October 13, 2010 / 3:12 PM / 9 years ago

States probe Sirius XM for consumer practices

NEW YORK (Reuters) - Top legal officials from five states are jointly investigating Sirius XM Radio after complaints by consumers about the satellite radio company’s billing practices and account management.

Ohio Attorney General Richard Cordray is spearheading the investigation, which began earlier this month and has been joined by Arizona, Connecticut, Tennessee and Vermont, as well as the District of Columbia.

Officials are examining a range of allegations surrounding Sirius XM’s policies on billing, customer solicitation and subscription cancellations and renewals. The company disclosed the probe in a regulatory filing on Wednesday.

The investigations come as Sirius XM, home to programs by Howard Stern and Oprah Winfrey, has found its footing and distanced itself from years of huge losses and questions about its business model. It has posted three straight quarters of profit and a steady addition of subscribers.

But its aggressive push to find new customers and retain existing ones has come under fire in some quarters. The Better Business Bureau said 3,462 complaints had been filed against Sirius XM in the past 36 months and that half of them involve billing or collection issues.

In Florida, for instance, customers said they were charged for automatic renewals of accounts they had canceled. Missouri consumers on the state’s no-call list have complained about being repeatedly contacted by Sirius XM after they canceled subscriptions. And, last year, Sirius XM was sued in federal court by a customer who accused it of deceptively increasing prices.

Sirius is not the first media company to face complaints from consumers over subscription policies.

In 2007, AOL paid $3 million to 48 states and the District of Columbia, after consumer complaints that AOL was making it difficult for customers to close accounts.

Sirius, in a statement, said it was cooperating with the investigations and that it believed its “consumer-related practices comply with all applicable federal and state laws and regulations.”

Analysts brushed off the investigation and focused instead on the strong subscriber numbers Sirius XM released for the third quarter on Wednesday. The company added 334,727 subscribers, more than three times year-earlier levels.

“All sorts of companies go through lawsuits,” said Barrington Research analyst Jim Goss. “The market hates uncertainty, but today the market seems to be enjoying these subscriber gains and high conversation rates.”

Moody’s also upgraded Sirius XM’s debt to a B3 rating on Wednesday. Debt rated B3 by Moody’s is considered speculative and subject to subtantial credit risk.

Sirius XM shares rose 5 cents to $1.40 on the Nasdaq.

Reporting by Liana B. Baker; Editing by Lisa Von Ahn, Derek Caney and Steve Orlofsky

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