Why Magic Jack is Ripe for A Major Government-Initiated Suit

dampier · Post by **dampier** » Fri Jan 30, 2009 11:23 pm

Magic Jack is really playing with fire with a lot of their advertising claims and actual practices. It's a virtual certainty that the clock is ticking before a state Attorney General's office starts investigating (I'm putting my money on Andrew Cuomo - NY Attorney General). Cuomo absolutely loves to file suits against companies that seem to hold up funds or place arbitrary limits on customers.

My bet is that the areas the company has significant exposure include:

1) The 30 day free trial that puts temporary holds on customer's credit or debit cards. The debit card hold is the one that could trip up a consumer with a low balance checking account as they may be unprepared for the temporary unavailability of their funds while the authorization hold waits to drop off. Customers need to be advised up front that a "free trial" involves a temporary hold on funds in their credit line or checking account which become unavailable until the authorization hold expires. Checks can bounce, overlimit fees can kick in, and credit scores can be impacted by such things.

2) The arbitrary time limits on calls, which began at 30 minutes, went to 60, and is now apparently 120 minutes. Customers are not notified of the changes to the service, and while many terms and condition contracts do permit changes, most states require consumer notification of the changes.

3) The abysmally deceptive and sleazy marketing of the product, from a website bereft of appropriate contact information to deceptive offers that claim to expire imminently but never do, customer counters that do not legitimately reflect actual customer numbers, bait and switch multi-year discount offers which claim up to five years of service, but actually turn out to include the current year one has already paid for (meaning four years of additional service, not the five promoted), and frankly deceptive infomercials which do not honestly reflect the actual performance and reliability of the product.

4) A "warranty" which often turns out to be non-existent. Many customers report that a defective MagicJack unit cannot be exchanged at no cost except during a very limited period of time (during the first month for example). After that, customers are told to purchase another unit. No definitive and uniform warranty policy seems to be in force.

5) Vaporware product features. Number portability, expanded exchanges for local numbers, and capacity increases have all been promised but either not delivered or provided on a very delayed basis.

Attorney Generals frequently bring suits against companies based on how an average consumer might interpret or understand a company's products or policies. They have the freedom to move beyond the terms and conditions customers are forced to agree to (which often give a company the right to do pretty much anything), because they themselves are not adherents to those policies. Their role is to enforce state consumer protection and uniform business law, and no terms and conditions can usurp those.

Some states are aggressive about obtaining financial relief for end consumers (NY and CA in particular), others routinely settle for fines which end up going into general state revenue accounts.

It's highly likely that as MagicJack increases its exposure to end consumers and gets more attention, its incredibly poor business record (the company earned an F from the Better Business Bureau which has temporarily been rescinded based on the promise of the company founder to improve service) means it's almost certainly going to face scrutiny in the near future by one or more states.

The games need to stop. I urge MagicJack to provide a more credible customer support infrastructure, revise its policies to ensure customers are more truthfully informed about the policies and limitations of the service, and recognize that regardless of its price point in the market, once a reputation is sullied and word spreads, people will reject the product no matter what it costs. And defending against a multi-state investigation for consumer fraud will assuredly be a costly endeavor, bringing even more negative publicity.

Anne · Post by **Anne** » Sat Jan 31, 2009 7:31 pm

Chill out.
Anne

az2008 · Post by **az2008** » Sat Jan 31, 2009 8:01 pm

dampier wrote:Attorney Generals frequently bring suits against companies based on how an average consumer might interpret or understand a company's products or policies.

I agree. But, one factor to interpret is the product's low price. When you buy a Yugo you can't expect the features of a Mercedes. How much responsibility does a buyer have to weigh the claims of the company and know they're buying a $1.66 per-month service?

dampier wrote:recognize that regardless of its price point in the market, once a reputation is sullied and word spreads, people will reject the product no matter what it costs.

I agree with that. Regardless of the what Dan can get away with legally, he has already damaged his reputation. Not just because something that costs $1.66 per month may be disappointing, but due to his own inept business practices which seem *designed* to disappoint, and to showcase his (apparently bad) character.

He does things that are entirely within his control, having nothing to do with money. Like the way he sold 4 years of service as 5. And, this was just *three* days after promising the BBB he would improve his business practices which led to so many bitter complaints.

