Minimum Rate Pricing

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[edit] Minimum Rate Pricing

Minimum Rate Pricing, Inc. (MRP) was a telecom company based out of New Jersey, which was involved in a major scandal concerning the slamming of small businesses using telecommunications services.

Under a consent decree agreement with the Federal Communications Commission (FCC), MRP agreed to voluntarily pay $1.2 million dollars to the U.S. Treasury by a consent decree in 1998 for fraudulent billing of customers. This consent decree contained the largest voluntary payment in any FCC slamming-related consent settlement to date, and detailed measures MRP would take to protect consumers against having their long distance carrier changed without their authorization, a practice known as "slamming."

The consent decree with the FCC was the product of an investigation conducted concerning numerous slamming allegations against MRP. In October 1997, the Common Carrier Bureau proposed an $80,000 forfeiture against MRP for apparently substituting itself as the long distance company for two consumers without their authorization. After the affected customers returned to their preferred carriers, MRP then apparently took action to switch the customers back to MRP based upon automatic switch-back provisions in its tariff.

Although MRP was also accused of "slamming" customers (as have numerous long distance companies, including AT&T) the most novel aspect of MRP's practices was its statements to prospective customers that they could save money compared to AT&T, MCI, and Sprint, because they set their rates to provide a percentage discount from the "minimum" basic rate of these three long distance companies.

In fact, this claim appears to have been true, at least with regard to interstate calls, but is nevertheless deceptive because of the likely inference that customers will be actually receiving the "minimum" rate (rather than the minimum basic rate) of these companies.

MRP subsequently eliminated its switch-back provisions, but the Bureau continued its investigation into other slamming-related issues concerning MRP's business and marketing practices. Today's Consent Decree culminates the FCC's investigation. MRP, whose principal place of business is Bloomfield, New Jersey, did not admit any wrongdoing in this proceeding.

One of the principal executive officers of MRP, Thomas L. Salzano, later became known for allegedly being behind the collapse of the would-be telecom giant Norvergence in one of the largest pyramid schemes in telecom history.

Norvergence was accused of fraudulently signing small businesses to long-term telecom hardware leasing agreements under false pretenses. Norvergence then sold those agreements to third-party financial institutions for up-front money, cancelled the service, and the small businesses were still liable to the third-party financial institutions for the 5-year contracts, even if never receiving a day of service.