Class Action Follies

CLASS ACTION FOLLIES….The Washington Post has a story today about one of my pet peeves: class action suits in which the “penalty” is more a benefit than a punishment. The piece in the Post is about a settlement in a case against Netflix:

In the past few years, both the FTC and the trial lawyers group have been actively protesting class-action settlements that bring little value to consumers, usually coupons with little monetary value, but pay off handsomely for lawyers.

….The FTC said the Netflix settlement was “more a promotional vehicle” for the company than a means to correct alleged misleading practices….Under the proposed settlement, which must be approved by the court, current Netflix customers would get a one-month upgrade to receive more DVDs, a value that ranges from $2 to $6, depending on the plan a customer already had. But if consumers fail to cancel that upgraded service at the end of 30 days, they would be billed for the more expensive service every month after that.

Netflix would pay to run a program like this. In fact, they do. After all, this kind of thing is a pretty standard sort of marketing come-on: “Upgrade free for 30 days! If you don’t like it, cancel with no further obligation!”

I’ve gotten offers like this several times, most recently from my cable company. In their case, the “settlement” was (I think) a one-month upgrade to digital cable for half price ? an offer not even as good as the usual promotions they run two or three times a year. It was a joke.

Why judges approve these kinds of deals is beyond me. They should either insist on cash settlements or else not bother. What we have now is just a sham.

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