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TK's MORNING BUZZ: Blockbuster's Offer to Settle the Class-Action Lawsuits It's Facing Over Late Fees Is Bad News for Other Video Retailers

6 Jun, 2001 By: Thomas K. Arnold

Blockbuster's offer to settle the class action lawsuits it is facing over allegedly charging exhorbitant late fees is bad news for other video retailers.

In criminal court, we all know a plea bargain is a sign of guilt; innocent people don't cop to anything. Guilty parties plea bargain because they hope to get a lighter sentence -- that's all.

In civil suits, a settlement offer is the equivalent of a plea bargain; and while accused parties often offer to settle for all sorts of different reasons (the high cost of litigation, for one), anyone who then engages in the challenged practice risks guilt by association.

Blockbuster's settlement offer is no different. Since the news broke yesterday morning, I've heard more than a dozen remarks, all amounting to, "If they didn't do anything wrong, then why are they willing to give away free video rentals?"

Granted, Blockbuster may be on more tenuous legal ground than most retailers. The crux of the Blockbuster case is that when videos are rented out for two-day or five-day periods, Big Blue charges the late-returning consumer a second full rental charge instead of prorating the fee for each additional day. As one of the lawyers involved in the suit argued, "When you rent a car for $300 a week and bring it in three hours late, they don't charge you another $300; they prorate it and charge you for the extra three hours."

That's a compelling argument that's sure to strike a chord with the public. I don't know of any independent retailers who have the same policy in place; even if they offer multi-day rentals, the offending consumer only pays the equivalent of one day's rental fee, or less, for a video returned one day late.

But because of the high profile of the Blockbuster case, any retailer who charges late fees will likely be lumped into the same category as Big Blue -- and forced to take his lumps the next time he tries collecting.

Comments? Contact TK directly at:TKArnold@aol.com

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