AOL to settle class-action suits

America Online has reached an agreement to give away millions of free hours to settle several lawsuits.

CNET News staff
2 min read
America Online has agreed to give away millions of hours to settle several lawsuits accusing the online service of misleading billing practices.

Attorneys representing AOL subscribers in 11 class-action lawsuits said Friday that they have received preliminary approval from a San Francisco Superior Court judge that would award free hours to current subscribers and cash to former customers.

"We believe that this settlement represents a fair resolution of claims raised against America Online in numerous lawsuits," the attorneys said in a joint statement.

According to the lawsuits, consumers have not been aware that charges for online time are rounded up to the next full minute. Additionally, AOL was charged with adding 15 seconds to each session for "connection" time and with occasionally billing customers for time spent in designated "free" areas.

The settlement applies to those who subscribed to the service between July 15, 1991, and March 31, 1996. Current subscribers would receive one free hour, and customers who spent more than $300 during the five-year period would receive one additional hour for each $300 in charges.

Former subscribers who spent more than $300 would be eligible to receive cash based on a similar calculation through a simple claims process. Under the proposed settlement, America Online would be required to pay a maximum of $500,000 to the entire class of former customers.

The company also agreed to "promptly implement" improved billing and cancellation procedures, the lawyers said.

America Online had about 5.5 million subscribers as of March 31. During the period covered by the settlement, the company charged $10 per month for five hours of connect time, plus about $3 for each additional hour. Last week, the fees were changed to $20 per month for 20 hours of connect time, which values each hour given away under the settlement at $1.

AOL has acknowledged in recent weeks that its billing practices are being scrutinized by the Federal Trade Commission and attorneys general from several states. Last month, America Online chairman Steve Case said the company hoped to settle the class-action lawsuits quickly, as well as adequately address the various investigations.

Nevertheles, Case said, the agreements would not have an "adverse impact" on the company. America Online stock closed at 41-1/8 Friday, down 2-1/4 points.