Consumer Protection

SACRAMENTO – California Attorney General Edmund G. Brown Jr. today announced a $3 million settlement with America Online (AOL), one of the nation’s largest Internet service providers. The prelitigation settlement, entered into by California, the District of Columbia and 47 other states, resolves complaints that AOL failed to disclose terms and conditions of paid service and made it extremely difficult for consumers to cancel their AOL pay services. Under today’s agreement AOL will make a number of improvements including: easier cancellation procedures, improved billing disclosures and commitment to refunding unauthorized charges.

Historically, AOL’s primary service has been dial-up Internet access, typically offered through a free trial offer that requires consumers to cancel their accounts to avoid a monthly membership fee. AOL announced in August 2006, that it would begin limiting its role as an Internet access provider and start allowing customers to convert to free e-mail accounts.

California Attorney General Edmund G. Brown Jr. said: “Today’s agreement will minimize the potential for consumer confusion during the transition to free e-mail accounts.”

Prior to this settlement, AOL only allowed customers to cancel their service by fax, mail or telephone. The majority of consumers called AOL directly and wound up speaking with service representatives who earned rewards, in some cases up to $3000 per month, for persuading customers not to terminate service. Consumers complained that this practice of trying to “save” customers made cancellation extremely difficult if not impossible.

Today’s settlement puts strict limitations on the practice of “saving” customers and requires recording and verification of these telephone calls. In addition, consumers are now able to easily cancel service online at: http://cancel.aol.com.

Today’s settlement also requires AOL to change confusing billing practices. AOL will clearly disclose how terminated accounts are reactivated and the customer must now resubmit any payment information before AOL can reactivate a paid service. The company will also clearly disclose the exact charge that will be placed directly on a customer’s monthly telephone bill. AOL will also revise its practice of allowing consumers to create “spin off” accounts, which are additional paid accounts for AOL service that stem from one original membership. Under the settlement, these accounts can now only be created over the telephone and customer service agents must completely disclose the exact additional cost of creating a “spin off” account.

The agreement also requires AOL to give refunds to consumers who complained of unauthorized charges for AOL service. If a consumer can show AOL billing after a cancellation attempt, AOL will refund those charges. The company will continue cooperating with the state to resolve outstanding complaints and continue refunding consumers for unauthorized charges.

The California Attorney General's Office was on the executive committee that led the negotiated agreement. Other participants in today’s settlement include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia Wisconsin, and Wyoming, the Commonwealths of Kentucky, Massachusetts, Pennsylvania and Virginia, and the District of Columbia.

Under the settlement, AOL must provide a proper mailing address, fax number, and e-mail address where consumer complaints may be forwarded. Consumers who believe they have been charged by AOL for unauthorized service may contact the Attorney General’s Public Inquiry Unit to make a complaint. Complaints may be made in writing to: Public Inquiry Unit, Attorney General's Office, Attn: P.O. Box 944255, Sacramento, CA 94244-2550, or by using the online consumer complaint form: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL

The settlement agreement is attached.

WASHINGTON D.C. – California Attorney General Edmund G. Brown Jr. announced today that Microsoft has agreed to make significant changes in the design of its desktop search feature in the Windows Vista operating system. Details of Microsoft’s agreement were outlined in a joint status report that was filed today in federal district court regarding the company’s compliance with a 2002 antitrust Final Judgment.

California Attorney General Edmund G. Brown Jr. said: “This agreement—while not perfect—is a positive step towards greater competition in the software industry. It will enhance the ability of consumers to select the desktop search tool of their choice.”

The California Attorney General’s Office became concerned with allegations that Microsoft was in violation of the Final Judgment after Google presented a complaint about the desktop search function in Vista, referred to as “Instant Search” in Microsoft’s promotional materials. Google argued that desktop search in Windows Vista is a “Microsoft Middleware Product” (MMP) and is therefore subject to the Final Judgment. The state contended that Vista’s desktop search feature is functionality that did not exist in prior Windows operating systems and is therefore covered under the Final Judgment.

