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AOL calls billing problems isolated

As investigations loom, AOL says any billing discrepancies were "isolated incidents"

Responding to reports that America Online's billing practices are being investigated, CEO Steve Case characterized any discrepancies as "isolated incidents" in an open letter posted today in its community forum.

"As members have brought issues to our attention, we've established a pattern of acting promptly to correct problems and provide our members with important information that they need to know," Case said in the letter. He also noted that AOL alerted members to their disclosure practices and "isolated incidents of inaccurate billing."

Last week, it was disclosed that the New York state attorney general's office was investigating how AOL calculates the amount of time it charges for. AOL already faces lawsuits filed by subscribers in California, Pennsylvania, and other states that charge the company with overbilling.

Now the Federal Trade Commission is looking into AOL's billing practices to see if they violate federal regulations, according to a government source quoted by Business Week. The FTC is specifically examining whether AOL, as well as other online service providers, makes it difficult for users to cancel their subscriptions after their free trial period has ended.

AOL's Case acknowledged that the company has been in "discussions" with the FTC and various state attorneys general regarding business practices in the industry as a whole. "The issues being discussed include electronic funds transfer policies--and expanded advertising disclosures about service trial and cancellation policies," he wrote.

"We are working toward satisfactory resolution of all these matters--including reaching agreements with the plaintiffs in the class action and the FTC--as quickly as possible...We do not believe the changes we have made or will make to business practices will hamper our ability to serve our membership," Case added.

Nonetheless, the suspicion of impropriety has already cost AOL on the stock market. After trading as high as 53 points early in June, news about investigations combined with financial analysts' reports that AOL's growth will slow brought its stock price down to 39-1/2 at the close of market yesterday. Case's reassurances seem to have had the effect of halting yesterday's slide, with the price actually gaining slightly so far in trading today.

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