Satellite

DirecTV Suit Accuses EchoStar of False Advertising

6/23/2004 4:47 AM Eastern

DirecTV Inc. filed a lawsuit against direct-broadcast satellite rival EchoStar Communications Corp. last week, accusing Dish Network’s parent of using false advertising to target subscribers in areas served by Pegasus Communications Corp.

The suit -- filed June 18 in the United States District Court, Central District of California -- alleged that EchoStar “has created false and misleading advertisements” to coerce DirecTV subscribers in Pegasus areas to drop DirecTV and switch to Dish.

DirecTV announced June 1 that the National Rural Telecommunications Cooperative no longer had the exclusive rights to distribute its service in its territories, which terminated Pegasus’ exclusive agreements, as well. Pegasus then filed for Chapter 11 bankruptcy protection two days later.

However, DirecTV said in its suit, “Regardless of this dispute, both DirecTV and Pegasus have made clear in press releases and on their Web sites that consumers receiving DirecTV programming in Pegasus territories will have no interruption of their service.”

According to DirecTV’s suit, EchoStar has created ads for its retailers in Pegasus-served areas making false claims such as, “Warning, Pegasus customers! DirecTV may turn off your TV channels,” and “DirecTV by Pegasus customers may lose their TV channels.”

According to DirecTV, the EchoStar ads falsely stated that the affected subscribers will be unable to receive DirecTV signals after Aug. 31, and that those customers must switch to Dish in order to continue receiving satellite programming.

DirecTV claimed that EchoStar has distributed these advertisements to its retailers and placed them on its retailer Web site, as well as running radio advertising with the same messages.

“We believe our advertising is factually accurate,” EchoStar responded in a prepared statement. “It informs Pegasus customers of the risk that they may lose service and the great alternative available to them by switching to Dish Network. We intend to vigorously defend against the litigation.”

“To complement its false and misleading ad campaign, EchoStar, on information and belief, has implemented a ‘Pegasus bounty’ program,” DirecTV said in the lawsuit. “This program provides its retailers with extra financial incentive to clip DirecTV subscribers from DirecTV and Pegasus in the rural regions once served exclusively by Pegasus.”

The company continued, “On its retailer Web site, EchoStar provides its retailers with a map of the Pegasus and NRTC regions to use in conjunction with the false and misleading advertisements referred to above.”

DirecTV added, “Once DirecTV loses a subscriber based on EchoStar’s false and misleading ad campaign, DirecTV may never again be able to develop a relationship with the subscriber.”

The company is seeking “a temporary restraining order, a preliminary injunction and a permanent injunction prohibiting EchoStar and its affiliates” from continuing to state that the Pegasus customers’ service is in jeopardy, and from soliciting customers on that basis.

DirecTV also wants the court to require EchoStar to “contact in writing all subscribers whom EchoStar or its retailers have communicated with as the result of the advertisements and inform those subscribers that EchoStar’s prior advertising claim that DirecTV may turn off its satellite-television service was false, and that DirecTV and Pegasus remain committed that there will be no interruption.”

September