Netflix changes settlement terms
Users won't be automatically charged at end of upgraded service
By Jennifer Netherby -- Video Business, 2/22/2006
FEB. 22 | Facing objections from the Federal Trade Commission and 400 consumers, Netflix changed the terms of its proposed class-action settlement Wednesday so that users won’t be automatically charged for an upgraded service after they receive a free month.
Under terms of the initial settlement deal, Netflix was to offer eligible members a month of free upgraded service that would automatically renew in subsequent months at the higher subscription rate unless members opted out. Those who subscribed before January 2005 but are no longer members would get a free month of service.
The settlement drew complaints because of the opt-out requirement and the $2.53 million that plaintiffs’ attorneys would receive under the deal. Netflix has said the total settlement is expected to cost the company $4 million, meaning that the bulk would go to attorneys’ fees.
Under the altered agreement, plaintiffs’ attorneys in the case have agreed to take a reduced fee so that a portion of the $2.53 million in fees would go to lawyers who filed objections to the original settlement proposal. Some of the objecting lawyers filed claims on behalf of consumers angered over the attorney settlement fees.
Attorneys must file fee requests by March 13. If the attorneys’ fees surpass $2.53 million, Netflix can reject the settlement.
The company presented its new settlement proposal at a hearing Wednesday in San Francisco Superior Court. A final settlement hearing is scheduled for March 22.
“We think the revised settlement is for the best interest of all parties,” a Netflix spokesman said.
The FTC at Wednesday’s hearing has no objections to the revised settlement and no other attorney’s present objected to the new terms, the Netflix spokesman said.
Netflix agreed last fall to settle the lawsuit, which claimed the company didn’t provide unlimited rentals or one-day deliveries as promised. The company admitted no wrongdoing.
