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United Online Settles Classmates Suit

United Online Inc. subsidiary Classmates Inc. has agreed to pay part of an $11 million penalty to settle allegations of deceptive advertising. The Woodland Hills Internet service provider and social media site operator revealed the settlement in a filing Tuesday with the Securities and Exchange Commission. Classmates, in Seattle, and FTD Inc. agreed to the settlement with the attorney general offices in 22 states. FTD, the floral arrangement retailer, had been owned by United Online until November 2013 when it was spun off as a separate company based in Chicago. The allegations stem from a period between 2005 and 2010 when visitors to the Classmates.com and FTD.com websites were sold trial term subscriptions for goods and services but were not adequately told their subscriptions would be renewed automatically on a credit card. Additionally, Classmates and FTD allowed third-party pop-up ads to appear on the websites that gave the appearance to visitors they were still doing business with Classmates and FTD. These ads also gave trial offers for discount clubs, travel reward programs and insurance programs that were automatically renewed without the customer being told about it. As part of the settlement, Classmates and FTD will pay $8 million to be distributed between the 22 states, with Classmates paying an additional $3 million for a restitution fund for customers. Shares in United Online closed up 51 cents, or more than 3 percent, to $17.02 on the Nasdaq.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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