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Blockbuster Pays $300K Fine, Stock Drops

19 May, 2009 By: Erik Gruenwedel


Blockbuster Inc. May 19 said it would pay $300,000 in civil fines and legal costs as part of a stipulated judgment that found the Dallas-based No. 1 DVD rental service had overcharged consumers in about 500 California stores on ancillary items, including popcorn, candy, sellthrough movies and related merchandise.

Blockbuster agreed to settle the litigation without admitting any wrongdoing.

The five-year case — first filed in San Diego County — involved 229 inspection reports in 14 counties to determine whether Blockbuster employees charged consumers more than the advertised or posted price on scanned items in violation of unfair competition and false advertising statutes.

“This does not reflect the way we conduct business at our stores,” Blockbuster said in a statement. “We have assured the state that we will continue to take the necessary steps to ensure pricing for the products in our stores is accurate.”

Los Angeles district attorney Steve Cooley said the matter was pursued so that consumers would be able to rely on the accuracy of prices charged at the check stand.

Separately, Lazard Capital Markets analyst Barton Crockett said Blockbuster’s newly revised credit facility coupled with improved in-store stocking of new titles would likely keep it from filing for Chapter 11 bankruptcy protection this year.

However, the analyst said the 12% decline in domestic same-store rentals, including $87.2 million loss in cash flow from operations, disclosed in the most recent financial quarter portend concern.

“The key is that same-store rental and cash flow trends improve in the [second quarter over the first quarter],” Crockett said.

Blockbuster shares closed down three cents to 79 cents per share after topping $1 last week.

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