Press Release

48 Attorneys General Announce Settlement with Blockbuster Over Advertising For "No Late Fee" Program

March 29, 2005

(Anchorage) Acting Attorney General Scott Nordstrand today announced that he and the Attorneys General of 46 other states plus the District of Columbia reached agreement with Blockbuster Inc., to settle allegations that it misled consumers in the advertising of its "No Late Fee" program.

The Attorneys General alleged that the advertising campaign was misleading because it failed to clearly and conspicuously disclose key elements of the program. If a consumer kept an item out for more than seven days after its due date, the consumer was charged for the selling price of the video. If returned within 30 days, the selling price was refunded, but the consumer was charged a "restocking" fee of $1.25, or higher, at some franchise stores. The Attorneys General also alleged there was insufficient disclosure of the fact 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.

"Advertisers must be aware that that they have an obligation to avoid misleading slogans," said Nordstrand. "Slogans can be misleading and violate state law if they do not clearly and accurately describe the complete terms and conditions attached to their offers. Blockbuster stores in Alaska took steps to advise customers that the Alaska stores were not participating in the promotion and why. The owners of Blockbuster in Alaska fully cooperated with the department of law."

Blockbuster began advertising the "The End of Late Fees" and "No Late Fees" 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 chose to participate. There are 17 Blockbuster franchised stores in Alaska owned by Boarder Entertainment. None of them ran the "No late fees" promotion.

As part of the settlement, which Blockbuster entered into without any admission of wrongdoing, Blockbuster will pay the states a total of $630,000 for attorneys' fees, costs of investigation and consumer protection.

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