Comcast Itching for a Fight With FTC Over Ad Claims

Last Updated Nov 5, 2009 2:12 PM EST

You'd think that Comcast -- being once bitten by the FTC -- would now be twice shy. But no. The cable TV provider refused to cooperate with a voluntary inquiry into its ad claims that it serves customers with a "fiber-optic network," and the case has been referred directly to the FTC as a result.

Back story: Verizon challenged Comcast in the Council of Better Business Bureau's National Advertising Division to prove that its network had fiber optics. Verizon alleges that while part of Comcast's network is indeed fiber-optic cable, the bit that goes into customers' houses is only regular coaxial cable.

Even though Comcast knew that NAD's policy was to refer companies to the FTC for investigation if they refuse to participate in the challenge, Comcast demurred. (There is an understanding that NAD referrals go to the top of the FTC's in-box.)

Strategically, the decision is an odd one because Comcast is not popular with the FTC. In April of this year the feds fined Comcast $900,000 for repeatedly making telemarketing calls to customers who had begged the company never to call them again. Comcast had made 900,000 unwanted calls.

Comcast's reason for not participating with the NAD was that Verizon's lawyer was conflicted and might gain access to confidential information that could help Verizon in unrelated multidistrict litigation against Comcast.

Comcast's decision merely accelerates any future potential confrontation between the FTC and Comcast. It's an especially strange move because the FTC historically dislikes repeat offenders. Note that in the FTC's statement on the April fine, FTC chair Jon Leibowitz said that "we will be especially tough on companies that ignore their obligations under prior court orders." No specific court order is at stake here, but you can see the general principle.

And Comcast had choices: The NAD process is voluntary, has an appeals process, and is not legally enforceable unless the FTC gets involved. In other words, Comcast could have tied up Verizon and NAD for months if not years before arriving at the top of the FTC's Bay Boys list. And yet the cable company has chosen to go looking for trouble.

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