Netflix Inc. told a judge Wednesday that it would change the terms of a class-action settlement amid criticism that the online DVD rental company was going to use the accord to recruit customers.

The settlement calls for Netflix to offer a month of free or upgraded service to more than 6 million current and former customers. The Federal Trade Commission, however, criticized the company’s plan to automatically charge for the resumed or upgraded service unless recipients took steps to cancel after the free month. In response, Netflix dropped the plan for automatic charges.

The settlement would give a free month of service or an upgrade to any customer who used Netflix before Jan. 15, 2005.

Despite criticism for its allocation policy, Swasey said the Los Gatos-based company continued to thrive, shipping out 7 million DVDs a week to more than 4.2 million subscribers.

Netflix has estimated that the settlement will cost the company about $4 million, including $2.53 million for attorney fees.

 

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