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AOL, Compuserve Settle Federal Charges of Unfair Practices

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September 23, 2003
America Online, Inc. (AOL) and its subsidiary, CompuServe, today settled Federal Trade Commission charges that they engaged in two separate unfair practices.

The first allegation involves AOL's continuing to bill AOL Internet service subscribers after they asked to cancel their subscriptions. The other allegation involves the late delivery of $400 rebates to consumers who signed up for CompuServe Internet service.

According to the FTC's complaint outlining the charges, most AOL subscribers who want to cancel their Internet service call AOL's customer service department, but AOL's customer service representatives were instructed to try to persuade consumers to change their minds about cancelling their AOL service.

The FTC charged that AOL failed to implement appropriate measures to ensure that all customer requests for cancellation were properly executed. As a result, in numerous instances, subscribers who requested cancellation continued to be charged monthly service fees.

"No company should retain subscribers against their wishes," said Lydia Parnes, Deputy Director of the FTC's Bureau of Consumer Protection. "When consumers cancel their service, they expect the billing to stop."

The FTC's complaint also alleges that AOL and CompuServe failed to deliver timely rebates to consumers in connection with a $400 CompuServe rebate program. The companies promised consumers a $400 cash rebate toward the purchase of an eligible computer, if the consumers signed up for three years of CompuServe Internet Service at $21.95 per month. They promised that the rebates would be delivered within eight to 10 weeks, and in some cases, 45 days.

The FTC alleges that the companies unfairly extended the time period in which they delivered the rebates to consumers, causing substantial injury to consumers whose rebates were not delivered within the time promised.

The proposed consent agreement would require the companies to ensure that subscribers' requests for cancellation are promptly processed and that billing ceases.

The settlement would also require the companies to send confirmation notices to subscribers who ask to be cancelled but who supposedly change their minds. Internet service subscribers would get letters confirming that they agreed to continue their service and informing them of the terms of their continued service. If the subscribers do not wish to continue their Internet service, they would simply mail or fax back an enclosed cancellation request form.

The proposed consent agreement contains a provision that would require AOL and CompuServe to have a reasonable basis for any claims made about the time frame in which any rebate offered in connection with Internet or online service will be mailed. It also would prohibit the companies from failing to provide such rebates within the times they specify or, if no time is specified, within 30 days.

A final agreement on the proposed agreement will be announced after a 30-day period for public comments, which will be taken until Oct. 23.

Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

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