Verizon Communications Inc. (VZ) To Pay a Record $7.4 Settlement with FCC

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Verizon Communications Inc. (NYSE:VZ) has reached today the largest settlement in the Federal Communications Commission’s history, by agreeing to pay $7.4 million in order to settle an investigation about its failure to send opt-out notices to approximately two million of its customers, meaning that it effectively unlawfully used the personal information of affected consumers for marketing purposes, FCC said today in a statement. In addition, the company has also agreed to inform all customers of their privacy and opt-out rights in every bill for the next three years.

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Verizon Communications Inc. (NYSE:VZ) did not inform approximately two million of its new customers about their privacy rights, which includes not informing them on how to opt out of having their sensitive personal data, such as the billing and location, accessed and used for marketing purposes. The Communications Act makes the protection of the data mandatory, the report stated. Phone companies can only access and use such information in some very specific cases, such as for marketing purposes, but only when they are being specifically approved by the customer through an “opt-in” or “opt-out” process.

Travis LeBlanc, Acting Chief of the FCC’s Enforcement Bureau, said that companies have duty to inform customers of their privacy choices and respect those choices.

“It is plainly unacceptable for any phone company to use its customers’ personal information for thousands of marketing campaigns without even giving them the choice to opt out,” he said.

Verizon Communications Inc. (NYSE:VZ) did use an “opt-out” process for many of its customers, sending notices in the form of a message in their welcome letter or their first bill. Still, approximately two million of its customers did not get such opt-out notice, for the period from 2006 till 2012, an action through which Verizon Communications deprived this group of consumers of their “right to deny it permission to access or use their personal information for certain marketing purposes”, the statement said.  Moreover, Verizon Communications failed to report the discovery of the problem to the FCC within the allowed five business days, doing so only after as many as 126 days after the discovery.

Warren Buffett‘s Berkshire Hathaway is a large shareholder of Verizon, owning over 15 million shares as at the end of the second quarter 2014.

 Disclosure: none

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