Dixons sues AOL over internet arm

World's largest service provider faces paying damages over slanderous claims by CompuServe

FREESERVE, the internet subscription service set up by Dixons in September, is suing its competitor AOL for slander and malicious falsehood. Freeserve is also seeking a restraining injunction against its rival, the largest internet service provider in the world.

In a writ lodged in the High Court, Freeserve alleges that customer service reps for CompuServe, which is owned by AOL, were telling people that Freeserve's provision for free access to the net was temporary and that its service would become fee-paying.

"At the end of 1998, Freeserve became aware that some CompuServe customers who were calling CompuServe to cancel their subscriptions in order to transfer to Freeserve, were being told by CompuServe's customer service personnel that they should not do so because Freeserve would be charging for its service in the future," Dixons said in a written statement on Friday. "This was blatantly untrue."

AOL, which in Britain operates as a joint venture between the US company America Online and the German media conglomerate Bertelsmann, says that it has responded to Freeserve's concerns. It believes the dispute will soon be settled out of court. AOL concedes that one outstanding issue is the amount of damages it will pay.

"In January 1999, Dixons made a complaint to CompuServe claiming that CompuServe customer support staff were giving incorrect information to its members about Dixons' Freeserve service," AOL said in a written statement on Friday. "CompuServe did not receive any corroborated evidence to support the complaint but conducted an immediate and thorough investigation into these allegations. This was promptly followed by an undertaking by CompuServe that its customer support staff would not make any statements to members which could be considered defamatory by Dixons Freeserve."

Both sides played down the gravity of the dispute. But it highlights the ferocious competition in the mushrooming market for internet service providers. Initially, companies like AOL sought to profit by charging fees both to subscribers and companies using the net to sell and advertise.

AOL charges pounds 16.95 a month for unlimited access to the net. CompuServe, which aims at a more professional audience, charges pounds 17.

In recent weeks, however, British internet service providers have set a worldwide trend by offering access to the net free. The strategy is to capture large numbers of net surfers and to think of them as shoppers in cyber shopping malls.

ISPs attracting the most surfers have the best chance of selling their wares over the net, and also selling space in their cyber-shopping malls to other companies.

Last month, booksellers WH Smith, The Sun, and HMV joined a growing number of companies offering free internet access.

The British internet retail market is expected to grow to pounds 3bn by 2003 from pounds 236m last year, according to Forrester Research.

Freeserve has 1.1 million subscribers in the UK. America Online has 17 million subscribers worldwide. In the face of the free access phenomenon, AOL and other fee-charging ISPs like Yahoo! are seeking to differentiate themselves.

Last week Dixons, the UK's biggest electrical retailer, announced that it had appointed Credit Suisse First Boston and Cazenove to consider a partial flotation of Freeserve.

Analysts said the exercise could value Freeserve at more than pounds 2.5bn. Shares in Dixons hit an all-time high.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...