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Fair is Fair - Or Is It?

17 Jan, 2006 By: Holly J. Wagner

Netflix has agreed to settle a class action case over the way the company managed subscriber queues and disclosed its disc shipment and intake procedures, but the Federal Trade Commission is intervening to change the terms.

The FTC contends that Netflix's proposed settlement, offering a month of service or service level upgrade to the offended consumers, does more to benefit Netflix and lawyers than consumers.

Now, I understand the FTC's problem with the opt-out provision in the settlement, which requires the consumer to actively cancel the subscription or upgrade at the end of the free month.

But I can't help wondering where the FTC was when Blockbuster and Movie Gallery settled their late-fee cases a couple of years back. Both brick-and-mortar chains, which at the time were exclusively in the physical world, settled their cases with coupons for free or discounted rentals.

Movie Gallery awarded class members coupons ranging in value from $9 to $16 each, good on movie or game rentals and purchases. Blockbuster's coupons were valued between $9 and $18 each. To my mind that sort of blows holes in the FTC's argument that the low value of the Netflix settlement — $3 to $18 per class member, is insufficient.

The FTC took no position on the merits of Chavez v. Netflix, only on the settlement terms. I'm not sure any of these settlements were the best the courts could do for the consumers or the businesses involved. But if Netflix can fix the opt-out clause, the settlement is comparable to what those in similar cases in the past and there's no reason to treat this settlement any differently.

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