March 30, 2005 in Business

Blockbuster settles

Associated Press
 
Associated Press photo

Blockbuster, the nation’s largest movie-rental chain, has agreed to pay about $630,000 to settle claims by 47 states and the District of Columbia that the movie rental chain deceived consumers with its “No Late Fees” campaign.
(Full-size photo)

DALLAS — Blockbuster Inc. agreed to make refunds to consumers after officials in 47 states charged that the nation’s largest movie-rental chain deceived the public with advertisements that proclaimed the end of late fees.

Dallas-based Blockbuster also agreed to pay the states about $630,000 to reimburse them for the costs of their investigations into consumer complaints and said it would change the advertising of its late-fee policy.

Blockbuster, however, said it would not scrap the fees — only do a better job of disclosing them.

Chief executive John Antioco said even with refunds and the cost of new signs and brochures to explain the policy, the settlement will cost Blockbuster less than $1 million. It had revenue of more than $6 billion last year.

Tuesday’s agreement was the latest setback in Blockbuster’s efforts to charge customers who are late returning rented movies and games. Blockbuster had hoped that the “No Late Fees” policy it launched in January would end a long-simmering cause of consumer resentment against the rental chain.

The settlement also followed closely on the heels of Blockbuster’s failure to acquire rival Hollywood Entertainment Corp. Antitrust regulators had raised objections to the deal, fearing that an even larger Blockbuster would wield too much power over rental prices.

In the face of questions from the Federal Trade Commission, Blockbuster announced Friday that it was abandoning its pursuit of Hollywood.

Hollywood’s shareholders are expected to approve a sale to Movie Gallery Inc. next month, which will produce a much larger competitor to longtime industry leader Blockbuster.

Blockbuster shares fell 18 cents, or 2 percent, to close at $8.74 on the New York Stock Exchange. Its shares have traded in a 52-week range of $6.50 and $17.87.

State officials began looking into Blockbuster’s “No Late Fees” policy soon after it took effect Jan. 1. Under the policy, consumers who kept movies or games seven days past their due date were charged on their credit card as if they had bought the item. If they returned the rental later, they were charged a restocking fee.

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