Business Week magazine reported the FTC probe was not a formal investigation. But the magazine quoted a government source as saying some of the online service's billing practices might be unfair, and might violate federal law.

In a "Community Update," Steve Case acknowledged to his company's members that it is facing not only a possible FTC probe, but probes from several states' attorneys general, and a class action lawsuit. Case said the issues being discussed with the FTC and the states' attorneys general "include electronic funds transfer policies (allowing consumers who pay through automatic withdrawals from their checking accounts to get online upon request before a hard copy payment authorization is received), and expanded advertising disclosures about about service trial and cancellation policies."

Case said the class action lawsuit against AOL focused on the billing of charges by the online service. Some of the issues brought up in the suit included the disclosure of the company's one-minute increment billing practice, and isolated incidents inaccurate billing for use in one of AOL's designated "free" areas, he said. Discussions have been held with the parties involved in the suit, Case said, and AOL is hopeful that the matter can be settled in the near future.

Any agreements made with the various regulatory agencies and the plaintiffs in the class-action lawsuit "will not have an adverse affect on the company," Case said, "and we do not believe the changes we have made or will make to business practices will hamper our ability to serve our membership."

Case also said improvements have been made to the company's customer service department, with an increased number of employees to handle customer questions, a new support center in Oklahoma City, Oklahoma, and an improvement in turnaround time for answering e-mail questions.

(Bob Woods/19960621/Press Contact: Pam McGraw, America Online, 703-918-1746)

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