles, there's an army of "experts" who twist themselves into pretzels trying to pretend U.S. telecom is a healthy, normal, vibrant market. Blinded by partisan loyalties, sector financial links, or ideologies embedded decades ago in grad school, they're incapable of even acknowledging that Americans pay too much money for spotty, substandard service with historically terrible customer support. They're even less likely to acknowledge the corruption, regulatory capture, and lack of competition that made this dysfunction possible. If it is acknowledged, it's downplayed to a comical degree.

As in the Ma Bell days, at the heart of U.S. broadband dysfunction sits phone companies. Providers that have long refused to upgrade their aging DSL networks despite millions in taxpayer subsidies, yet lobby for state laws that ensure nobody else can deliver broadband in these neglected footprints either. These are companies that have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising, then, that many telco DSL customers are fleeing to cable, assuming they even have a second broadband option.

The poster child for U.S. telecom dysfunction is Frontier Communications. Frontier has repeatedly been busted in a series of scandals involving substandard service and the misuse of taxpayer money. Frontier-related graft and corruption in many states (like West Virginia) is so severe, state leaders have buried reports detailing the depth of the problem, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest.

In many states, regulatory capture ensures that Frontier's behavior never sees so much as a wrist slap. That was particularly noticeable when Frontier was recently busted charging users a $10 monthly "rental" fee for modems that the users owned. Frontier, like many big ISPs, has also been given free reign to impose all manner of additional sleazy and misleading fees, usually used to help broadband and TV providers falsely advertise a lower rate.

Even in states where consumer protection is a little tougher, the penalties aren't routinely damaging enough to deter bad behavior. The latest case in point: Washington State Attorney General Bob Ferguson reached a settlement with Frontier last week (pdf) in which Frontier will pay a $900,000 fine for years of imposing bullshit fees on the company's customers. One such fee, dubbed the "Internet Infrastructure Surcharge," imposed an additional $4 monthly on user bills:

"Ferguson began investigating Frontier in 2018 after receiving more than 600 complaints and "focused on Frontier Northwest's failure to adequately disclose fees during sales of cable, Internet and phone services since 2016," Ferguson's announcement said. "For example, the company charged as much as $3.99—nearly $50 per year—for an 'Internet Infrastructure Surcharge,' without adequately disclosing the surcharge in its advertising."

Note that Frontier has 3,735,000 broadband subscribers, each paying $4 a month in completely erroneous surcharges. That's nearly $15 million in bullshit charges in just one month, or $180 million in fraudulent revenue every year. While the $900,000 fine is semi-helpful, it's far from a deterrent -- especially considering that the ISP's settlement with the state doesn't require they stop charging the bullshit fee, just that they make it clear to consumers on their bill. $900,000 is chump change to these regional monopolies.

Keep in mind that Washington is one of the most "aggressive" states in the country at consumer protection, which admittedly isn't saying much. Also keep in mind that this is just one ISP. Numerous ISPs routinely engage in this same or worse behavior, usually with absolutely no penalty whatsoever from state or federal regulators like the FCC. It's the exact sort of behavior that's only made possible by two things: a lack of competition in the broadband market, and feckless, captured regulators who are more worried about campaign contributions than outright fraud.

All ignored, in turn, but a laundry list of telecom policy experts who've made entire careers out of pretending that the US telecom sector is healthy and immensely innovative. In reality, the closest many of these companies get to innovation is in coming up with ethically dubious surcharges.

Filed Under: bogus fees, fake fees, fine, washington state, wrist slap
Companies: frontier communications

A Decade Later, AT&T Pays A Pittance For Lying About Its Unlimited Data Plans

from the ill-communication dept

Back in 2014 the FTC sued AT&T for selling "unlimited" wireless data plans with very real and annoying limits. The lawsuit noted that starting in 2011, AT&T began selling "unlimited" plans that actually throttled upwards of 90 percent of your downstream speeds after using just two or three gigabytes of data. AT&T spent years trying to wiggle out of the lawsuit via a variety of legal gymnastics, including at one point trying to claim that the very same net neutrality and FCC Title II rules AT&T was trying to kill prevented the FTC from holding it accountable.

