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.

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Comments on “FTC Recognizes Netflix Settlement Is Really Just A Promotional Gimmick”

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Brad Leonard (profile) says:

Good for goose, good for landshark

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.

hautedawg says:

We don't learn

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

JFarley says:


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.

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