Sirius XM Radio Inc. (Nasdaq: SIRI) is facing a proposed class action lawsuit alleging deceptive advertising practices.
According to the lawsuit filed by plaintiffs Christopher Carovillano and Steven Brandt in the US District Court for the Southern District of New York, the company advertises its music plans at misleadingly low prices by concealing a fabricated “US Music Royalty Fee” that significantly increases the true cost of the plans.
The plaintiffs claim that Sirius XM fails to mention the words “US Music Royalty Fee” in any of its advertising, including the fine print. The only disclaimer provided by the company is that “Fees and taxes apply,” which the plaintiffs argue does not adequately inform consumers about the additional charge.
Reasonable consumers, they contend, would not expect Sirius XM to impose such a fee, let alone hide it under the generic label of “Fees and Taxes.”
The lawsuit highlights Sirius XM’s reliance on converting free trial users, who are automatically provided with a 3- to 6-month trial of the service when purchasing a new vehicle. Once these users are enticed to sign up, the company allegedly prevents them from discovering its deceptive practices by not sending periodic bills or receipts.
The plaintiffs argue that Sirius XM silently and automatically renews subscriptions without adequate disclosure or consent.
Furthermore, the complaint alleges that when a promotional rate expires, such as a $5 monthly charge that jumps to $17.99, the royalty fee also increases accordingly. The plaintiffs claim that Sirius XM intentionally misrepresents the fee as “US” to mislead consumers into thinking it is a government-related charge, while it is actually a profit center for the company.
Carovillano and Brandt seek to represent a nationwide class of Sirius XM subscribers, excluding those in California, New Jersey, and Washington, as well as a New York subclass. The plaintiffs assert that the company’s conduct violates New York consumer protection laws and raises additional claims.
Sirius XM has not provided an immediate comment. The plaintiffs are seeking damages and a court order that would prevent Sirius XM from charging the music royalty fee without adequate disclosure and consent from customers.
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