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AOL Won't Offer Refunds

Online giant positions itself against possible New York state lawsuit, class-action filings.

By Glenn McDonald, PCWorld   

Analysts say the move indicates AOL%squots resolve to fight allegations of fraudulent business practices.

AOL has been plagued with service complaints since switching to a flat-rate pricing system in December. Disgruntled users have already filed several class-action suits, and AOL is currently in negotiations with 20 state attorneys general regarding allegations of deceptive business practices.

Dennis C. Vacco, New York state attorney general, said Friday he will sue the online service for deceptive business practices unless current talks make satisfactory progress.

Ted Julian, an analyst for the research firm International Data Corporation (IDC), said AOL%squots decision to discount mass refunds can be seen as a positioning maneuver.

%dquotAnything AOL agrees to right now can be used for leverage in an ongoing suit,%dquot Julian said. %dquotAny conclusive move on AOL%squots part could suggest an internal admission that they%squotre at fault.%dquot AOL did not return calls Monday regarding general refund policies.

Chris Wolf, an attorney specializing in technology law with the Washington, D.C. firm Proskauer, Rose, Goetz, and Mendelsohn, agreed that offering refunds to some users could open a legal can of worms.

%dquotOnce they offer refunds to some, they may be overwhelmed with requests from those who have working service and are looking to reap a windfall,%dquot Wolf said.

AOL has repeatedly assured users that the company is spending millions to upgrade its network, which has been overloaded by the dramatic usage increase since December%squots pricing change.

Wolf said he believes AOL%squots problems should be remedied by the marketplace, not the law.

%dquotIt%squots a business problem. If AOL can%squott provide satisfactory service, people should go to other [service providers] in the market. Certainly, people should get what they pay for, and that%squots the role of the attorney general to ensure that, but it%squots still a stretch to call it fraud.%dquot