Oregon Department of Justice

Oregon Blockbuster customers, who allegedly were misled by the company's advertisements and marketing of its "No Late Fee" program, may be eligible for full refunds or store credits under a settlement agreement filed today in Marion County Circuit Court. Attorney General Hardy Myers' consumer protection office was instrumental in brokering an agreement between Blockbuster and 46 other states and the District of Columbia.

"This case is a perfect illustration of how a catchy phrase can sell a product or service without the straight facts to back it up," Myers explained. "Being clear and conspicuous with details about a promotion are essential for an honest marketplace."

Under the Assurance of Voluntary Compliance filed today, the Attorneys General alleged that the Blockbuster advertising campaign was misleading because it advertised "No Late Fees" but failed to clearly and conspicuously disclose that a customer, who rented a video or game and kept the item more than seven days past its due date, would be charged for the selling price of the item. In order to reverse the forced sale charge, customers could return the item within 30 days and pay a restocking fee. The AVC also alleged that Blockbuster failed to sufficiently disclose that 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.

Blockbuster began advertising "The End of Late Fees" and "No Late Fees" on December 15, 2004, with the program starting on January 1, 2005. In Oregon, the program is available at 83 company-owned stores and 10 of the 16 franchise stores that chose to participate.

Blockbuster has agreed to provide a full refund or credit to any customer of a corporate or franchise store who participated in the "No Late Fee" program and did not understand the program. Refunds will be equal to the selling price of any rental items converted to a sale and which were not returned within thirty days from the sale date. Items must be returned in good condition.

The restitution will be on a one-time per customer basis but will cover all items rented which were converted to a sale before the customer learned on the first rental transaction that a sale would occur. If the customer already returned the item but paid a "restocking" fee, the fee will be refunded

Customers who rented from non-participating franchise stores and who did not understand the "No Late Fee" program and were charged a late fee on the initial transaction, may receive rental coupons equal to the number of rented items. Coupons are only available from stores that did not inform consumers of their non-participation.

Customers requesting refunds or credits from company or participating franchise stores and those seeking coupons at non-participating stores should act by April 28, 2005.

Refund forms are available at the stores to be mailed to Blockbuster, 1201 Elm Street, Suite 2100, Dallas, TX 75270, Attention: Steve Krumholz, but Blockbuster has requested that the complaints at company and participating franchise stores be resolved on the spot.

Under the terms of the settlement, Blockbuster has agreed that in future advertising for any "No Late Fee" program, it will:

• Not represent in any of its advertising that there are no late fees or only limited late fees unless accompanied by clear and conspicuous and proximate disclosure of the existence of any charge (including any rental fee, restocking fee, or charge associated with a rental transaction that has been converted to a sale).
• Disclose any limitation on the stores participating in the offer.

The agreement covers advertisements in e-newsletters, email and on the Internet, in direct mail pieces, large out-of-home promotions such as on billboards or buses, on television or radio, anything in print, any large signage on the outside and inside of stores such as banners, floor decals and signs.

Blockbuster also agreed that all stores will clearly and conspicuously display Blockbuster's policy for return of rental product and applicable charges if product is not returned.

For the next six months, Blockbuster will:

• Post notices in each company store and request participating franchise stores to do the same. The notices will inform customers of the terms and conditions of the "No Late Fee" program. The 8 by 11 inch notices are to be printed on one-side in 26 point font, and in addition to other locations, they must be placed next to the stores' entrance and exit doors and in at least one location, which can be viewed by all customers before making rental transactions;
• Clearly and conspicuously include the terms and conditions of the "No Late Fee" program on policy statements that appear at the end of some of the aisles in every store;
• Prominently display brochures containing the terms and conditions of the offer in every store;
• Remove from its stores the current external and internal signage advertising the "No Late Fee" program and request and recommend that participating franchise stores do the same;
• Require any franchise store that is not participating in the "No Late Fee" program to remove any contrary advertising;
• Have a hyperlink in at least 14 point font on its website (blockbuster.com) which explains the terms and conditions of the offer; and,
• Tell customers that when unwinding a rental that has been converted to a sale and charged to a credit card, they must produce the card to obtain a credit.

As part of the settlement, which admits no law violation, Blockbuster will pay the states a total of $630,000 for attorney's fees, costs of investigation and consumer protection.

Details on the settlement can be found at www.blockbuster.com or by calling the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. The Oregon Department of Justice is online at www.doj.state.or.us.