ATTORNEY GENERAL CUOMO SECURES AGREEMENTS WITH SEVEN ELECTRONICS
COMPANIES IN NEW YORK FOR USING ILLEGAL ONLINE BUSINESS PRACTICES TO
SCAM CONSUMERS NATIONWIDE
Cuomo’s Agreements Will Deliver $665,000 in Restitution to Consumers
Nationwide who were Scammed By Fraudulent Companies
AG Also Announces Partnership with NY Better Business Bureau and
ResellerRatings.com to Quickly Detect and Prosecute Illegal Online
Business Practices
NEW YORK, NY (June 25, 2009) - Attorney General Andrew M. Cuomo today
announced settlement agreements with seven online electronics stores
located in New York for engaging in a variety of illegal and
fraudulent
business practices that scammed consumers nationwide out of hundreds
of thousands of dollars. Under the terms of today’s settlements, the
seven companies will pay a total of $665,000 in restitution and civil
penalties, and over $100,000 to cover the costs of the Attorney
General’s investigation. Two of the companies will close
completely. The remaining five companies have agreed to substantially
change their business practices and will be subject to ongoing
monitoring by the Attorney General’s Office.
“These companies engaged in the worst kinds of consumer fraud, from
classic bait-and-switch schemes to blatant lies and bullying sales
tactics,” said Attorney General Cuomo. “Today’s agreements will
protect consumers nationwide from these types of predatory online
merchants, as well as deliver much-needed restitution to hundreds of
individuals who fell victim to these illegal practices. Let this be a
message to online merchants everywhere: such abuse of consumers and
violation of the law will not be tolerated.”
Attorney General Cuomo’s investigation revealed that these seven
companies would advertise consumer electronics, such as cameras,
camcorders, projectors, and related accessories online at prices
significantly lower than their competitors to induce consumers to
place orders via the internet. Once an order was placed, the companies would
call consumers and try to sell them additional or “upgraded”
merchandise at inflated prices. If the consumer refused to purchase
the additional merchandise, the companies would cancel the sale or claim
the item was backordered for months. If the consumer did agree to purchase
the additional merchandise, the companies would send them lower
quality merchandise than what was promised, or merchandise that the consumer
never ordered in the first place. When customers tried to return the
items, they would either be denied or be slammed with undisclosed fees.
All of the companies further limited customers’ ability to return
merchandise by requiring them to speak to a live customer
representative during limited business hours, and then refusing to answer those
telephone calls.
Under the agreements secured today by Cuomo, two of the companies,
Camera Wiz and Sonic Photo, will dissolve completely. The following
five companies will completely revamp their business practices and be
subject to ongoing monitoring: Best Price Camera, Foto Connection,
1 Way Photo, 86th Street Photo and Broadway Photo, LLC. All of the companies
will pay substantial monies to provide restitution for consumers who
were subjected to the companies’ illegal business practices.
In addition to their bait-and-switch and illegal sales practices, all
of these companies obtained fake “consumer testimonials” through
websites that claim to be impartial consumer-based “rating”
websites, but are in fact pay-per-click-based websites filled with
content provided by the websites’ proprietors. Most of the companies
changed names and websites so often that consumers looking for
truthful reviews or testimonials for the companies would be unable to find
them.
After receiving hundreds of complaints against each of the companies,
the Attorney General’s Office and the New York Better Business Bureau
(“NY BBB”) worked cooperatively to investigate and establish all of
the names under which the companies ever did business.
Under today’s agreements, two companies—Camera Wiz and Sonic
Photo—will go out of business completely. To continue doing
business, the other five companies will substantially change their
business practices to comply with New York law and be subject to
ongoing monitoring by the Attorney General’s Office and will be required to
post a total of $160,000 in performance bonds for the ongoing
protection of consumers. Although two of the companies—Best Price Camera and 1
Way Photo—are relocating to outside New York State, they have agreed
in the settlements to be bound by New York Law and to be subject to
on-going monitoring by the Attorney General’s Office.
The settlement funds will provide restitution to consumers who were
the victims of the companies’ illegal business practices. Consumers who
believe they qualify to receive restitution should submit claims to
the NY BBB, which will then evaluate and issue the appropriate restitution
from July 1, 2009 to December 31, 2009. All funds, if any, remaining
in any of the restitution funds after December 31, 2009 will be forfeited
to the State of New York as a penalty.
Attorney General Cuomo also announced that his office has created an
innovative arrangement with the NY BBB and ResellerRatings.com to
quickly and effectively detect, investigate, and prosecute instances
of illegal business practices by Internet-based companies. In particular,
the NY BBB and ResellerRatings.com will report companies to the
Attorney General’s Office once there is evidence that suggests a company is
engaging in fraud, based on either the volume of complaints received
or the tenor of consumer reviews posted online. The Attorney General’s
office will share in return the results of its investigations and, in
the case of ResellerRatings.com, will alert the website whenever the
office is able to determine that fake “consumer testimonials” have
been posted.
The settlements announced today were handled by Assistant Attorney
General Karen Geduldig of the Internet Bureau and Assistant Attorney
General Darcy M. Goddard, under the supervision of Deputy Attorney
General for Economic Justice Michael Berlin.
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