America Online agreed to keep its customers better informed about changes in its pricing practices under a $2.6 million settlement with 44 states, including Utah, which was announced Thursday.
The agreement was touted by state attorneys general as giving consumers new protections when AOL raises prices or changes its services."We believe that the agreements reached with AOL will greatly benefit all Utahns as we enter the ever-expanding world of the Internet," said Utah Attorney General Jan Graham. "The disclosure requirements and other safeguards will help Utah consumers make informed decisions when using America Online, and, ultimately, other online services."
Graham praised AOL for cooperating with the states to resolve the consumer protection issues named in the lawsuit.
Consumer protection elements of Utah state government saw changes in AOL's billing structure as troublesome in December 1996. Other states did as well, leading to the federal lawsuit.
"AOL had a history of misleading consumers on changes in costs and services," Michigan attorney general Frank Kelley said. "This agreement will stop those practices by requiring AOL to inform customers up front of any modifications."
Thursday's settlement agreement is the third between states and the nation's largest online provider.
The company, based in Dulles, Va., agreed to provide at least 30 days notice - via e-mail or through a pop-up screen online - of any changes in its pricing or contracts.
It agreed to make clear that its trial offer of 50 free hours must be taken in the first month of service, and that customers must specifically cancel the service if they wish to avoid being charged each month after that. AOL must mail customers a written confirmation of cancellation.
Whenever entering a game or other premium area, customers will now be greeted with pop-up screens telling them of additional charges.
AOL also agreed to give consumers conspicuous reminders to be sure that the telephone numbers they use to access the service are local, so they won't get charged for long-distance calls. And the company will show a pop-up screen informing customers of additional charges if they use its toll-free number when local access is unavailable.
AOL spokeswoman Tricia Primrose said the agreement ended two years of talks with the states, and said many of the terms of the agreement had already been implemented. Dan Curry, a spokesman for the Illinois attorney general's office, said the agreement settled all pending issues between AOL and the states.
America Online did not admit any fault as part of the agreement, which followed an investigation into the company's advertising and pricing practices. The $2.6 million will be shared by the states to cover the costs of the investigation.
Barbara Petito, spokeswoman for Pennsylvania Attorney General Mike Fisher, said her office was pleased with the agreement.
"We're pretty convinced we have a very positive working relationship with (AOL) and they're going to abide by this agreement," Petito said.
This is the third settlement AOL has made with states since December 1996. At that time, AOL settled with 19 states and agreed to provide clear notification when the company switched customers to a $19.95 a month plan.
In February 1997, the company agreed to refund customers the equivalent of one month's charges after a system overload left many people unable to connect to AOL. With Thursday's settlement, AOL has paid out a total of $34 million.
The company is dealing with the increased scrutiny that comes from becoming a mass medium, said Adam Schoenfeld, an analyst with consultant group Jupiter Communications. "Some of the old wink and nod practices have had to change," he said. "AOL has been fairly forthcoming in making the changes, but I think they would have preferred not to have been under threat from the states."
The states involved in the agreement were Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin.