It’s not unusual for a company to offer unhappy customers a special deal to hold onto their business. But at some point, do all those discounts become unfair to customers who pay full price?

That was at the core of a case recently presented to the California Court of Appeal (Ramsey v Comcast Cable.)

Charles Ramsey started subscribing to Comcast Cable Communication’s Xfinity cable TV service at his Santa Clara County home in 2009. As a new customer, Comcast offered him a “limited time promotional rate” good for one year, after which the price of his subscription would increase.

When his promotional rate was about to expire, Ramsey decided he didn’t want to pay the higher standard rate for his cable TV service and contacted Comcast to cancel his subscription. A salesperson offered him an upgraded package with additional TV channels and higher internet speeds, but Ramsey declined, saying he only wanted the basic service.

After more discussion, the sales rep eventually offered a “new” one-year promotional rate for the same services Ramsey had been receiving.

This continued every year, with Ramsey calling when his promotional rate was about to expire and Comcast offering him a new promotional rate lower than he would have paid if he had allowed his service to renew as scheduled.

In 2021, Ramsey sued Comcast in Santa Clara County Superior Court, alleging violations of California statutes aimed at protecting consumers and preventing unfair competition.

He argued that it was not fair for the company to give discounts to some customers while failing to let other customers know that such discounts were available. He asked the court to issue an injunction against these “unfair or deceptive acts or practices” in order to “prevent future injury to the general public.”

He said he had signed up for Comcast’s services at costs “he reasonably believed to be the accurate, true, and the actual price of those services,” when in fact, the company offered “secret and unearned discounts on their services to select consumers” and “concealed the existence of these discounts” from the public.

This practice of “issuing secret rebates constitutes an unfair business practice” that harms consumers as well as Comcast’s competitors, he argued. It also violates consumers’ right to see and rely on accurate and truthful advertising, including statements about the pricing for the company’s services, he said.

Ramsey did not seek monetary damages. He asked only that the court bar the practices he cited and award him his costs and attorney’s fees.

Comcast asked the court to compel Ramsey to submit his claims to arbitration. It pointed out that he had accepted the terms of the company’s subscription agreement, which since 2011 had contained a clause saying any “dispute” would be “resolved through individual arbitration.”

Furthermore, starting in 2021 the subscriber agreement also included a waiver of all class, collective, and representative claims, so arbitrators could provide relief only for an individual customer’s claim and not “for or against or on behalf of anyone who is not a party” – such as other customers, or members of the general public who were not Comcast subscribers.

The trial court denied Comcast’s request for arbitration. It cited a 2017 Supreme Court ruling (McGill v Citibank) which said an arbitration provision that waives a plaintiff’s right to seek injunctive relief on behalf of the general public is “contrary to California public policy” and thus unenforceable.

Comcast appealed, arguing that the trial court erred in concluding that Ramsey was seeking “public injunctive relief.” The company said the injunction he requested would not benefit the general public, but only a subset of its subscribers: those receiving promotional rates who were thinking about whether to renew. It also said the McGill decision is preempted by the Federal Arbitration Act (FAA).

The appellate justices rejected Comcast’s reasoning.

They noted that public injunctive relief primarily benefits the general public, and benefits the individual plaintiff only incidentally or as a member of the general public. Ramsey’s complaint, they said, aimed to enjoin Comcast from engaging in allegedly “unfair or deceptive” acts or practices “to prevent future injury” to its current and potential customers.

Private injunctive relief, to the contrary, aims to rectify individual wrongs in a private dispute between the parties, and benefits the public only incidentally, if at all.

The justices agreed with Ramsey that any consumer considering Comcast’s services would want complete and accurate information about what happens after promotional pricing ends “without misrepresentations and concealment.” More transparent pricing would benefit existing Comcast subscribers and any consumer considering subscribing to its service, the justices said.

As for Comcast’s claim that the FAA preempts the McGill rule, they said the California Supreme Court has already said that it did not.

The justices affirmed the trial court’s ruling allowing Ramsey to litigate his claim in court rather than before an arbitrator.

Consumer services companies will sometimes include language in their agreements to force their customers to arbitrate disputes, but may fail to keep up with the ever-changing case law that governs such agreements. 

By Laurie Murphy