Five Democratic US senators allege that AT&T's use of forced arbitration clauses has helped the company charge higher prices than the ones it advertises to customers.

The senators pointed to a CBS News investigation that described "more than 4,000 complaints against AT&T and [subsidiary] DirecTV related to deals, promotions and overcharging in the past two years." But customers have little recourse because they are forced to settle disputes with AT&T in arbitration, according to Sen. Al Franken (D-Minn.), Richard Blumenthal (D-Conn.), Ron Wyden (D-Ore.), Patrick Leahy (D-Vt.), and Edward Markey (D-Mass.).

"Forced arbitration provisions in telecommunications contracts erode Americans' ability to seek justice in the courts by forcing them into a privatized system that is inherently biased in favor of providers and which offers virtually no way to challenge a biased outcome," the senators wrote in a letter yesterday to AT&T CEO Randall Stephenson. "Forced arbitration requires consumers to sign away their constitutional right to hold providers accountable in court just to access modern-day essentials like mobile phone, Internet, and pay-TV services."

Forced arbitration provisions such as AT&T's also "include a class action waiver; language which strips consumers of the right to band together with other consumers to challenge a provider's widespread wrongdoing," they wrote.

When contacted by Ars today, AT&T argued that arbitration is better for consumers than courts of law.

“That tells me they're cheating people”

The CBS News story the senators referred to begins with the following passage:

Gary Raia signed up for an AT&T promotion—Internet and DirecTV for around a $100 a month for two years. When his first bill in July was nearly double that, he complained to AT&T. "Every month you open up your envelope and you go, 'OK, what's the surprise this month?'" "As I am talking to them, I get on the Internet and I look at the special," Raia told CBS News. "Their special is $99.99 and I say, 'can you just look at the Internet?'" Months later, he was still paying a lot more. "That tells me that they're cheating people," he said.

The senators said they are "particularly concerned about AT&T's treatment of customer complaints alleging that the company charged a higher rate for services than initially offered in a deal or promotion." The CBS News report found problems in AT&T's process for resolving customer complaints and that in the past two years, "only 18 out of AT&T's nearly 150 million subscribers sought accountability for these—or other—issues through individual, forced arbitration proceedings," the senators wrote.

The senators asked for details on how many complaints AT&T has received about breaches of deals, offers, and promotions in the past two years. They also want information on how many of those complaints were handled in an arbitration process, the average dollar amount of consumer claims, and data on what percentage of complaints "were heard by the same arbitration provider."

"What efforts is AT&T taking in response to the CBS News investigation to ensure that it is fully honoring its promotions and that customers receive consistent information from customer service representatives?" the senators asked. They requested a response by June 30.

Federal Communications Commission member Mignon Clyburn wants the FCC to limit pre-dispute arbitration clauses, but no such change is likely to happen under the commission's Republican leadership. Franken has authored Senate legislation that would ban mandatory arbitration clauses, but Congress is also controlled by Republicans.

Supreme Court ruling went AT&T’s way

The terms of service for AT&T Internet and DirecTV require customers to "agree to arbitrate all disputes and claims" against AT&T. Class actions and trials by jury are prohibited, although individual cases in small claims courts are allowed. Even in arbitration, similar claims by multiple customers cannot be consolidated into a single case unless AT&T agrees to waive that requirement.

The AT&T Internet terms of service describe small claims court as "the exclusive alternative to arbitration." AT&T will pay for the arbitrator's fees when customers make claims for up to $25,000 (or $75,000 in the case of DirecTV), although customers can be forced to reimburse AT&T for those fees if the arbitrator finds the claim is frivolous.

AT&T and DirecTV customers are given 30 days to reject future changes to the arbitration provision, but there isn't any way to opt out of the arbitration/small claims provision altogether. By contrast, Comcast and other ISPs offer a method for opting out. AT&T confirmed to Ars that arbitration and small claims court are the only options for its customers.

The company did provide us with a general statement on its use of arbitration.

"We have been widely recognized for having one of the most consumer-friendly arbitration policies in the country—one federal court said our arbitration agreement has 'perhaps the most fair and consumer-friendly provisions this Court has ever seen,'" AT&T said. "The agreement provides strong incentives for us to resolve disputes prior to arbitration, and we resolve the vast majority before arbitration begins."

The federal court statement referenced by AT&T came from a US District Court ruling that found AT&T's "class action ban [was] unconscionable under California law," according to a Law360 article.

"Despite ruling it unconscionable, Judge Dana M. Sabraw of the US District Court for the Southern of California hailed the contract as having 'perhaps the most fair and consumer-friendly provisions that court has ever seen,'" the article said. AT&T ultimately won that case when the US Supreme Court ruled in 2011 that the Federal Arbitration Act "preempts California’s rule classifying most collective-arbitration waivers in consumer contracts as unconscionable."

AT&T said that it pays consumers a $10,000 premium "if the arbitrator awards the consumer more than our final settlement offer."

The company resolves the vast majority of consumer claims before arbitration, AT&T said.

"Arbitration is always convenient for the consumer because any hearing takes place in the county where the consumer resides and, for claims under $10,000, the consumer may choose whether the arbitration will be in person, by telephone, or by written submission," AT&T said.