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States Settle With Blockbuster

March 29, 2005
Forty-eight states and the District of Columbia, have reached an agreement with Blockbuster, Inc., to settle allegations that it deceived consumers in advertising its "No Late Fees" program.

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Under the settlement, Blockbuster has agreed to provide refunds, credits or coupons to consumers who lost money because of the misleading promotion and will drop misleading signs and advertisements that did not fully inform consumers that rentals could be converted into sales if they were not returned promptly.

The state Attorneys General alleged that the advertising campaign was misleading because it failed to clearly and conspicuously disclose that a consumer who rented a video or game from Blockbuster and kept it more than seven days after its return due date would be charged for the selling price of the video.

After that, a consumer wanting to return the video would be charged a "restocking" fee of $1.25, or higher at some franchise stores. New Jersey sued Blockbuster on similar charges earlier this year.

The Attorneys General also alleged that there was insufficient disclosure that the program was offered only at participating stores and that some customers of nonparticipating franchise stores thought they would not have to pay late fees.

"Consumers have a right to expect that an advertisement means what it says," said Florida Attorney General Charlie Crist. "Behind each catchy slogan or phrase is a responsibility to disclose the complete terms and conditions attached to the offer."

Blockbuster began advertising its "The End of Late Fees" and "No Late Fees" promotion on December 15, 2004, with the program starting on January 1, 2005. The program is available at all company-owned stores and those franchise stores that choose to participate.

Under the terms of the settlement, Blockbuster will pay the states a total of $630,000 for attorneys fees, costs of litigation and consumer protection programs. In addition, the company has agreed that in future advertising it will not suggest or state in any of its advertising that there are no late fees or only limited late fees unless the information is accompanied by a clear and conspicuous disclosure of the existence of any charge.

The company also agreed to advise customers of any limitation on the stores participating in the offer and to clearly and conspicuously display Blockbuster's return policy.

Blockbuster customers who believe they are entitled to a refund because they did not understand the program may get a refund form at a corporate-owned or participating franchise store. Requests are to be resolved on the spot if possible.

Customers who rented from a non-participating franchise store that did not have signs saying it was not participating in the "No Late Fees" program may ask for a coupon request form at the store. Customers may send the form to Blockbuster to receive rental coupons. Eligible customers are those who rented between December 31, 2004 and March 29, 2005.

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