AT&T sued for allegedly inflating DirecTV Now numbers with fake accounts

A new lawsuit alleges that AT&T inflated subscriber totals for DirecTV Now (which has been renamed AT&T TV Now) by creating fake accounts for the streaming service.

The suit – which was filed by investor law firms Pomerantz and Labaton Sucharow in the U.S. District Court for the Southern District of New York – accuses AT&T of lying to investors about the success of its virtual MVPD. It called AT&T TV Now “unreliable and prone to technical flubs, was of only marginal interest to AT&T customers, and, in a misguided attempt to compete with other content providers, was priced so low that it could not generate meaningful revenue to the company.”

The lawsuit said that “unrelenting pressure and strong-arm tactics” from AT&T's senior management to increase sales led employees to slip DirecTV Now, and its monthly fee, into subscriptions of AT&T customers without their knowledge. It also says that promotions and giveaways enticed some customers into willingly signing on for a DirecTV Now subscription, but that many of them never used the service and most stopped subscribing as soon as their heavily discounted promotions ended.

RELATED: AT&T loses 946K DirecTV, DirecTV Now subscribers in Q2

The suit also accuses top AT&T executives, including CEO Randall Stephenson and CFO John Stephens, of falsely praising the performance of the product in public statements.

“It was all a mirage… grounded in deception and fraud,” the suit says. The plaintiffs are seeking class action status for their amended lawsuit.

AT&T has said it will defend itself against the allegations.

"We plan to fight these baseless claims in court," AT&T said in a statement to FierceVideo.

The legal dispute over AT&T TV Now’s subscriber numbers and overall success comes after the service again lost a significant amount of subscribers. In the second quarter, AT&T TV Now lost another 168,000 subscriber, bringing its total to 1.34 million subscribers (down 25.9% year over year).