Federal regulators looking into AOL

Tim (tbyars@earthlink.net)
Fri, 21 Jun 1996 17:10:49 -0700

By Jim Davis
June 21, 1996, 1:45 p.m. PST

Suspecting that America Online may be overcharging its
users, government regulators are
looking increasingly askance at the online service,
and the company may in fact soon face a
Federal Trade Commission probe, according to a report
from Business Week.

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

Now the FTC 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 characterized any billing discrepancies as
"isolated incidents" in an open letter from
President and CEO Steve Case 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."

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. 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."

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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