These things go to Dan's character (or his judgment due to surrounding himself with low-brow people). Not just cutting corners due to the low price.

And, there are a lot of people who choose whether to patronize a business based upon things like this, not just whether it's $1.66 or $1.88 per month. When they get the impression that the people behind it have no principles nor concern for their reputation, a lot of people don't care how much money they may save.

Mark

MOA · Post by **MOA** » Mon Feb 02, 2009 12:00 am

You are forgetting the one major factor ...

How much MJ contributed to there election or re-election campaign

Anne · Post by **Anne** » Mon Feb 02, 2009 5:26 am

Someone please tell me where MJ is getting all this money. They can't be rolling in it at $20 a year. I asked Customer Service, but they said they were not allowed to discuss it.

Thanks, Anne

az2008 · Post by **az2008** » Mon Feb 02, 2009 11:35 am

Anne wrote:Someone please tell me where MJ is getting all this money. They can't be rolling in it at $20 a year.

I think there's a significant percentage of customers who stop using MJ before their subscription expires. They can't handle MJ's occasional surprises (30-minute call caps, network degradation as we've had the past couple weeks). If the person is in their first year, MJ pockets $40.

There are some people (like me) who fell for the extra 4-5 years. I know one person who did, and they stopped using MJ. That's another $50-$60 in MJ's pocket without any requirement to provide service.

IMO, the people behind MJ and YMAX are looking at an IPO or purchase. They might be flushing out an idea, perhaps not even breaking even, with the hope of making millions by selling it to someone like Walmart or Google.

Mark

Anne · Post by **Anne** » Mon Feb 02, 2009 11:43 am

Thanks.

I bought the 5 year plan as well, couldn't get my account to accept the change, so a customer rep did it for me. Now my account reads I will have service until 2015 (from this e-mail to God's Ears).

Anne

slayersofadmin · Post by **slayersofadmin** » Mon Feb 02, 2009 9:24 pm

No matter what we pay,we are supposed to expect as advertised!
otherwise it is a scam,falls under false advertising.
I do like my magicjack,only have had it for 2 weeks,but am disappointed that it said on the official website list that "585" area code for Rochester,NY was available,but when I received the magicjack and went to set it up, its not available,also never received the confirmation e-mail for the original account so I had to set up a new account.

dampier · Post by **dampier** » Fri Feb 06, 2009 1:26 am

Chill out.
Anne

Thanks for that profound contribution to an otherwise serious topic. Charmed.

I agree with that. Regardless of the what Dan can get away with legally, he has already damaged his reputation. Not just because something that costs $1.66 per month may be disappointing, but due to his own inept business practices which seem *designed* to disappoint, and to showcase his (apparently bad) character.

Dan, or someone within his company, has now reached even lower into the barrel paying for a major blog spam campaign. See that as part of a new topic. I can't imagine what will come next.

disappointed that it said on the official website list that "585" area code for Rochester,NY

I feel for you - I'm in Rochester as well. The problem (made by many of these kinds of companies) is that they have a contract with Verizon, which provisions their dialing pool of numbers. They saw 585 in the list and said - a-ha, that solves Rochester. Only the numbers in 585 are actually in Batavia, New York, which is a toll call for Rochester subscribers. Batavia is just inside the western boundary for area code 585. They didn't take into account the local dialing area for Rochester and figured Batavia was good enough. It's not.[/quote]

mberlant · Post by **mberlant** » Fri Feb 06, 2009 1:51 am

YMAX is in the process of commissioning 2000 more 585 telephone numbers. They are 585-300-6xxx and 585-993-8xxx, and will go live on February 11th. Unfortunately, these lines are also in Batavia.

cdwaldron · Post by **cdwaldron** » Fri Feb 06, 2009 10:10 am

When I look at the list of available area codes, I don't see the city listed. Where did you see Rochester listed specifically?

mberlant · Post by **mberlant** » Fri Feb 06, 2009 1:27 pm

YMAX does not have any lines at all in Rochester. The only lines they have in all of 585 are in Batavia.

I subscribe to the NANP MAC notification service. Everything that YMAX (the CLEC that supplies DIDs to MJ, and MJ's parent company) does is published. There is no guarantee at all that MJ will rent lines in any particular exchange that YMAX has purchased (hence, why you can't find Batavia), but owing to the exclusive relationship between YMAX and MJ there is a guarantee that MJ won't be offering any numbers where YMAX doesn't have them available.

