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Legal Issues

by Mike Masnick

Wed, Jan 11th 2006 3:23am





FTC Recognizes Netflix Settlement Is Really Just A Promotional Gimmick

from the do-they-read-Techdirt? dept

Back in November, we mocked the "settlement" that Netflix had agreed to in a class action suit concerning misleading advertising (though we also questioned just how "injured" anyone was by Netflix's original actions). The problem with the settlement went beyond the fact that the lawyers basically racked up most of the cash that Netflix paid out -- we've pretty much come to expect that. The real problem was that the settlement for customers was basically a marketing promotion, rather than any punishment, and was likely to pay off for Netflix rather handsomely in the long run. That's because the settlement meant Netflix customers would receive a "free" one month upgrade (or reinstated account if they had left), but at the end of the month, if they didn't proactively decline to keep the upgrade they would automatically be kept at that level and have to pay the higher fee. It would appear that the folks at the FTC aren't just going around and rubber stamping these deals as they saw the same thing we did (as did a number of others who set up websites to complain). The FTC has now asked the judge to reject the settlement, which they say: "appears dangerously close to being a promotional gimmick." As we said in the original post, if this settlement is allowed to stand, it opens up a great new line of business for some lawyers. Set up random class action lawsuits for some wrong that may have been done by customers and then quickly "settle" it for a few million (seen as an advertising cost by the "guilty" company) and force all their users into unexpected upgrades that many will fail to manually downgrade. It's the sort of thing that would pay for itself almost instantly.

6 Comments | Leave a Comment..


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  1.  

    Good for goose, good for landshark

    identicon
    Brad Leonard, Jan 11th, 2006 @ 6:36am

    I'd like to see a judge switch the "damages" and compensation on one of these cases.
    "Counsel, you and your firms all have free upgrades for a month. Members of the Class, you will split $15 Million". If they attorneys are truly acting in the best interest of their clients, this wouldn't be much of an issue.

    [ reply to this | link to this | view in thread ]

  2.  

    We don't learn

    identicon
    hautedawg, Jan 11th, 2006 @ 7:21am

    This happens day in and day out in America. We see advdrtisements in the media, we get mailings, hell, I even get phone calls about CAL. The ONLY winner in these things are the leeches that we call attorneys. I have nothing against (most) attorneys, but this is ridiculous. NetFlix has found a wonderful way to increase it's revenue and actually profit from the CAL. How ridiculous is that? Law suits are meant to punish and make the plaintif whole, not to contribute to the bottom line of the corporate scum. NetFlix didn't do anything wrong in my opinion, just someone wanting something for nothing, but that doesn't mean that should increase revenues through the suit. And we wonder why no one trusts the legal system. Hrrmph

    [ reply to this | link to this | view in thread ]

  3.  

    TimeWarner

    identicon
    JFarley, Jan 11th, 2006 @ 9:24am

    TimeWarner recently did the same thing. If you responded to become part of the class action, you got either 1 month of any service you currently did not have for free and you had to then call to discontinue the service or continue to be billed for it. You did also have the choice of 2 VOD movies as well as an alternate choice - but a $40 value say for trying their broadband service vs $8 of movies is a tempting incentive for some people. In the end, the consumer loses and corporate America pulls the wool over their eyes.

    [ reply to this | link to this | view in thread ]

  4.  

    No Subject Given

    identicon
    haggie, Jan 11th, 2006 @ 9:46am

    I'm simply disgusted. Judges that sign-off on these types of settlements need to be identified and removed from the bench. It is unconscienable.

    I would expect it from politicians, but from judges? How much more corrupt, lackadaisical, and self-serving can our society become?

    [ reply to this | link to this | view in thread ]

  5.  

    Sanction 'em! Big bucks, no wammy, STOP

    identicon
    Anonymous, Jan 11th, 2006 @ 9:57am

    The real question here is: Why aren't the plantiff and defense attorneys being sanctioned for this? How about the judge?

    So long as the penalties for CRIME are not enforced for these people, they will continue to game the system.

    [ reply to this | link to this | view in thread ]

  6.  

    Re: No Subject Given

    identicon
    Ryan, Jan 11th, 2006 @ 11:20am

    IMO, these days judges are treated like politicians. Too many issues track through the courts rather than going through a Constitutional amendment procedure.
    I'm tired of a few judges deciding what's right or wrong. I'd much rather have the majority decide.

    [ reply to this | link to this | view in thread ]


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