The chain also said it would stop showing higher prices on its in-store kiosks and would "conspicuously disclose to consumers" if the kiosk was displaying lower prices. Although the settlement is unlikely a cause for celebration at Best Buy, the chain actually fared quite well and will sustain little pain from it.
Why little pain? A $399,000 settlement is not a huge deterrent for a $50 billion chain, but it might become more annoying if it spreads to many other states. (If every other U.S. state and Washington, D.C., reached a similar settlement, it would still only be $20 million. At this stage, though, three years after Connecticut filed its charges, it's unlikely any other states or territories would begin actions.)
The actions required—the halting of the deceptive kiosk program—are trivial; that program had pretty much run its course. Mobile-equipped shoppers also make it irrelevant: A consumer who wants to prove the price of a Best Buy Web offer could simply do it on his/her phone. Therefore, Best Buy has agreed to put an end to a program that it pretty much had stopped pursuing some time ago anyway. Hardly a stinging penalty that will teach the chain a lesson about never try anything like this again.
The original problem stemmed from Best Buy's 2007 efforts at price-matching. Customers would see a low price on the Best Buy site and drive to a local store to pick up the product. When in the store, if they noticed that the in-store price was higher, they'd approach an associate asking for the chain to price-match its own site, as Best Buy advertised it would do. The associate would walk the customer to the in-store kiosk to check BestBuy.com to verify the lower rate. Lo and behold, the site showed the same in-store price. The consumer would typically shrug, assume that they misread it or that the sale had ended and abandon the attempt at the price-match.
The problem was that the kiosk wasn't showing the site's Web store. It was showing a site that looked identical to the Web site, except that it had higher prices. Best Buy's explanation at the time was that it wanted to have a kiosk in-store that displayed in-store prices. Given that in-store and online prices were different, it didn't make sense, the chain argued, to have a kiosk showing the lower online pricing.
This raises two points.This raises two points. First, Best Buy was one of many chains that were falling victim to the quicksand that is different prices for Web and in-store. It might make sense from a business plan perspective, but it's awfully messy in the real world. Ironically, the first chain to truly tackle this properly was Circuit City, which did so just before it collapsed. Its approach was to simply have one price across both channels. (It was the right move, but attempted far too late.)
The second issue about Best Buy's kiosks was that the sites were absolutely identical in look-and-feel. That, coupled with a lack of associate training—and an absence of meaningful signage—made it inevitable that associates would tell customers the kiosks were displaying Web pricing. It was never established that management told associates to mislead consumers, but the kiosk program was handled in such a way as to make such confusion almost unavoidable. Best Buy employees at the time didn't exactly help the chain's cause, saying that the goal was indeed to confuse.
Richard Blumenthal, Connecticut's attorney general (and now U.S. Senator-Elect), was heavily involved in his office's Best Buy case and he issued a strong statement on Tuesday (Dec. 14). "Best Buy had a bad idea: an alleged scheme that lured consumers into stories with Internet sales prices, only to find higher prices displayed on in-store kiosks," his statement said. "At the height of holiday shopping, consumers are on buying blitzes and are more vulnerable to such alleged deceptive schemes." (Every time we read that statement, we thought it said "buying blintzes." Have to stop reading legal statements right before dinner.)
The Senator-Elect's statement continued: "More than the money, this agreement holds Best Buy to its name, ensuring that consumers truly get the best buy advertised."
Blumenthal then waxed poetic: "This settlement rightfully returns money to consumers and taxpayers for Best Buy’s alleged scheme: a tale of two Web sites and two prices." (Wonder if an earlier draft continued with that Dickensian approach? "It was the best of prices, it was the worst of prices.")
The statement itself marked a strange series of U-turns.The statement itself marked a strange series of U-turns. The attorney general's office first announced a news conference to discuss the settlement on Monday (Dec. 13). Then the news conference was rescheduled for a later time that day. Then it was rescheduled for Tuesday (Dec. 14). On Tuesday, Blumenthal's office announced there would be no statement and that only the settlement's text would be released. Interviews were being scheduled. Later in the day, a settlement was indeed issued. But due to a negotiation with Best Buy, the statement couldn't be posted on the state's Web site, merely E-mailed to media representatives.
Best Buy settles and admits misleading consumers and then it gets to dictate that the state's comments on it won't go on the state's own Web site? Yeah, sounds like Best Buy was holding a pretty strong hand.
The serious problem with the settlement is the impact on consumers. The settlement covers purchases from Nov. 1, 2001, through March 8, 2007. As many as nine years after the purchase (the best case scenario is still more than three-and-a-half years old), consumers must submit forms proving that they were ripped off and by how much. How many consumers will bother? And if they do opt to bother, how many will remember those details—what was the online price and the difference with the in-store price—and be able to prove them? Remember that many of these price differences may be only a few dollars.
The settlement requires consumers seeking such restitution to submit a statement with their name and address, the date when they purchased the product, the price paid and the price "observed for the product on the in-store kiosk." That statement needs to include "copies of any invoices, receipts, computer print-outs" and "other supporting documentation." Each purchase requires an additional form to be filled out. The form also asks for the store location and whether cash or a payment card was used.
It's quite likely that the few consumers who bother to pursue refunds will end up getting almost enough cash to buy a t-shirt declaring "Connecticut proved that Best Buy ripped me off and all I got was this lousy t-shirt."--Frank Hayes contributed to this story.