The Federal Trade Commission sued DirecTV in federal court on Wednesday, claiming deceptive advertising by failing to adequately disclose price increases in the second year of two-year pay-TV contracts and hundreds of dollars in early-cancellation fees.
The satellite TV operator also does not clearly tell subscribers that they have to cancel premium channels when free promotion periods end or they will be charged for the channels, the government claimed in the suit, filed in San Francisco.
"DirecTV sought to lock customers into longer and more expensive contracts and premium packages that were not adequately disclosed," Edith Ramirez, the chairwoman of the FTC, said in a statement. "It's a bedrock principle that the key terms of an offer to a consumer must be clear and conspicuous, not hidden in fine print."
The government said the price increases in the second year of DirecTV contracts could be an additional $45 a month. Early-cancellation fees of $480 could be charged subscribers, the agency said.
DirecTV, based in El Segundo, Calif., said it had done nothing wrong.
"The FTC's decision is flat-out wrong, and we will vigorously defend ourselves, for as long as it takes," company spokesman Robert Mercer said in a statement. "We go above and beyond to ensure that every new customer receives all the information they need, multiple times, to make informed and intelligent decisions. For us to do anything less just doesn't make sense."
DirecTV, which has about 20 million subscribers, is the second-largest pay-TV operator. The government said instances of deceptive advertising date to 2007.
AT&T Inc. proposed acquiring DirecTV for $48.5 billion in May 2014. The Justice Department and the Federal Communications Commission are reviewing the proposed deal.