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Netflix User Sues Over Rate Hike, Claiming Breach of Contract

One Netflix subscriber is angry enough over the streaming giant’s fee hikes that he’s taking the company to court.

This week the customer, George Keritsis, filed a proposed class-action lawsuit against Netflix, alleging he was promised a lifetime guarantee of receiving the service for $7.99 per month as long as he didn’t suspend his account. The suit, filed Wednesday in the U.S. District Court for the Northern District of California in San Jose, asserts that at least 22 million U.S. Netflix users have such “grandfathered” account plans and are affected by the company’s rate increase for its standard HD plan to $9.99 monthly that began rolling into effect in May.

“I can tell you my client is upset because Netflix has acknowledged he had a guaranteed or grandfathered account but nevertheless insisted on raising his price,” Tom Shapiro, a partner with Boston-based Shapiro Haber & Urmy who is representing Keritsis, told Variety.

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Netflix did not respond to a request for comment.

Keritsis’ class-action complaint alleges breach of contract and seeks an order enjoining Netflix from imposing rate hikes on subscribers whose rates were supposedly permanently guaranteed, as well as monetary damages.

“For a period of time, Netflix solicited persons to subscribe to Netflix’s streaming service by guaranteeing that Netflix would not increase monthly subscription prices as long as the subscribers maintained the subscription service continuously,” the lawsuit says. “Netflix has broken its contract with these subscribers by unilaterally raising monthly subscription prices.”

In the U.S., Netflix this May began raising the price of the standard HD service for those previously paying $7.99 monthly by $2, to $9.99 per month. Customers who signed up for the HD plan at $8.99 following its May 2014 price increase for new subs will be rolled over to $9.99 in October, according to Netflix. Alternatively, affected customers will have the option of continuing at $7.99 for a single-stream, standard-definition plan.

Keritsis claims he joined Netflix in 2011 with the expectation that he would remain locked in at the $7.99 per month rate forever, based on the company’s ads at the time. He also claims he confirmed with a Netflix customer-service rep that his price would never increase. But on June 22, according to Keritsis, Netflix notified him that his special pricing was being terminated and that he would be charged the $10 monthly rate.

In May 2014, Netflix told existing streaming customers that it would not raise prices for the next two years. And this past January, Netflix said it would shift those subs with grandfathered accounts to the $9.99 rate over the second and third quarters of 2016.

About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD plan, or will see it later this year, according to Nomura Securities. The analyst firm estimates the price hikes could result in upwards of 480,000 customers cancelling service while also generating $520 million in additional annual revenue for Netflix.

Keritsis is represented by Shapiro and the law firm Schubert Jonckheer & Kolbe, according to the complaint.

Netflix ended the first quarter of 2016 with 81.5 million streaming subscribers worldwide, including 47 million in the United States. The company is scheduled to report second-quarter earnings July 18 after market close.

Even with the price hikes, Netflix’s standard plan at $9.99 per month remains cheaper than Hulu’s commercial-free subscription service ($11.99 per month), HBO Now ($14.99) or Showtime’s over-the-top service ($10.99).

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