For you, the easiest way to confirm this information is to Google for NPA NNX changes and input either YMAX or 02/11/09 in your search.

cdwaldron · Post by **cdwaldron** » Fri Feb 06, 2009 2:01 pm

Thanks, mberlant, I understand that. I was wondering where 'slayerofadmin' found this "official" listing for Rochester that he refers to : "I do like my magicjack,only have had it for 2 weeks,but am disappointed that it said on the official website list that "585" area code for Rochester,NY was available"

I think this is another case of caveat emptor where the buyer figured any exchange in the area code would be free and didn't do his homework.

I would like to get a 607 area code that is free in Vestal but the only one available is Ithaca I think and that will be LD for Vestal POTS callers. [/quote]

mberlant · Post by **mberlant** » Fri Feb 06, 2009 8:41 pm

My guess is that he saw the 585 Area Code and imputed that since Rochester is by far the largest city in 585 that it would be on the list. Unlike others of us here (how I got turned on to this forum), he leapt before looking.

Before purchasing my MJ, I went to chat and specifically asked how to find out what Rate Centers are available in each Area Code, since the FAQ entry claiming that all intra-Area Code calls were free was so outrageously fraudulent. Chat folks said this information was only available after purchase during the registration process. Knowing there must be a better way, I ended up here. He didn't get here that fast.

slayersofadmin · Post by **slayersofadmin** » Sat Feb 07, 2009 2:33 pm

mberlant wrote:My guess is that he saw the 585 Area Code and imputed that since Rochester is by far the largest city in 585 that it would be on the list. Unlike others of us here (how I got turned on to this forum), he leapt before looking.

Before purchasing my MJ, I went to chat and specifically asked how to find out what Rate Centers are available in each Area Code, since the FAQ entry claiming that all intra-Area Code calls were free was so outrageously fraudulent. Chat folks said this information was only available after purchase during the registration process. Knowing there must be a better way, I ended up here. He didn't get here that fast.

Yup that was what happened,I actually made the assumption that since Rochester was the biggest city for 585 I assumed that would be it,also I did not know that prefix's also affected phone rates.
I always thought it was the area code,so I am now learning new things.
So I guess I should revamp(edit that original post)about saying Rochester was on the list.I should say that 585 was but certain prefix's are not which magicjack(and any other businesses) should be forced to state in their advertising to avoid confusion.

cdwaldron · Post by **cdwaldron** » Sat Feb 07, 2009 4:05 pm

Most local phone books will tell you what prefixes are toll free within a specific area code. It again boils down to doing your research and avoiding assumptions when possible. Are you still within your trial period? Might you return it if it doesn't meet your needs?

slayersofadmin · Post by **slayersofadmin** » Sat Feb 07, 2009 11:40 pm

Oh no,You are getting me all wrong!I am not bashing magicjack,I do like it I can live with the number I have right now.I can just tell peeps to call me and I will not answer and then just call them back.

mberlant · Post by **mberlant** » Sun Feb 08, 2009 1:29 am

slayersofadmin wrote:
mberlant wrote:My guess is that he saw the 585 Area Code and imputed that since Rochester is by far the largest city in 585 that it would be on the list.

Yup that was what happened,I actually made the assumption that since Rochester was the biggest city for 585 I assumed that would be it,also I did not know that prefix's also affected phone rates.
I always thought it was the area code,so I am now learning new things.
So I guess I should revamp(edit that original post)about saying Rochester was on the list.I should say that 585 was but certain prefix's are not which magicjack(and any other businesses) should be forced to state in their advertising to avoid confusion.

Yes, they should make the list of Rate Centers, and not just Area Codes, available on the web site prior to purchase. I know of no other VoIP provider that withholds that information.

