AT&T-owned DirecTV has defeated the bulk of a $4 billion lawsuit filed by the Federal Trade Commission, which wasn't able to convince a judge that DirecTV ads deceived customers about the price of service.

The FTC sued DirecTV in March 2015, alleging that the nation's largest satellite TV provider used deceptive advertising to get consumers to agree to price increases of up to $45 per month and early cancellation fees of up to $480. The FTC was seeking refunds for affected consumers.

But a judge's ruling on Thursday gutted the FTC's case against DirecTV, which has been an AT&T subsidiary since July 2015. "The FTC's ambition in attempting to show that over 40,000 advertisements were likely to deceive substantially exceeded the strength of its evidence," wrote Judge Haywood Gilliam, Jr. of US District Court for the Northern District of California. "This case did not involve the type of strong proof the Court would expect to see in a case seeking nearly $4 billion in restitution, based on a claim that all of DirecTV's 33 million customers between 2007 and 2015 were necessarily deceived."

The FTC failed to prove that DirecTV violated prohibitions on false or deceptive advertising in its TV commercials, online banner ads, newspaper ads, and direct mailings, the judge wrote. The judge has not yet ruled on whether DirecTV deceived customers on the directv.com website, but he wrote that "the FTC's case as to the websites was far from overwhelming."

"The evidence at trial conclusively established that the FTC failed in its case-in-chief to meet its burden of proving [an FTC Act violation] based on any of DirecTV's non-website advertisements," Gilliam, Jr. wrote.

Potential refunds for consumers were greatly limited by the judge's ruling. "Because the Court has granted Defendant’s motion for partial findings to the extent the FTC’s case is based on anything other than Defendant’s website, the scope of the maximum potential recovery in this case has been substantially curtailed," the judge wrote.

Caveats “buried in fine print”

The FTC argued that DirecTV ads for a discounted 12-month programming package were deceptive because they "fail[ed] to clearly disclose that the package requires a two-year contract."

DirecTV prices rose by up to $45 per month in the second year, and cancellation fees of up to $480 applied when customers canceled before the two years were up, according to the FTC.

"DirecTV also fails to disclose that its offer of free premium channels for three months is in fact a negative option continuity plan that requires consumers to proactively cancel to avoid automatic charges on their credit or debit cards," the FTC alleged when it filed its lawsuit.

Gilliam, Jr. noted that "the FTC does not contend that any of the over 40,000 advertisements it purports to challenge contained affirmatively false representations." Instead, the FTC argued that DirecTV ads were likely to mislead reasonable consumers because the caveats were not disclosed prominently enough.

In the FTC's opening statement at trial, the agency said that DirecTV's disclosures in ads, "if they exist at all, [are seen] flashing briefly on the screen, hidden behind hyperlinks, buried in fine print, or obscured by dense paragraphs of legal text."

But the FTC did not provide enough evidence to prove that reasonable consumers would be misled, Gilliam, Jr. wrote. The judge's decision said:

First, as to the very small number of advertisements actually analyzed by its expert witnesses, the FTC failed to establish that there was any misleading "net impression," or even to identify clearly what it claims the net impression was. Neither a facial review of these advertisements nor the FTC's extrinsic evidence established that these materials are likely to mislead a reasonable consumer. Second, the FTC also failed to articulate what common net impression is conveyed by the over 40,000 challenged advertisements (which spanned several different formats), or to explain how and why that impression would be likely to mislead a reasonable consumer.

The FTC hasn't said yet whether it will appeal the ruling.