FTC, 14 States Question AOL on Billing Practices
America Online Inc. said Friday that the Federal Trade Commission and 14 state attorneys general have been asking about its billing practices. The company also said it is negotiating settlements to 11 class-action lawsuits in which consumers are challenging its charges.
“We are working toward satisfactory resolution of all these matters--including reaching agreements with the plaintiffs in the class action and the FTC--as quickly as possible,” AOL Chief Executive Steve Case said in an electronic memo to the online service’s 6 million subscribers. As a matter of policy, the FTC would not confirm or deny whether an inquiry was underway.
AOL, which recently moved to just north of Dulles International Airport from Vienna, Va., provides access to the Internet’s World Wide Web as well as its own proprietary services, which range from investment information to electronic shopping.
The FTC’s interest was sparked by consumer complaints, AOL Vice President for Corporate Communications Jean Villanueva said in an interview. “They came to us and said: ‘We’re getting complaints in these areas. . . . Can you get us up to speed?’ ”
The agency, which polices unfair and deceptive trade practices, has been examining whether AOL has been adequately informing consumers that they will be billed automatically for the monthly subscription fee unless they cancel their membership before a free trial period expires. Many other online services use the same approach.
The issue for the FTC is whether AOL has disclosed that billing policy well enough, not whether the policy is legitimate, an AOL official said.
To disclose the policy, AOL has relied primarily on the computer screen consumers see when they register for the service, Villanueva said.
AOL and the FTC are discussing whether the policy should also be disclosed in AOL advertising, a company official said. The company recruits members through mass mailings of its software disks, and the free trial offer has been a cornerstone of its marketing strategy.
The class-action lawsuits, the first of which were filed last year, involve additional complaints.
AOL subscribers have accused the company of billing them for more time than they actually spent online. AOL has said the confusion may have arisen from its practice of rounding each online session up to the next minute and charging for 15 seconds of online time for signing on and signing off, time not reflected on the screen display. AOL is redesigning the display, an official said.
Some consumers have complained that they were charged for time spent using what were supposed to be free AOL services. AOL’s Case called those “isolated incidents,” and another executive said they could have resulted from technical glitches. AOL executives would not say how much money, if any, the disputed charges might represent.
They said they were in discussions with state attorneys general from California, Illinois, New York, Arkansas, Arizona, Florida, Iowa, Massachusetts, Minnesota, Pennsylvania, Tennessee, Texas, Vermont and Wisconsin. Illinois has taken the lead, said Pam McGraw, AOL director of media relations.
