May 28, 1998 6:35 PM PDT
AOL settles case with 44 states
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Ending a two-year investigation by attorneys general that resulted in three monetary settlements, AOL also agreed to pay the states $2.6 million to cover investigative costs and future consumer protection and education efforts.
Among the terms of the agreement, AOL promised to make clear in its "Free Trial Offers" that the 50-hour free trial must be used within a month.
In the past, consumers were upset for being charged for monthly service after the 50-hour period had expired. They said the online service did not properly warn them they would be charged automatically.
AOL also promised it would disclose the cost of its toll-free access number with a pop-up screen that also gives an option for the user to disconnect without incurring any charges. In the past, consumers had filed complaints to attorneys general claiming they were not given proper notification that they would be charged for telephone access when they dialed the service using the toll-free number.
In April, New York's attorney general said he was investigating the toll-free number, for which members were being charged $6 per hour.
An AOL spokeswoman said the pop-up window had been in place for the past year.
In addition, AOL agreed to provide members with 30 days' notice via mail or email before making any price changes or material changes to member agreements. Material changes include changing fee structures, methods of access, and services available, among others, said David Corvette, a spokesman in New York Attorney General Dennis Vacco's office.
The agreement concludes two years of negotiations between the online giant and a coalition of attorneys general, led by the Illinois attorney general's office. The complaints throughout the country centered on pricing issues.
In January 1997, AOL agreed to give refunds and online time to members who were locked out by busy signals after AOL switched to flat-rate pricing and members swamped the service.
AOL also refunded customers who felt they were overcharged when the online service automatically switched them from lower-priced plans to a flat-rate price plan of $19.95 per month.
"They were reactions to immediate problems where action was needed to stop the bleeding. In this case, it's more preventive medicine," Corvette said.
In July 1996, AOL also settled a class action suit, separate from the attorneys general investigation, in which the online service agreed to give refunds to members who felt they were overcharged by AOL's old hourly fees.
As a result of previous state negotiations and two prior settlements, AOL has paid $34 million in restitution to consumers in the past, state officials said.
The group of 44 attorneys general involved as well as AOL itself have emphasized that they hope today's agreement will set a standard among other Internet service providers to promote clear warnings and disclosure of policy changes.
"We are pleased to have developed with the attorneys general?a set of clear, consistent, and customer-focused standards for the Internet industry," George Vradenburg, AOL's senior vice president, said in a statement.
"What we hope this does is to set the bar at a high point to establish a standard for all other online services to follow," added Corvette. "We think that it will be of benefit to all consumers in the burgeoning online and Internet market. We will give consumers the tools they need to make informed choices about services they want before they incur charges for those services."
Reuters contributed to this report.