AOL Will Settle Billing Allegations
America Online Inc. has agreed to give millions of present and former customers free online time and cash worth a total of as much as $22 million to settle lawsuits alleging that it misled subscribers about its billing practices.
The proposed settlement, filed in San Francisco, would give many current subscribers an hour of free time online. Some former subscribers could apply for payments of $2.95 or more, depending on their past usage.
The Vienna, Va.-based company, the nation’s largest online service, also agreed to disclose more clearly the way it computes customers’ monthly charges, though it has implemented most of the changes since the lawsuits were filed last year. The 11 class actions allege the service did not adequately disclose what amounted to hidden charges.
The settlement would not directly address separate inquires into billing practices by the Federal Trade Commission and attorneys general in more than a dozen states.
The settlement document says America Online “vigorously denies . . . that it engaged in any wrongdoing and contends that it has agreed to the settlement . . . in order to avoid needless litigation costs and disruption.”
“We are committed to maintaining an active dialogue with our members, consumer groups and regulators,” America Online Chief Executive Steve Case said in a statement. “. . . It is our expectation that we will continue to refine our practices in the interest of better meeting consumer needs.”
Plaintiffs’ attorneys disclosed the settlement in response to questions from the Washington Post. It would affect anyone who was an AOL subscriber between July 15, 1991, and March 31, 1996. Neither side in the dispute would or could provide the total number of people in the class, but AOL had 5.5 million subscribers in the U.S. and Canada as of March 31.
Any eligible person who still subscribes to AOL when the settlement becomes final would automatically get an hour of free time, which costs $2.95. In addition, AOL agreed to dole out almost 1.4 million free hours to heavy users at a rate of one free hour for every $300 they were billed during the period.
Former subscribers could rejoin AOL and get an extra hour of free time beyond the free-trial period offered all new subscribers. Or they could apply for cash payments of $2.95 for every $300 of charges they previously paid.
The deal won preliminary approval from a California judge this week. The settlement would not take effect until after a final court hearing Sept. 20, lawyers said.
AOL’s vice president for corporate communications, Jean Villanueva, said “the actual costs” to the company of providing the free time “are considerably less” than their retail value. One AOL official disputed the plaintiffs’ attorneys’ estimate that the settlement has a retail value of as much as $22 million, saying $18 million would be a better estimate.
At issue were AOL’s practice of rounding each session up to the next minute for billing purposes and charging 15 seconds of connection and disconnection time for each session.
