Settlement With Internet Provider Ensures That Consumers Receive Notice Of Changes To Service Agreement

State Attorney General Spitzer today announced a settlement with one of the nation's largest Internet Service Providers (ISPs), that requires the company to provide its subscribers with clear, conspicuous, and advance notice of all material changes to its service agreement. The agreement with Juno Online Services, Inc., a subsidiary of United Online Inc., stems from a widely-publicized but never consummated effort by Juno to bind its ISP subscribers to a vastly different set of terms from those included in the company's original service agreement.

In settling with the Attorney General, Juno has agreed to provide subscribers with notice of any material change to the service agreement at least 30 days prior to the effective date of the change by either e-mail, a "pop-up" screen, or U.S. mail, as well as a conspicuous posting on the company's web site. The company is also obligated to clearly and conspicuously identify the nature of any change, state the effective date of the change, and provide a comparison to the prior version of the service agreement. In addition, Juno must pay $30,000 to cover the costs of the Attorney General's investigation.

The Attorney General's investigation found that during February and March 2001, in an effort to establish a "Virtual Supercomputer Project" that would potentially link subscribers to a vast, distributive computing system, Juno failed to provide its subscribers with sufficient notice of several controversial and unorthodox amendments to its service agreement. Among these were terms stating that subscribers authorized Juno to download so-called "computational software" onto their computer, change the screen saver, and permit Juno to require subscribers to leave their computers on at all times to allow remote access by Juno. Likewise, according to the new contractual terms, consumers would be liable for all costs, expenses, and maintenance or technical issues resulting from continuous operation of the computer.

The Attorney General's investigation found Juno's original disclosure of the term changes insufficient because the disclosure was limited to a web site posting. Juno's subsequent disclosure, made by e-mail after the Attorney General had contacted the company, remained insufficient because the contract amendments were neither described nor highlighted in the e-mail; instead, subscribers were provided simply with an unannotated, and thus legally insufficient, 15-page version of the new contract - leaving consumers unlikely to have understood, or even recognize, the changes.

"It is neither appropriate nor legally permissible for a company to attempt to impose such fundamental changes without letting customers know in advance. Consumers need and the law requires adequate and effective notice," Spitzer said. "This attempt to modify a service agreement was particularly disturbing because of the significant burdens the company attempted to place on the consumer. My office will continue to vigorously enforce the law, especially against internet companies that engage in this type of contract modification practice."

The agreement between the Attorney General's Office and Juno is one of the first instances in which an ISP has agreed to modify its practice in disclosing modifications to service agreement terms and conditions.

This case was handled by Assistant Attorney General Don Tellock of Attorney General Spitzer's Internet Bureau, and Kenneth Dreifach, who is Chief of that bureau.

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