Further, their specific false statement that all calls from within the same Area Code are free remains in the FAQ despite numerous notices to them to either change the statement to a true one. In many communities in the US (Dallas comes to mind), so-called "Metro" telephone numbers are available from the phone company for a higher price. These Metro phone numbers have a larger than normal local calling area that applies to both outbound and inbound calls. A prospective MJ customer can easily be misled to believe that this special service is included in the MJ package. Unlike other slimy gimmicks that MJ uses to entice customers, this one utilizes a patent falsehood. MJ's concious decision not to correct the falsehood confirms their culpability in the fraud.

az2008 · Post by **az2008** » Sun Feb 08, 2009 10:43 am

mberlant wrote:Unlike other slimy gimmicks that MJ uses to entice customers, this one utilizes a patent falsehood. MJ's concious decision not to correct the falsehood confirms their culpability in the fraud.

I agree. I used to give MJ a large benefit of the doubt. Just dismissed things as overzealous marketing, or the faux paus of a startup company.

But, I've seen too many things that exemplify a conscious disregard for the customer. A disregard for ethics. Even honesty.

These things are so systemic and obvious that, if it were an individual they would be clinically diagnosed as a sociopath.

Mark

Racerbob · Post by **Racerbob** » Sun Feb 08, 2009 5:55 pm

I live in Webster,NY which is in the 585 area also and I presently have an 861-xxxx phone number which sucks also. That is for Batavia,NY which is a good 35-40 miles from here at least. My neighbors next door have to call long distance if they want to call me. I was really hoping that in an area that is as large as ours that we would be getting more local exchanges added. This is one of MJ's glaring shortcomings and it would be nice to see them correct it.

mberlant · Post by **mberlant** » Mon Feb 16, 2009 12:52 am

Well, it seems that someone in MJ is a fan of this forum. Last Friday MJ modified their FAQ entry to add a *comment. The new text of the FAQ entry is:

magicJack_FAQ wrote:If your magicJack phone number is in the same area code as your friends and family, they are not charged long distance to call your magicJack phone number*. If they are in a different area code, they are subject to the rates their phone company would charge for calling the area code your magicJack is registered with.

*Please remember that some calls are not considered local calls, even though they are in the same area code. Please refer to your local carrier for more information on local and long distance calls.

Last Update: Feb 13, 2009

So, rather than erase the lie and replace it with the truth, they decided to leave the lie in place and add a comment that tells the truth.

sanderson_111 · Post by **sanderson_111** » Wed May 27, 2009 3:01 am

IMO, the people behind MJ and YMAX are looking at an IPO or purchase. They might be flushing out an idea, perhaps not even breaking even, with the hope of making millions by selling it to someone like Walmart or Google.

You could be right, but because it is a private company it makes it hard to fallow the money trail. If I could track that the money is being used in the company and not being (flowed thru to another outside company for some lic fee) I would be filing a suit tomorrow and bring it to class action in no time. But sadly if the revenue goes out the back door as fast as it comes in the only one that can really do anything against this company is the government as the legal expenses could never be recouped from a suit. I have gathered evedence that will be sent to the justice department for review and others to have them track and move on false and deceptive practices and also could be brought in towards other charges that I can't mention as of yet. With this I am sure sadly large sums of capital could be pooled from the other over charging phone companies which would love to see MJ close shop. But not to worry as other competitors are just months away from entering the market place.

When MJ advertised in the MJ window about a year ago for a short time Get 6 years for only $59.95, then changed it to 5 years and today has both 5 years and a new plan that says "With Our best deal ever!" 4 years for only $59.95 well that is an all out lie and they will be held accountable for making such a claim.

My personal opinion is that the company is just doing a massive money grab before other competitors jump in the market. Offer crazy prices for terms they don't really have any real intention of being in business for. 5 years? Heck how many people can they draw in to pay for the 5 yr plan before maybe they are shut down for the deceptive practices they seem to practice? For all we know they could have the money flowing through to another company billing them for other services etc. Sheltering the funds from suits and leaving the subscribers short changed when it all collapses and catches up to MJ the company.

If a company with such money flow can be proven to be moved in such a way and the company collapses then Fraud charges if evedence warrents it can be issued against the board members as the charges the government would have to prove would be that they used the structure with the intention to defraud the public and used deceptive practices inorder to entice and enhance the speed at which the flow of capital into the scheme. Of course this is just here say and not fact but is something that is possable with many companys with interesting and questionable structures.

Many companies use such a structure to avoid taxes others to keep capital from suit exposure and others to commit fraud.

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Why Magic Jack is Ripe for A Major Government-Initiated Suit

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false and deceptive / the evidence is now in.