Over the last seven years, more than 500 complaints flowed into the Washington State Attorney General’s Office and the Better Business Bureau regarding Seattle-based digital media provider RealNetworks, Inc. Consumers spoke of “odd charges” appearing on their credit cards, complaining of bills for monthly subscriptions for premium television, sports or game content that they never ordered.

“Deceptive pre-checked boxes and fine print obligated consumers to not-so-free trials for subscription services they didn’t want in the first place,” said Washington State Attorney General Rob McKenna. “People were charged for months — sometimes years — paying hundreds of dollars for subscriptions they knew nothing about.”

A lawsuit and settlement filed today in King County Superior Court by McKenna’s Consumer Protection Division aims to end practices that are unfair and deceptive under Washington state’s Consumer Protection Act. Those practices include so-called “free-to-pay conversions” in which free trials rapidly result in monthly charges – unless consumers take quick action.

Attorney General’s Office attorneys and staff reviewing consumer complaints also found other concerning trends. “Some said they had difficulty getting RealNetworks to stop the charges and others complained that when they called the company to cancel subscriptions, they were pitched even more ‘free trials,’” said Paula Selis, who heads the Attorney General’s High Tech Unit.

Jennifer Horwitz of Seattle was one of those consumers. “RealNetworks didn’t dispute that I had cancelled their service before the free trial expired but when I asked them for a refund, they refused,” she said today. “I had to fight my way up the chain of command. They continued to stonewall, only agreeing to a partial refund ‘as a courtesy to me.’  I believe this was calculated to make a profit by misleading consumers and taking money they were not entitled to.”

Today, McKenna announced a settlement with RealNetworks that will end the questionable practices and provide restitution for consumers throughout the country. Among numerous requirements, RealNetworks agrees to comply with the federal Restore Online Shoppers Confidence Act, which requires a customer’s express consent before he or she can be charged for a free trial that converts into a paid subscription. While McKenna’s office brought a previous case regarding unauthorized charges by online merchant Intelius, this is the first time a defendant in a state action was required to comply with the new federal law.

Under the terms of the settlement, RealNetworks is also required to:

Stop using pre-checked boxes to obtain consent from consumers to purchase products or services;

Stop offering free-to-pay conversions that do not clearly disclose all the terms of the offer, including subscriptions that are automatically charged on customers’ credit cards;

Provide an online method of cancelation so that consumers may easily cancel their subscriptions;

Send e-mail or other reminders that consumers are enrolled in a free-to-pay conversion, along with instructions for how to cancel the subscription;

Cancel subscriptions within two days of a consumer’s request to do so; and,

Inform consumers who have called to cancel a subscription of additional subscriptions on their account.

The settlement also provides for a $2 million claims-based pool to provide full restitution for consumers who were victimized during the three year period prior to December 2009 when the practices detailed in the Attorney General’s complaint were most common.

“The company has voluntarily made numerous changes since December 2009 to curb the practices that are at issue in the lawsuit and this, thankfully, has resulted in fewer recent complaints to our office,” McKenna said.

Consumers who were unknowingly signed up using pre-checked boxes between January 2007 and December 2009 will receive a postcardindicating that they are eligible for a refund. Additionally, consumers may visit realnetworksrestitution.com to submit a claim. RealNetworks also agrees to pay $400,000 in attorney’s fees.

More information:

· Complaint (PDF)

· Consent decree (PDF)