Microsoft Settles Lawsuit Over Its Internet Billing Practices
Microsoft Corp. has agreed to pay more than $100,000 and change its billing practices to settle a consumer protection suit alleging that the company continued to charge California customers for Internet service they tried to cancel, prosecutors announced Tuesday.
The settlement ends a 3 1/2-year probe into complaints that Microsoft failed to promptly close Internet accounts when customers tried to end their service. Microsoft refused to cancel a subscription unless the customer could provide the credit card number used to bill the account.
During the investigation by the Orange County district attorney’s office, Microsoft produced two dozen complaints from angry customers in Orange County and throughout California.
But prosecutors said the number of affected consumers could be much higher, and under the settlement, California subscribers who believe they were overcharged can seek compensation from the company.
Last Wednesday, the district attorney’s office filed a consumer protection lawsuit alleging that Microsoft’s practice of billing customers who asked to terminate their service amounted to “unlawful or unfair business practices.”
“It was apparent that the people who complained were very upset, so we decided there had to be some change in [Microsoft’s] procedures,” Orange County Deputy Dist. Atty. Andrea L. Burke said.
While admitting no wrongdoing, Microsoft promised to reimburse consumers as part of the settlement and to scour records from as far back as 1998 to find others who might have been improperly charged. Company officials also agreed to make it easier for customers to end Internet service.
The case is the latest in a series of legal claims filed on behalf of customers against the software company.
Microsoft is in the midst of trying to settle more than 100 consumer antitrust lawsuits, including the high-profile claim filed by the U.S. Department of Justice. In addition, nine states, including California, and the District of Columbia continue to press for tough court sanctions against the company over alleged monopoly practices.
In the Orange County case, prosecutors said that any overcharging by Microsoft was probably not deliberate. Rather, it occurred because of the company’s billing policies.
Subscribers to the Microsoft Network who telephoned the company to cancel their Internet service were asked for credit card information as proof of identification. Sometimes, a customer’s credit card had been upgraded or replaced due to theft, so the card no longer matched the number listed in Microsoft records.
When the numbers did not match, customers were asked to produce bank records to prove they were the account holder, prosecutors said. Meanwhile, Microsoft allegedly continued to bill them for service they no longer wanted.
The monthly cost of the services ranged from $4.95 to $19.95, with some customers being overcharged for up to four months’ service, Burke said.
Microsoft was “trying to make sure they were dealing with the correct customer,” she said, “but the effect on consumers was that they couldn’t immediately terminate their account.”
Microsoft officials said they are willing to compensate anyone who was overcharged.
“Our intention has always been to make account changes convenient but also secure,” company spokesman Matt Pilla said. “We apologize if this created any inconvenience for customers.” The settlement, which was also signed by the California attorney general’s office, was approved Monday by Orange County Court Commissioner Dennis Keough.
Under the agreement’s terms, Microsoft will pay $75,000 in fines and reimburse prosecutors $25,000 for the cost of their investigation. The company will pay back subscribers with free Internet access or credit card reimbursements.
In the future, company officials will refer subscribers with similar credit card problems to a supervisor, who will try to resolve the problem.
“This addresses an issue that customers were concerned about,” Burke said. “It should give them some immediate relief.”
