The wagons are undoubtedly circling in Richfield, Minnesota.
That's where Best Buy President Brian Dunn presides over a massive retailer that booked $1.3 billion in net income from $35 billion in sales. The 46 year old Dunn has successfully navigated choppy waters in big box retailing that consumed other players. Income is up, share prices have more than tripled in five years, and there is even a little dividend built in for value investors.
Until recently, Dunn's biggest headache was likely the stock price that had essentially stalled for two years. Now he faces revisiting a headache from four years ago, when the giant retailer and Microsoft were accused of deceptive trade practices in luring consumers to the latter's Internet service. And the folks in Connecticut aren't helping either. Here's why:
The original case was tossed out in 2003, but now Wall Street is jittery because a Best Buy attorney has admitted that he altered documents related to the case. The 9th U.S. Circuit Court of Appeals has now ruled that the companies must stand trial again, this time for violating the RICO Act, more commonly associated in the public's mind with gangsters and organized crime.
On top of those headaches, Connecticut's savvy Attorney General Richard Blumenthal is finally bringing suit against Best Buy on an unrelated matter that the local press broke weeks ago. According to reports, Best Buy used a in-store website that looked identical to its commercial website but showed hire prices. This type of scam was common in the home improvement industry for decades, allowing contractors to show an "invoice price" and then add a healthy markup when the actual price was different. In a reversal of that idea, Best Buy allegedly showed in-store customer higher prices then were actually advertised on the web on a site that looked identical to the store's regular web site.
Blumenthal's comments about the suit were strident. "Best Buy gave consumers the worst deal - a bait-and-switch-plus scheme luring consumers into stores with promised online discounts, only to charge higher in-store prices, he said. The state has reportedly been gathering multiple consumer complaints from shoppers who say they visited Best Buy, but were told that the items set aside for the sales price were gone.
Labels: Best Buy, Blumenthal, Microsoft
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