4 Probes Reportedly Focus on PacBell Sales Tactics
Pacific Bell’s aggressive sales pitches and advertising are under investigation by state regulators and at least three district attorney’s offices acting on complaints that the company’s methods are deceptive and a form of fraud, according to sources familiar with the probes.
Investigations underway in Alameda, Monterey and San Mateo counties mirror an ongoing inquiry by the California Public Utilities Commission, which regulates phone and energy companies. PUC hearings on the case are set to begin Thursday.
Hundreds of customers have complained that the San Francisco-based phone company is using misleading advertising and sales tactics to pressure them into buying packages of add-on phone services that they don’t need or want.
None of the district attorney’s offices involved would confirm the investigations. And a PacBell spokesman said the company has no knowledge of any district attorney investigations into PacBell “for any reason.” But sources familiar with the probes say the inquiries involve PacBell’s highly successful push to boost sales of special phone equipment, inside wire repair plans, caller ID and other phone features.
PacBell, which San Antonio-based SBC Communications acquired in 1997, has adopted aggressive sales programs and quotas that result in employees selling customers voice-mail or three-way calling for fax and computer lines and pressuring them to sign up for services they say they can’t afford, employees and customers told The Times.
In addition, many customers have complained to the PUC that features were added to their bills even though they repeatedly rejected the sales pitches.
Service Representatives Allege ‘Cramming’
PacBell’s employees--motivated by fear of missing sales goals or by eagerness to win bonuses--are increasingly resorting to underhanded selling, including “cramming,” the practice of adding charges to a phone bill without the customer’s permission, according to many service representatives who asked not to be named.
Company officials deny that the new sales efforts mislead customers and dismiss the notion that the incentive plans lead to unethical sales.
“I’m not looking to make quick sales to customers, because it will hurt us long-term,” said Michael Kaufman, president of PacBell’s consumer marketing group.
Kaufman said that the company does not tolerate unethical actions and that it has fired several employees for improper sales methods.
As the state’s largest phone company, PacBell--with more than 16 million business and residential phone lines--provides local service to the majority of Californians. Each month, the company’s sales representatives handle 3.5 million customer calls dealing with everything from billing problems to phone book orders.
But according to company documents obtained by The Times, service representatives are required to push for orders and read lengthy sales scripts--regardless of the purpose of the call.
“I want Pacific Bell to succeed, because I want my job, but the way they are going about it is totally unethical,” said PacBell employee Ramona Givens, who has worked for the company 20 years, the last 10 as a service representative. “We’re not explaining all the services, and customers are not understanding what they’re getting.”
Under PUC rules, phone companies are required to provide customers with complete explanations of service options and are barred from providing misleading information. The PUC has the power to assess fines and order refunds.
Sources said the district attorneys have begun looking into complaints against PacBell as potential violations of consumer protection laws related to deceptive marketing and advertising.
This is not the first time the company has been accused of marketing abuses. In 1986, state regulators ordered PacBell to refund $63 million to customers misled by sales programs.
The potential damage to PacBell from the current investigations could extend beyond customer refunds. Any formal rebuke of its methods would probably damage SBC’s standing with regulators, who are reviewing its pending merger with Chicago-based phone company Ameritech as well as its request for permission to expand into the long-distance business.
PacBell representatives are required--under threat of being fired or disciplined--to first offer a package that costs $24.95 per month and includes voice-mail, caller ID and nine other features ranging from call waiting to repeat dialing and priority ringing, sources say.
If the customer declines the first offer, employees are required to counter the person’s objections and then “fall back” to progressively smaller bundles of service. If the customer declines all those offers, employees must try to sell a phone or individual calling services, PacBell sales documents show.
Dave Mitchell, a computer programmer in Dublin, Calif., said a PacBell telemarketer called him in October to offer a service package.
“I told them no repeatedly, and they kept saying, ‘How about this? How about that?’ and on and on and on,” he said. When the telemarketer told Mitchell that he would get the services free for a month anyway, he replied, “Fine.”
He said he later received a bill--with the extra charges--and was forced to call the company to have the issue resolved.
Internal PacBell documents show that the incentive plans give employees credit for all features sold, even if the transactions are later disputed or the items removed. High sales totals are rewarded with cash bonuses, trips, television sets and other prizes, according to employees and company documents.
Employees Appeal to Watchdog Group
One PacBell employee said that in a single day she removed 14 calling features, two caller IDs and one voice-mail. “All of those customers said that they never ordered any of that,” said the service representative, who asked not to be identified. “I had one lady cuss me out and hang up on me.”
In a “plea for help” letter to a consumer watchdog group, 29 PacBell service representatives expressed discomfort with the intense pressure to sell.
“These changes are all directed to making Pacific Bell much more profitable--but this profitability comes at the expense of customer service and service representatives’ personal ethics,” the letter states.
Inquiry Has a Familiar Ring
PacBell acknowledges that it wants to increase orders and that it sometimes promotes certain products. But Kaufman said employees are merely required to offer those products and are not punished for failing to meet sales quotas.
“Customers may not know what they need, and I think we owe them the right to know what’s available and if there’s a big discount,” Kaufman said.
PacBell has tacitly acknowledged the rise in feature disconnects. In internal documents obtained by The Times labeled “Save Our Products,” the company instructs employees to talk customers out of canceling add-on services, even if they say they never ordered them in the first place.
Bob Curry of San Luis Obispo said that in June he placed an order for call waiting. But weeks later, he said, he received a caller ID phone and an extra charge on his PacBell bill.
“I said, ‘All I want is call waiting,’ and they kept saying, ‘Well, that’s part of Package A or Package B,’ ” Curry said. “I got a bill with about 15 things on it that I didn’t want or need.”
The current investigations are reminiscent of the 1986 case in which state regulators found PacBell guilty of marketing abuses and ordered the company to halt its telemarketing and sales incentive programs and distribute refunds.
At the time, PacBell blamed any misdeeds on rogue sales representatives. The PUC’s cease-and-desist order was lifted in 1990, though PacBell did not reinstate any incentive-based sales programs for several more years.
But fliers noting similarities between the old and new marketing cases have begun circulating within PacBell: “Coming soon to a state near you: cease and desist--the sequel. Feel the agony of sticking it to seniors. See the PUC do an investigation. Hear the company ring up those refunds.”
Many employees fear that they again will shoulder the blame if PacBell is found guilty of any misconduct.
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Calling for
Complaints
Pacific Bell customers with phone service complaints can call the company at (800) 310-2355, or the California Public Utilities Commission at (800) 649-7570.