Nearly a decade after AT&T's molestation of the dictionary began, the company has finally agreed to a $60 million settlement with the FTC without actually admitting any wrongdoing. That $60 million, after lawyers get a cut, will be split among millions of customers who signed up for AT&T unlimited data plans before 2011. Moving forward, AT&T also has to clearly disclose any limits on its "unlimited data plans" in a conspicuous manner (read: not hidden via fine print or embedded in a hyperlinked asterisk).

For a company that pulled down $46 billion in revenues in the last three months that's not much of a penalty. And because the FTC's ability to rein in telecoms is restricted only to policing offenses that are very clearly "unfair and deceptive" under the FTC act, AT&T is, of course, still imposing all manner of restrictions on its unlimited data plans, it's just being marginally more clever about it. For example. AT&T's latest "unlimited" plans, released just last month, include all manner of restrictions on how you can use them and how much bandwidth you can use, AT&T's just marginally more up front about it.

The problem is the government has been doling out wrist slaps on this subject for the better part of a decade without much to show for it. New York's Attorney General forced Verizon to dole out $100 million in refunds as long ago as 2007 in a bid to get the company to stop lying. Fast forward to 2019, and Verizon's still selling unlimited data plans with limits; in fact it now charges its unlimited data users extra if they want to actually view movies in HD. Sprint has also experimented with throttling video, music, and games on its unlimited data plans unless you pony up more cash.

Regulators have generally looked the other way while carriers use their dominance to impose arbitrary nickel-and-diming limits. But because they inform users of the restrictions in a 400 page EULA, the FTC lacks the authority to really crack down on the behavior (assuming it had the resources or bandwidth to even do so in the first place) because it's not crystal clear they're being "unfair and deceptive." The FTC's Rohit Chopra issued a statement making it clear that a lack of competition is the primary culprit here:

"AT&T’s bait-and-switch scam is a good window into the many harms that result from dominant companies operating without the discipline of meaningful competition,” he said. ”Their market power, financial resources, and one-sided information gives them license to ignore their own contractual obligations while aggressively enforcing every little clause in the fine print."

This sort of stuff is only going to get worse. While the FTC's authority is limited, the FCC was built from the ground up to hold telecoms accountable. But the FCC's recent decision to self-immolate at lobbyist request not only gutted net neutrality, it eliminated much of this authority over ISPs. It also eliminated transparency rules requiring ISPs be transparent about the types of connections they're selling. Eroding the FCC's power and shoveling oversight to a resource and authority constrained FTC was always the entire point of the gambit, something many folks still don't seem to understand.

In other words, unless states get involved (unlikely in more than half of them given AT&T's immense regional lobbying power), there's really not much stopping ISPs from misleading consumers about the type of connections they're buying, proving they're just modestly clever about it. And with the looming T-Mobile Sprint merger eroding 25% of existing competition, there's less incentive to compete on price or much of anything else. Guess what happens when you combine lobbyist-neutered regulatory oversight with limited competition?

Filed Under: competition, false advertising, ftc, settlement, transparency, unlimited, wrist slap
Companies: at&t

Separate And Unequal: Gen. Petraeus Facing Mild Wrist Slap For Leaking Eight Books Full Of Classified Info To His Mistress

from the granted-Most-Favored-Leaker-status dept

The administration still wants to punish whistleblowers and leakers, but only if it can do it with logic borrowed from Animal Farm. When it comes to prosecution, some leakers are more equal than others.

John Kiriakou -- who exposed a single CIA operative's name while exposing its waterboarding tactics -- spent more time in jail than former CIA director Leon Panetta, who has spent (at last count) a grand total of 0 days locked up for leaking tons of classified info to Zero Dark Thirty's screenwriter, Mark Boal.

Of course, some leaks just aren't leaks, at least not according to the government. Kiriakou's were wrong. Panetta's were right. And Kiriakou spent three years in prison for a lesser "crime."

Thomas Drake faced a potential 35-year sentence for his exposure of wasteful NSA spending. The government's case against him self-imploded, however, resulting in a guilty plea to a misdemeanor and no jail time.

General Petraeus, who leaked classified information to his mistress, is in line to receive the lightest of wrist slaps for his indiscretion: two years probation and a $40,000 fine. The lightness of the sentence suggested by government prosecutors belies the extent of Petraeus' wrongdoing.

What he handed over to his mistress far surpasses anything the above whistleblowers "leaked."

