Dish Network has agreed to pay $210 million in penalties to the US government to settle a multi-year lawsuit, which alleged that the satellite TV provider violated telemarketing practices.
According to the US Department of Justice (DoJ), Dish Network (DISH) will pay $126 million in civil penalties to the US for making millions of telemarketing calls to promote and sell its satellite TV and programming services, which were in violation of the Federal Trade Commission’s Telemarketing Sales Rule (TSR). The satellite provider will also pay a combined $84 million to four states for violations of the Telephone Consumer Protection Act.
“This settlement represents the largest civil penalty ever paid to resolve telemarketing violations under the FTC Act, and exceeds the total penalties paid to the government by all prior violators of the TSR,” according to a statement by the DoJ.
The lawsuit, which was first filed in 2009, went to trial in 2016. The plaintiffs, including the states of California, Illinois, North Carolina, and Ohio, alleged that Dish made millions of unlawful telemarketing calls to consumers and was responsible for millions more made by retailers that marketed their products and services.
“We have long taken our compliance with telemarketing laws seriously and we maintain rigorous telemarketing compliance procedures and policies,” Dish commented in a statement. “While we respectfully disagree with the underlying liability judgment, which involved telemarketing calls made between 2003 and 2011, this matter is now resolved.”
In an SEC filing, the company said that it has until January 3, 2021 to make the penalty payment. (See DISH stock analysis on TipRanks)
In a 2017 opinion, Dish was found liable for more than 66 million telemarketing violations of the TSR and other federal and state statutes, imposing compliance measures and awarding the plaintiffs with $280 million in civil penalties and damages, out of which $168 million was to be paid directly to the US and $112 million to the state plaintiffs. Earlier this year, the US Court of Appeals for the Seventh Circuit affirmed those liability findings, but ordered that civil penalties and damages be recalculated.
In reaction to the settlement, Raymond James analyst Ric Prentiss reiterated a Buy rating on the stock. “While the $210M payment due by January 3, 2021, will present a headwind to cash flows, we view the resolution of this matter as a positive for DISH, especially with the payment being less than the accrual, and the Pay-TV business generating significant free cash flow,” Prentiss commented in a note to investors.
Overall, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 3 Buys and 2 Holds. With shares up 3.5% this year, the average price target stands at $47.67 and implies upside potential of about 30% to current levels.
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