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

For immediate release -- Thurssday, May 28, 1998.
Contact -- Elisabeth Buck, 515-281-7687,
or Bill Brauch, 515-281-8772

Miller: AOL Landmark Settlement to Protect Consumers

America Online signs 27-page agreement protecting consumers at all stages -- from free trial periods, to ongoing service, to cancellation.

DES MOINES-- Attorney General Tom Miller said Thursday that Iowa and 43 other states have signed a formal agreement with America Online that sets standards that can be applied across the new and rapidly growing online industry. Calling the settlement a "landmark," Miller said that the protections give consumers a comprehensive battery of protections and resolve complaints the states have lodged against the nation's largest online service provider.

"We alleged that numerous AOL practices were unfair to consumers," Miller said. "For example, we alleged that AOL offered a so-called free trial offer that was in fact not free if some of the promised number of free hours were used after 30 days. We alleged that consumers sometimes unexpectedly had to pay long-distance charges to access AOL, that AOL sometimes increased its fees without adequate notice, and that consumer cancellation orders sometimes weren't honored quickly enough."

In the 27-page "Assurance of Voluntary Compliance" signed today, AOL agreed to a detailed set of practices the States sought to protect consumers.

"This agreement will give consumers a fair shake," Miller said. "It prohibits certain practices and it makes sure that consumers will receive the information they need to mak e careful choices."

"Although there are tremendous benefits to online communications, there are also pitfalls for consumers," Miller said. "This settlement shows how our consumer protection laws can work to enhance fair competition in a relatively new industry. The settlement will benefit consumers by providing needed protection. And it will benefit the industry by raising consumer confidence in the industry."

    Miller said that the settlement agreement provides protection for consumers at various stages:
  • Under terms of AOL's "Free Trial Offer," the company must make new disclosures, including that the 50-hour free trial must be used within one month, that the consumer must cancel the trial to avoid billing, and that consumers should be careful to determine if AOL maintains a local access number in their area to avoid long-distance charges. If consumers cancel their AOL service, procedures will be explained clearly in AOL under "Keyword: Cancel" and "Terms of Service," and the company must mail a notice of cancellation.
  • If AOL plans to increase its monthly fees or otherwise modify it contract with customers, it must provide clear and conspicuous notice of the changes at least 30 days in advance. The notice must be delivered by e-mail, a "pop-up" screen, or U.S. mail. The notice must describe the change, state its effective date, and direct the subscriber to an area where the change is explained in detail. If such a notice is not provided, a subscriber is entitled to a refund on any price increase.
  • AOL must notify all consumers via "pop-up screen" when they enter a game or other premium service area where charges are incurred beyond the monthly fee. The pop-up box must state the rate per minute of the extra charges.
  • AOL agreed to provide improved online tools to prevent unauthorized purchases by children or others. The tools include restrictions on setting up "sub-accounts" for children and other measures designed to help parents supervise their children and prevent them from making certain online purchases.
The 44 states that are part of the agreement are: AL, AK, AZ, AR, CA, CT, FL, GA, HA, ID, IL, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, NE, NV, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, TN, TX, UT, VT, VA, WA, WV, and WI.

AOL agreed to pay the States a total of $2.6 million for legal costs and consumer education, with Iowa's share at $76,363. AOL also has paid a total of $34 million in restitution to consumers as a result of state negotiations in two previous settlements with groups of states. The 1996 action involved AOL switching people automatically to a $19.95-per-month plan, and the 1997 action provided refunds and other measures to resolve online access problems.