|One of the Blockbuster TV ads in the 'End of Late Fees' campaign.
Consumer fraud act
In court papers filed Friday, Attorney General Peter Harvey also said the video and game rental company's advertising violates the state's Consumer Fraud Act and Merchandise Advertising Regulations.
In a statement, Blockbuster said: "The fact is there are no longer late fees at Blockbuster, and we are surprised that the New Jersey State Attorney General never directly contacted us about this."
The controversial ad campaign, from the independent agency Doner of Southfield, Mich., started in early January on national TV, radio, online and outdoor ad placements. Blockbuster's company-owned 4,500 stores are participating in the no-late-fees program, as are an unspecified number of its 600 franchisees.
Conversion to purchase
The ads, however, do not tell consumers that they will be charged the purchase price for the video if they don't return it within seven days or that they'll be charged a restocking fee if they return the video within 30 days, according to the suit. Ads do not "prominently disclose" that some franchised stores continue to charge late fees, the suit says.
New Jersey officials are asking for restitution from Blockbuster to customers whose overdue rentals were converted to a sale, or those who were charged a restocking fee or a late fee by a non-participating store. The suit also asks for as much as $10,000 in civil penalties for each violation.
The lawsuit, filed on behalf of residents of New Jersey, where there are 170 Blockbuster stores, takes aim at every step of the retailer's program. The suit notes a "very small, limited disclaimer" on the TV ads that says: "Participating stores only. See store for complete details." Radio ads offer the disclaimer "Details at participating Blockbuster stores."
'Fail to disclose'
The company's Web site "requires consumers to go to a third Internet page" for full details on the new policy, the lawsuit says. Store employees "fail to disclose to consumers the complete terms and conditions," the suit says.
"We expect businesses to completely and clearly tell their customers about all relevant terms and conditions regarding their policies," said Jeffrey Burstein, New Jersey's acting consumer affairs director. "We will not tolerate the withholding of such important information from consumers, especially when it results in unexpected out-of-pocket expenses."
'Very thorough steps'
Blockbuster, in defending its campaign, said in a statement that "we've taken a number of very thorough steps to let customers know how our new program works." The chain, the country's largest video renter, launched the new program to better compete with video-on-demand, online services such as NetFlix and retailers like Walmart.
The lawsuit comes at a time when Blockbuster is trying to gobble up its chief rival, Hollywood Video, whose board of directors recently rejected a takeover bid.