Online Electronics, Camera Sellers Settle Charges They Duped Consumers
The New York-based companies are required to pay restitution to their Texas customers, under two settlement agreements with the state of Texas. It wasn't immediately clear whether other states were considering similar action. Broadway Photo also signed a settlement agreement with the state of New York in 2009 to resolve allegations of bait-and-switch and high-pressure sales tactics.In addition, Starlight, using the business names The Digital Nerds and Techon Digital, agreed to stop doing business in Texas and will dissolve as a corporation, the Texas Attorney General's Office said in a statement.
Boris Kogan, attorney for Starlight, told Consumer Ally that he and his client thought "the matter was justly resolved."
Broadway Photo and its owner, Albert Houllou, will be allowed to continue to do business in Texas but must conduct business in a straightforward manner that doesn't violate Texas law, the agreement states.
Edward D. Burbach, attorney for Broadway Photo and Houllou, told Consumer Ally his client is pleased to have reached a settlement agreement with the Texas attorney general to resolve its three-year-old investigation into certain practices of the prior management.
"As set forth in the settlement, we do not believe that any violation of law occurred," Burbach said. "However, with the payment of the $35,000 fine and formal adoption of changes we have implemented, we can put this behind us and get back to concentrating on offering our customers the best electronics at a great price."
The agreements resolve the agency's charges that the companies misled customers about the descriptions and quality of their electronics products. The companies also agreed to pay $35,000 in civil penalties and $65,000 in attorneys' fees. Starlight will pay an additional fine if it doesn't follow the agreement or go out of business.
In both cases, restitution is available to consumers who have filed complaints against the companies, or who will file complaints within 90 days of the filing of settlements.
In November 2008, the agency charged the two companies with using bait-and-switch sales schemes to sell their products. They sought to attract customers by offering the lowest retail prices on price-comparison websites such as Everyprice.com and Shopcartuse.com, according to state investigators.
Both companies were cited in enforcement actions filed by the agency in 2009.
After placing orders on the companies' websites and receiving confirmations, customers were later asked to call a telephone number to reconfirm their orders, the agency found in its investigation.
During these calls, the companies used aggressive, high-pressure sales pitches to sell overpriced accessories, including memory cards and batteries. The companies' telemarketers claimed these upgraded accessories were required for the customers' equipment to work properly.
When customers refused the offers, they were told their purchase was used, refurbished or a foreign "gray market" model that wouldn't work in the United States, the agency said. The telemarketers used this tactic to encourage customers to purchase a new, higher-priced U.S. version.
If the upgrade was refused, the companies canceled the customers' orders, claiming the products were back-ordered. When the companies did ship orders, customers often received used or refurbished products.
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