DirecTV raises its prices: violation of contract with existing customers?

DirecTV has announced that it will raise prices on new and existing customers in the coming year, even though many of those existing customers are currently under contract with the satellite television provider which they believed would lock in the pricing scale at the time they signed up. Like other satellites companies, DirecTV requires new customers to commit to a two year contract. It initially claimed the contract was to cover the price of the included equipment, but policy shifts have taken the equipment out of the equation, leaving the contract requirement not justifiable reason to exist and instead merely serving to force customers to stick around whether they remain satisfied with the service or not. The price increase makes clear that only one of the two parties is contractually obligated to anything at all, as DirecTV is claiming the right to raise prices without giving customers the right to leave. This begs the question of whether DirecTV is violating contractual law by raising prices, and whether customers have any legal ground to stand on…

It’s worth pointing out that the price increases for 2013 are what DirecTV says is an average of 4.5%. That means that the typical customer paying $45 per month will now be paying $47 per month instead. But if the two year contract requires customers to continue paying after prices have been increased, what would stop DirecTV from raising prices by 200% and requiring customers to stick around anyway? Realistically, very little. In order to protect itself, the company has likely included legal language in the contract which allows it to raise prices. Then again, the DirecTV signup process never actually places a contract in front of you and never asks you to sign anything, so customers could make the legal argument that they were never made aware of the price increase clause and never agreed to it. It wouldn’t be the first time a major utility company changed contractual policies in a manner which violated the law. When AT&T began capping the unlimited data plans which its longtime customers had been contractually entitled to, several of them took the carrier to small claims court and promptly walked out with a few thousand dollars. However AT&T’s lawyers ended up changing the policy so that it didn’t technically violate the contract language but still managed to screw customers out of their unlimited data. We’ll see if DirecTV customers try revolting in the same manner in which Netflix customers did last year…

Part of what caused the Netflix uproar is that the service had always been based on the idea of low pricing, and its $10 a month flat rate for limitless content led to widespread backlash when it attempted to raise the price to a mere $16 a month. In contrast DirecTV charges a minimum of $45 or so per month for a basic package, with some customers paying more for the basic package and many others paying far more for premium channels. The variable pricing, combined with the fact that it was never marketed as a super-inexpensive service to begin with, will work in DirecTV’s favor when it comes to public sentiment. While customers will become upset, they may not find enough of a voice to force the company to rescind its price increases. For its part DirecTV claims that although it’s raising prices by an average of 4.5%, its actual cost of operations has increased 8% and it’s eating the remaining increase.

Will Stabley
Will Stabley is the Founder and Senior Editor of Stabley Times.
Will Stabley