Consumer Law

Lawyer in the Dell: bait and switch ads enjoined

By Rebecca Tushnet

AP: New York judge says Dell misled customers

A New York judge concluded today that Dell engaged in repeated false and deceptive advertising of its promotional credit financing and warranties.

State Supreme Court Justice Joseph Teresi ordered the computer retailer to more clearly disclose that most customers don't qualify for free financing or get "next day" repair service.

?"For too long at Dell the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all," [New York Attorney General Andrew] Cuomo said. "This decision sends an important message that all corporations will be held accountable for the promises they make to consumers."

? The company noted earlier that it had 6 million transactions in New York between 2003 and 2006, with alleged complaints representing only a tiny fraction. Dell also told the court that it has started selective recording and auditing of sales representatives to avoid misrepresentations and has invested millions of dollars in customer service and technical support, significantly reducing customer waiting times on the phone.

According to the judge, Dell ads offered promotions like free flat-panel monitors, additional memory, rebates, instant discounts and financing with no interest or no payments for a period to "well qualified" or "best qualified" customers. However, Cuomo's submissions indicated as few as 7 percent of New York applicants qualified for some promotions.

"Most applicants, if approved for credit, were offered very high interest rate revolving credit accounts ranging from approximately 16 percent up to almost 30 percent interest without the prominently advertised promotional interest deferral," Teresi wrote. ?

"Dell certainly has knowledge of the relative numbers of customers who qualify for various promotions," Teresi wrote. "It is therefore determined that Dell has engaged in prominently advertising the financing promotions in order to attract prospective customers with no intention of actually providing the advertised financing to the great majority of such customers. Such conduct is deceptive and constitutes improper 'bait advertising."'

Many customers applied for credit thinking they would get the promotional rate, Teresi wrote. He enjoined Dell from advertising promotional rates without prominently disclosing how many applicants are likely to qualify, as well as the usual credit terms.

Full post as published by 43(B)log on May 28, 2008 (boomark / email).