When the US-based movie and game rental chain launched its ‘No late fees’ promotion in January 2005, it met with a hail of ‘misleading’ protests from US State District Attorneys. Blockbuster has now settled with 47 states on onerous terms.
Video rental chain Blockbuster paid $630,000 to settle claims by 47 US states and the District of Columbia over its advertising. The campaign that caused the problem broke in January 2005 and its theme was "No late fees".
Attempting to regain the initiative from competitors such as the on-line service Netflix and retailer behemoth Wal-Mart, the new Blockbuster policy gave customers an additional one week grace period to return a movie or game rental, with "no late fees".
Not mentioned up front …
What the campaign did not mention, however, was that if the DVD, video or game was not returned within one week, the rental would be automatically converted into a sale, with the punter being charged the cost of buying the DVD etc minus the rental, leaving him out of pocket by an average of $8. Also not mentioned was a $1.25 restocking fee for returning late rentals or that not all of the chain's 5,000 stores were participating in the promotion.
Initially when the multiple state "misleading" claims flowed in, Blockbuster took a firm line. They denied there was any misleading effect, saying that customer behaviour showed that consumers understood the programme quite clearly.
Now, however, Blockbuster has decided to settle with all but one US state.
The settlement is no slap on the wrist. It involves no less than eight commitments on the part of Blockbuster as follows:
1. reimburse any customers who tell Blockbuster that at the time they took out the movie or game they did not appreciate that if they returned it late they would be charged a re-stocking fee and/or have their rental turned into a sale;
2. add more in-store signage explaining its policies on returns;
3. include more brochures instore explaining the policy;
4. setting up "no late fees info centres";
5. redesigning Blockbusters' receipts to include return program information;
6. make details of the returns policy easier to access on Blockbuster.com;
7. reinforce employee training so staff are fully clued up on the returns policy; and
8. give free rental coupons to any consumers who incurred charges, mistakenly believing that the store they were using was participating in the promotion.
Why this matters:
It is difficult to imagine such a settlement being forced on a retailer by UK Trading Standards in a similar situation, and this case finally dispels the myth of weak-kneed US consumer protection laws. It is also yet another reason why UK marketers should think themselves very lucky indeed that the most that they might have to face here in the UK in a similar situation might be a couple of thousand pounds fine before the Magistrates, plus perhaps the odd civil action for breach of contract or misrepresentation by more and more disappointed punters.