Under the proposed solution, Microsoft will provide users and Original Equipment Manufacturers, such as HP or Dell, with greater flexibility to choose and access competing desktop search products. Microsoft has promised to deliver the required changes in a beta Service Pack 1 of Windows Vista, which Microsoft currently anticipates will be available by the end of the year.

The attorney general announced the agreement in conjunction with Microsoft, the United States Department of Justice and Plaintiffs in the New York Group (including New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina, and Wisconsin) and the California Group (including California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, and the District of Columbia). The changes resolve complaints lodged against Microsoft under the California Group’s Final Judgment from November 2002.

The agreement is reflected in the attached joint status report, filed today in the federal district court in Washington D.C. The Final Judgment is also attached. The Judge is Colleen Kollar-Kotelly.

The KFC Corp. agreed Tuesday to comply with a 1986 voter-approved initiative requiring companies that expose consumers to harmful substances provide a 'clear and reasonable warning.'

The company agreed to warn California customers that its fried or baked potatoes contain acrylamide, a chemical known to cause cancer. Acrylamide, a byproduct created by the reaction of chemicals in food and high heat, is found in French fries and potato chips at high levels. For example, a serving of fries or potato chips has approximately 82 times more acrylamide than is allowed in drinking water under U.S. EPA standards.

Proposition 65, the initiative demanding the exposure warnings, was approved by 63 percent of California voters.

The KFC Corp., in settling a lawsuit with California Attorney General Edmund G. Brown Jr., agreed to supply consumers with acrylamide warnings to comport with Proposition 65, the Safe Drinking Water and Toxic Enforcement Act. The company, without admitting wrongdoing, also agreed to pay $208,000 in civil penalties and $133,000 to fund Proposition 65 enforcement actions.

A hearing before Los Angeles County Superior Court Judge Wendell Mortimer Jr. is scheduled May 29, when the California Department of Justice and the KFC Corp. will request the court's approval.

The settlement was the first as part of an ongoing Proposition 65 enforcement action against major food and beverage producers. They include: Frito-Lay Inc., Pepsico Inc., H.J. Heinz Co., Kettle Foods Inc., Procter & Gamble Distributing Co., Procter & Gamble Manufacturing Co., Wendy's International Inc., McDonald's Corp., and Burger King Corp.

The settlement agreement is attached.

(OAKLAND) – Attorney General Jerry Brown today announced an $8 million, 30-state settlement with Bayer Corporation that will resolve an enforcement action initiated because of Bayer’s failure to adequately disclose safety risks associated with the use of Baycol, a drug used to lower cholesterol that was pulled from the market in August 2001.

“This settlement is important because it establishes an obligation on pharmaceutical companies to inform the public and physicians about the tests they conduct on products,” Attorney General Brown said. “Posting both the positive and negative results from studies, will allow medical professionals to make better and safer prescribing decisions for their patients.”

The judgment, filed today in San Diego Superior Court, requires Bayer to publicly register most of its clinical studies and post the results at the end of each study. It also requires future marketing, sale, and promotion of its pharmaceutical and biological products to comply will all legal requirements, and prohibits Bayer from making false or misleading claims relating to any of these products sold in the United States.

In May 1998, Bayer introduced Baycol, a statin cholesterol-lowering drug, into the United States market. All statins carry a known risk of myopathy (a weakening of the muscles) and rhabdomyolysis (a more serious muscular disease). Bayer learned the risk of Baycol was significantly higher than other statins, especially at higher doses and when combined with genfibrozil (another cholesterol-lowering drug), through post-marketing surveillance of its product. In August 2001 Bayer voluntarily withdrew Baycol from the market.

The Attorneys General allege while Bayer informed the U.S. Food and Drug Administration about these adverse effects, they failed to adequately warn prescribing doctors and consumers about the risks. In entering the settlement, Bayer denies any wrongdoing.

In addition to California, the Attorneys General of the following states joined the settlement: Arizona, Arkansas, Connecticut, Delaware, Florida, Idaho, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington and Wisconsin.