Analyzing the Recent Verizon-Netflix Business Dispute Under Florida’s Unfair Business Practices Law

By: Jeff Lieser Posted on: Tuesday, July 8th, 2014

Ahhhhh…the weekend is here. It’s time to relax and watch your favorite Netflix show. Uh-oh. Why is it taking forever to download? What are all those little dots?

“The Verizon Network is crowded right now.
Adjusting video for smoother playback…”

Smart tv and hand pressing remote controlA few hundred thousand customers of Verizon and other internet service providers (ISP) recently saw this error message while experiencing slow downloads and grainy picture quality as they were trying to watch videos on Netflix. Worried that the message would tarnish its otherwise sparkling reputation, Verizon sent a message of its own to Netflix in an indignant cease-and-desist letter dated June 5, 2014.

Verizon demanded that Netflix take down the message, calling it a deceptive and unfair business practice. Verizon wanted proof that the diminished service was solely Verizon’s fault, as well as a list of Verizon customers who were shown the message. Failure to provide this information, Verizon warned, could lead to legal action. Unaffected by the threat, Netflix stated on June 9, 2014, that the error message had been sent to customers of Verizon and other ISPs as part of a test that would continue until June 16, 2014.

Florida Deceptive and Unfair Trade Practices Act (FDUTPA)

Although Verizon has not sued Netflix yet, a legal analysis of a potential claim against Netflix under FDUTPA is interesting and worth considering. FDUTPA allows a plaintiff to seek a court order prohibiting another from engaging in deceptive or unfair practices. The Act also permits recovery of damages caused by those practices. A deceptive practice is one that is likely to mislead a reasonable consumer and affect his or her actions regarding a product. F.T.C Policy Statement on Deception, Oct. 14, 1983. An unfair practice is one that violates public policy and is unethical or unscrupulous.  Urling v. Helms Exterminators, Inc., 468 So. 2d 451, 453 (Fla. 1st D.C.A. 1985).

Verizon: Message Gives Customers Wrong Impression of Verizon

Verizon blames Netflix for the substandard service, claiming that Netflix chooses to send video content from its servers through paths that may be congested well before connecting to Verizon’s network. Therefore, according to Verizon, the message is inaccurate and misleading and has the potential to make customers think that the Verizon network is generally too crowded and troublesome to stream video on other sites, such as Hulu and YouTube. In short, Verizon is worried that the message will cause its customers to cancel their Verizon internet service.

Netflix: Message Gives Customers Correct Impression of Verizon

Keep in mind that Netflix is not Verizon’s competitor. Netflix needs Verizon and other ISPs to deliver video content to its customers. In fact, to ensure faster speeds, Netflix has agreed to pay Verizon to gain direct access to its network, but Verizon has been slow to install the necessary infrastructure. Netflix says that it does not deliberately select congested paths, and Netflix wants its customers to know that their streaming problems are due to a lack of capacity at their ISP’s network.

Message Wouldn’t Change Customers’ Impression of Verizon

Customers were already blaming their ISPs for downloading problems before Netflix started to issue the message in mid-May of this year. One thousand U.S. consumers with streaming video capability were asked which company was most likely at fault for slow downloading speeds—the video provider or the ISP. An overwhelming 86% blamed the latter. Of the 400 consumers who used primarily Netflix for streaming, 91% blamed Verizon for streaming problems. In light of these surveys, Verizon would have a hard time winning the argument that the Netflix message deceives consumers or gives them an unfair impression of Verizon. See generally, Firestone Rhodes Pharmacal Co., Inc. v. F.T.C., 208 F.2d 382 (7th Cir. 1953); Firestone Tire & Rubber Company v. F.T.C., 481 F.2d 246 (6th Cir. 1973); F.T.C Policy Statement on Deception, Oct. 14, 1983 (reliable consumer surveys admissible to prove whether a particular statement is likely considered important by consumers).

If your company has been accused of unfair trade practices, or your company has been harmed by another company’s unfair trade practices, let the experienced business litigation attorneys at the Tampa law firm of Lieser Skaff Alexander help you protect your interests. We will examine the legal aspects and realities of your case, advise you as to probable outcomes and find the best way to resolve the matter in a cost-effective and timely manner.

Sources:

Verizon Sends Cease and Desist Letter to Netflix Over Slowdown Notices

Netflix is making sure customers know whom to blame for slow, grainy video

Netflix Dings Verizon Again on Speed, Says It Will End ‘Blame’ Messaging Test

To Err Is Human. To Forgive Divine. To Blame It On Someone Else Is Just Business.

UPDATE 1-Netflix to stop messages blaming Verizon for slow streaming

References:

The Unexplored Territory of Unfairness in Florida’s Deceptive and Unfair Trade Practices Act

Obtaining Relief for Deceptive Practices Under FDUTPA