The Price of Free to Pay Conversions

Over the last seven years, the Washington State Attorney General’s Office and the Better Business Bureau have received hundreds of  complaints  regarding Seattle-based digital media provider RealNetworks, Inc.  Consumers spoke of “odd charges” appearing on their credit cards, complaining of bills for monthly subscriptions for premium television, sports or game content that they never ordered.

“Deceptive pre-checked boxes and fine print obligated consumers to not-so-free trials for subscription services they didn’t want in the first place,” said Washington State Attorney General Rob McKenna. “People were charged for months — sometimes years — paying hundreds of dollars for subscriptions they knew nothing about.”

A lawsuit and settlement filed today in King County Superior Court by McKenna’s Consumer Protection Division aims to end practices that are unfair and deceptive under Washington state’s Consumer Protection Act. Those practices include so-called “free-to-pay conversions” in which free trials rapidly result in monthly charges – unless consumers take quick action.

Attorney General’s Office attorneys and staff reviewing consumer complaints also found other concerning trends. “Some said they had difficulty getting RealNetworks to stop the charges and others complained that when they called the company to cancel subscriptions, they were pitched even more ‘free trials,’” said Paula Selis, who heads the Attorney General’s High Tech Unit.

One common issue faced by consumers was the difficulty in obtaining a refund after canceling.  RealNetworks threw up roadblock after roadblock in an effort to thwart consumers from obtaining a refund, an action that further enraged consumers, which in turn fueled more complaints.

The settlement with RealNetworks will end these practices and provide restitution for consumers throughout the country. Among numerous requirements, RealNetworks agrees to comply with the federal Restore Online Shoppers Confidence Act, which requires a customer’s express consent before he or she can be charged for a free trial that converts into a paid subscription. This isn’t the first legal action undertaken in connection with these sort of practices.  While McKenna’s office brought a previous case regarding unauthorized charges by online merchant Intelius, this is the first time a defendant in a state action was required to comply with the new federal law.

Under the terms of the settlement, RealNetworks is also required to:

  • Stop using pre-checked boxes to obtain consent from consumers to purchase products or services;
  • Stop offering free-to-pay conversions that do not clearly disclose all the terms of the offer, including subscriptions that are automatically charged on customers’ credit cards;
  • Provide an online method of cancelation so that consumers may easily cancel their subscriptions;
  • Send e-mail or other reminders that consumers are enrolled in a free-to-pay conversion, along with instructions for how to cancel the subscription;
  • Cancel subscriptions within two days of a consumer’s request to do so; and,
  • Inform consumers who have called to cancel a subscription of additional subscriptions on their account.

The settlement also provides for a $2 million claims-based pool to provide full restitution for consumers who were victimized during the three year period prior to December 2009 when the practices detailed in the Attorney General’s complaint were most common.

Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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