AOL agrees to tone down ‘free trial offers’

Brian Seals

Thursday, May 28, 1998 | 10:04 a.m.

"Free trial offer" will have to mean just that for America Online under an agreement the company reached with the attorneys general of Nevada and 43 other states.

Nevada today joined the other states in announcing the agreement over advertising practices by the 12 million-member service -- the nation's largest online service and Internet provider.

"We got complaints and we are also working with the National Association of Attorneys General," said Richard Linstrom, senior deputy attorney general.

The agreement centers on the Dulles, Va., company's use of the phrase "free trial offer." The agreement also addresses unauthorized credit card charges and advertising targeted to minors.

"Under this settlement, AOL must notify consumers in advance whenever there is a price increase or substantial service change," Nevada Attorney General Frankie Sue Del Papa said in a written statement. "The notification must be clear and direct. The goal is to make sure that customers know all the facts so they can make informed decisions."

AOL maintains it has not broken any laws. The company agreed to pay $2.6 million to the states for fees related to the investigation. Of that amount, Nevada's general fund will receive $38,000.

Attempts to contact AOL for further comment failed.

The attorneys general maintain that customers taking advantage of free trial offers are still charged even if they don't used a proscribed number of hours within a certain time frame. Charges are also accrued under such an offer for long distance toll charges. AOL will make new disclosures that the 50-hour trial offer must be used within 30 days to avoid billing.

Also, customers are charged for subsequent service after the trial period if they fail to notify AOL they want to cancel their subscription. The attorneys general maintain that in some cases unauthorized credit card charges resulted when that happened.

AOL agreed to advertise those conditions more conspicuously and to better inform customers they must notify the company they want to cancel service.

Among the other issues AOL agreed to resolve:

* AOL advertising targeted at people under 18 will have to be in language understandable to people that age and that a person has to be at least 18 to subscribe to the service.

* The company will have to more conspicuously inform customers of changes in pricing structure. AOL had previously changed its price structure from $9.95 for five hours and $2.95 for each hour thereafter to $19.95 for unlimited use, according to the agreement. The agreement calls for price changes to be posted through e-mail, a pop-up computer screen or U.S. mail. Customers must be notified 30 days in advance of the change. The company increased its rate earlier this year to $21.95 to pay for a network upgrade.

* Customers entering a premium site with a surcharge will have to be notified they are entering such an area through a pop-up computer screen. The screen will detail the costs for entering the area and tools to help parents block their children from making online purchases.

* Customers will be notified of communications charges that are in addition to subscription charges.

According to the court filing, AOL's position in agreeing to the conditions was that it was "attempting to establish new industry standards that will benefit consumers of online services and will make the Internet a mass medium available to all Americans."

AOL has paid a total of $38 million in settlements to date, including two previous settlements with state attorneys general. Those cases were related to accessibility problems with AOL -- customers would try to get online and receive busy signals.

"I think the publicity from that case caused people to call about their problems with America Online," Linstrom said.