immediate release -- Thursday, December 5, 1996.
AOL Agrees to Protect Customers
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.
As It Changes Pricing Plans
"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
"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.