- The Washington Times - Tuesday, March 29, 2005

DALLAS (AP) — 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.

Yesterday’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 introduced in January would end a long-simmering cause of consumer resentment against the rental chain.

The settlement also came 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 the company.

Hollywood Entertainment’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, typically $1.25.

State officials said many consumers were unaware of the fees because they were not mentioned in advertising. They said many consumers thought they could keep the rentals for as long as they wanted.

“Blockbuster promised the end of late fees … but consumers across the country were surprised when they got a bill for the full price of the video or for a game that they checked out from Blockbuster,” said Texas Attorney General Greg Abbott.

Blockbuster said that it disclosed the charges when it introduced the “No Late Fees” program, noting that many press accounts at the time mentioned the new charges.

Blockbuster headed off a potential new lawsuit with yesterday’s settlement, which calls for Blockbuster to post more in-store signs that describe potential charges and to print on each receipt the amount customers would be billed if they kept a digital video disc, videotape or game beyond the rental time.

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