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Netflix Changes Terms, Offers Upgrades After Settlement

3 Nov, 2005 By: Holly J. Wagner



Netflix is offering members a free service upgrade for a month and former members a free one-, two- or three-out subscription as a settlement in a class action lawsuit.

Eligible consumers can opt into the settlement at www.netflixsettlement.com. Consumers who take advantage of the offer must cancel or reset their memberships after the month of courtesy service, or Netflix will continue their service at the higher level, according to the settlement agreement.

The company earlier announced it expected to shell out $3 million to $4 million to settle the Frank Chavez v. Netflix consumer class action lawsuit, which alleged false advertising, unfair and deceptive trade practices and breach of contract regarding DVD delivery times.

The company also changed its terms and conditions to disclose some of the practices Chavez alleged were deceptive. Among the statements:

  • "In determining priority for shipping and inventory allocation, we give priority to those members who receive the fewest DVDs through our service. As a result, those subscribers who receive the most movies may experience that (i) the shipment of their next available DVD occurs at least one business day following return of their previously viewed movie (ii) delivery takes longer, as the shipments may not be processed from their local distribution center and (iii) they receive movies lower in their queue more often than our other subscribers."

  • "In certain instances, your next available DVD will not ship until at least one business day following our receipt of your returned movie. This can occur, for example, when your top choices are not available to you from your closest distribution center or the number of shipments to be processed by the distribution center on that day has been exceeded. When this happens, your DVD will likely ship on the next business day and may come from an alternate distribution center."

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