Welcome to the Department of Justice, Iowa Attorney General Tom Miller

For immediate release -- Thursday, December 5, 1996.

Miller: AOL Agrees to Protect Customers
As It Changes Pricing Plans

DES MOINES.--Attorney General Tom Miller said today that Iowa and 19 other attorneys general have reached an agreement with America Online (AOL) that will protect consumers who might not have wished to be switched to AOL's more expensive new $19.95 per month flat-rate plan.

"We objected to AOL's plans to automatically convert all of its members to the new plan unless a member specifically objected," Miller said. "We call that a negative option, and it's not permissible. You cannot tell someone they have a more expensive new service without them ordering it."

Prior to December, AOL charged most users $9.95 per month for five hours of access, with additional hours "metered" at $2.95 per hour. AOL then announced recently that it would automatically shift all users to a flat rate of $19.95 per month for unlimited access (a fee now charged by many other online service providers.)

"That might be just fine for many AOL members, but our concern was that the process could be unfair to consumers who didn't notice the change and don't want the higher flat-fee rate," Miller said. "For example, there may be a lot of members who don't log-on that often who fall in that category."

Miller said AOL agreed to cooperate with the attorneys general in order to protect its members from any adverse consequences of the change. The agreement provides:

AOL must automatically provide retroactive refunds to all consumers who ask to switch back to their old plan prior to April 10, 1997. Persons who request a refund after that will also be entitled to the refund unless there is fraud or bad faith on the part of the consumer.

AOL must undertake a variety of special measures to notify members about the changes, and must obtain affirmative consent to the changes from as many members as possible. AOL will use "pop-up" screens, U.S. mail, and a toll-free number to provide information and answer questions (1-888-265-8888).

"This was tricky because we couldn't completely roll-back the automatic switch to the $19.95 per month flat rate," Miller said. "Too many people were already counting on it. On the other hand, we had to protect users who might not want the switch but hadn't noticed it and wish to keep their current plan. I think we've come up with a good solution."

Miller said the attorneys general will continue discussions with AOL about how such changes should be made in the future to avoid the "negative option" problem. He said his office has rejected negative option pricing plans in the past in connection with increases in cable television service and costs.