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AT&T hit with lawsuit alleging it faked DirecTV Now customer numbers

AT&T encouraged employees to sign customers up for the service without their knowledge, the suit alleges.

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AT&T is facing allegations it told employees to create fake DirecTV Now customer accounts.

Angela Lang/CNET

AT&T is facing a lawsuit alleging it created fake customer accounts to make it look like DirecTV Now was seeing customer growth ahead of the company's merger with Time Warner. The lawsuit, which seeks class action status, alleges AT&T "encouraged" its employees to add the service to customers' accounts without their knowledge, as reported earlier Monday by Bloomberg.

The amended complaint, filed Friday in the US District Court for the Southern District of New York, is being brought on behalf of anyone who purchased AT&T stock ahead of the $85 billion Time Warner merger.

"Employees were taught and actively encouraged to convert activation fees that customers traditionally had to pay to upgrade their phones into DirecTV Now subscriptions by waiving the fee, but charging the customer anyway," the lawsuit alleges. These fees were then allegedly applied to up to three new DirecTV Now accounts that were created using fake email addresses.

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Customers weren't told they had been signed up for subscriptions, the complaint alleges, with a former AT&T employee claiming in the lawsuit that "at least half" of all DirecTV Now accounts were "bogus."

"Another former employee ...  was seeing between 20-40 complaints per week from customers being billed for DirecTV Now despite not signing up for an account," the complaint alleges. "As one former employee put it, everyone within the sales organization 'totally knew.'"

"We plan to fight these baseless claims in court," an AT&T spokesperson said in an emailed statement.

According to the original complaint filed on April 1, AT&T didn't mention the risk factors of its price increases and promo discount decreases, which then resulted in declining subscriber numbers, in the lead-up to the merger. "Investors suffered severe losses" as a result, it is alleged.

DirecTV Now, which is being rebranded as AT&T TV Now, has been struggling, losing 168,000 users in the second quarter. AT&T is about to launch another streaming service, HBO Max, which could turn the company's video side around. 

Read the full complaint below.

Gross v AT&T by jonathan_skillings on Scribd

First published Sept. 16 at 3:45 p.m. PT.
Updated 4:30 p.m.: embeds complaint.