While he was commander of coalition forces in Afghanistan, Petraeus “maintained bound, five-by-eight inch notebooks that contained his daily schedule and classified and unclassified notes he took during official meetings, conferences and briefings,” the U.S. Attorney’s Office for the Western District of North Carolina writes in a statement of fact regarding the case...

All eight books “collectively contained classified information regarding the identifies of covert officers, war strategy, intelligence capabilities and mechanisms, diplomatic discussions, quotes and deliberative discussions from high-level National Security Council meetings… and discussions with the president of the United States.”

The books also contained “national defense information, including top secret/SCI and code word information,” according to the court papers. In other words: These weren’t just ordinary secrets. This was highly, highly classified material.

On top of that, he lied to the government about these books, first in the form of a sworn statement...

Petreaus retained those Black Books after he signed his debriefing agreement upon leaving DOD, in which he attested “I give my assurance that there is no classified material in my possession, custody, or control at this time.” He kept those Black Books in an unlocked desk drawer.

And again to investigating FBI agents.

In an interview on October 26, 2012, he told the FBI:

(a) he had never provided any classified information to his biographer, and (b) he had never facilitated the provision of classified information to his biographer.

Simply lying to the FBI has consequences far greater than those Petraeus will face. But that's because he's General Petraeus and you're not -- as 22-year-old Kirstie Barratt recently discovered.

United States Attorney Bill Nettles stated today that Kirstie Elaine Philome Barratt, age 22, of Fort Mill, South Carolina was sentenced to 24 months’ imprisonment today after earlier pleading guilty to making a false statement to a federal agent, in violation of Title 18, United States Code, Section 1001. United States District Judge Joseph F. Anderson, Jr. imposed the term of imprisonment, which will be followed by a 3 year term of supervised release. In October, Barratt plead straight up to the charge without a plea agreement. Barratt also may face deportation as a result of her guilty plea. During the sentencing hearing, Judge Anderson granted the government’s motion for an upward departure from the federal guidelines sentencing range of 0 to 6 months, noting that this was a “rare” case and that Barratt “knowingly placed a law enforcement officer’s life in jeopardy” by her false statement.

Petraeus was a trusted member of the military and the CIA. And he turned over eight books worth of classified info to his biographer/mistress just because she asked. But because he's part of the administration's arbitrarily-selected "in crowd," and because he didn't embarrass the government as much as he embarrassed himself, he's facing a sentence of nearly nothing. His suggested punishment will have zero effect on his current position at a top equity firm and his life will suffer none of the disruptions Kiriakou and Drake experienced. He'll be $40,000 poorer -- and with "deterrents" like these being deployed -- none the wiser.

What's most disgusting about Petraeus' cakewalk of a proposed sentence is that he himself took a hypocritical hardline stance on leaking after Kiriakou's sentencing.

When John Kiriakou pled guilty on October 23, 2012 to crimes having to do with sharing a single covert officer’s identity just days before Petraeus would lie to the FBI about sharing, among other things, numerous covert officers’ identities with his mistress, Petraeus sent out a memo to the CIA stating,

"Oaths do matter, and there are indeed consequences for those who believe they are above the laws that protect our fellow officers and enable American intelligence agencies to operate with the requisite degree of secrecy."

Yeah. "Oaths matter." Except when you're the one uttering them, right? Apparently, a "requisite degree of secrecy" means stashing eight books full of classified info in an unlocked desk drawer and handing them out to your clandestine SO in hopes of keeping your knob biography as polished as possible.

This administration is severely hypocritical, but seemingly no more so than in its treatment of whistleblowers. There are those who will be persecuted and punished and those whose similar indiscretions will be waved away by government prosecutors. The problem is: you may not know which of these faces of the administration you'll be facing when you decide to start blowing the whistle. Chances are -- given this administration's track record -- it will be the vindictive, angry administration that continually hopes to "send a message" with each new whistleblower/leaker prosecuted.

Those on the inside of the military/industrial/surveillance supercomplex -- who leak under the name of "anonymous official" to aid filmmakers, deploy talking points or steer narratives -- will never see this side of the two-faced administration. Their leaks are more equal than others.

Filed Under: cia, classified information, david petraeus, doj, fbi, john kiriakou, leaking, lying, punishment, thomas drake, wrist slap