Nothing irritates wireless customers more than
learning after the fact that their cell phone
provider has unilaterally changed the terms of their
service agreement. Now, the U.S. Supreme Court is
being asked to rule on the issue.
Virtually every cell phone contract gives
companies permission to change service agreements.
Most also require consumers to agree that they will
not file suit to settle disputes but will submit to
binding arbitration, using arbitrators appointed by
the company.
Theres not much individual customers can do
about this, but at least one state is trying to go
to bat for the lowly consumer: In 2004, Minnesota
enacted a law that requires cell phone companies to
provide notice and get customer permission before
changing the terms of the customers contract.
Not surprisingly, cell phone companies were
unhappy, and just two weeks before the measure was
to take effect, cell phone companies filed a lawsuit
in United States District Court, arguing that
federal law preempted the statute.
Under federal law, states are not permitted to
regulate the rates charged by cell phone companies,
but may regulate other terms and conditions of cell
phone contracts.
In September of 2004, U.S. District Judge John
Tunheim issued a decision siding with the state,
finding that the new law was an appropriate consumer
protection measure regulating the terms and
conditions of cell phone contracts.
The cell phone companies appealed to the Eighth
Circuit Court of Appeals, which reversed Judge
Tunheims decision in December of 2005. The Eighth
Circuit concluded that the Act regulated the rates
of cell phone services and, therefore, was preempted
by federal law. Under the Eighth Circuits decision,
the Act cannot be enforced.
Now, Minnesota Attorney General Mike Hatch has
filed a petition with the United States Supreme
Court requesting review of the case.
"The Eighth Circuits decision leaves citizens at
the mercy of cell phone companies, which are now
allowed to change the terms of a customers
contract, including the rates they charge, without
the customers knowledge or consent," said Hatch.
"By requiring notification and permission from cell
phone customers, our law provides basic fairness
that is currently missing in the relationship
between cell phone companies and their customers."
The Supreme Court will consider the petition and
decide whether to hear the case. If it decides to
hear the appeal, it will likely happen during the
20062007 term.
The Act
The Consumer Protections for Wireless Customers
Act was enacted in May of 2004 after the legislature
heard from cell phone customers that companies
routinely changed the terms of their contracts,
including the price, without their knowledge or
consent.
Customers testified that when they found out
about the changes, they tried to terminate their
contracts only to be hit with a termination penalty
of $150 or more.
The appeal raises critical questions about the
rights of all 50 states to protect their citizens
from the unfair business practices of a very
powerful industry, hatch said.
In 2004, almost 185 million Americans had cell
phones, and at that time the Attorney Generals
Office received more complaints about cell phone
companies than against all local telephone companies
and energy utilities combined.
The Act involved in the cell phone lawsuit
includes the following provisions:
• Requires cell phone companies to provide customers
with a copy of their contracts.
• Requires cell phone companies to give customers
advance notice of contract changes which could
increase the cost or extend the length of the
contract.
• Cell phone companies must get consent from their
customers before increasing the cost or extending
the length of contract.
• If a customer proposes a change in service, such
as adding night and weekend minutes, the cell phone
company is required to notify the customer if the
change will increase the cost or extend the length
of the contract.