THE ATTORNEY GENERAL OF TEXAS
Ken Paxton

Wednesday, February 23, 2011

New York Web-Based Electronics Retailers Prohibited From Violating Texas Law

AUSTIN Under two agreed judgments with the State of Texas, New York-based Starlight Camera & Video Inc. and Broadway Photo, LLC must pay restitution to their Texas customers. In addition, Starlight agreed to cease doing business in Texas and will dissolve as a corporation. Today’s agreements resolve the Texas Attorney General’s investigation into allegations that the defendants misled customers about the descriptions and quality of their electronics products.

Broadway Photo and its owner Albert Houllou may continue doing business in Texas but must conduct business in a straightforward manner that does not violate Texas law. In settlement of that lawsuit, the defendants agreed to pay $35,000 in civil penalties and $65,000 in attorneys’ fees to the State. The judgment against Starlight Camera & Video is a $255,000 civil penalty, with $5,000 to be paid up front and the balance to be paid if they violate the judgment or fail to dissolve as a corporation.

In both cases, the restitution is available to dissatisfied customers who previously filed complaints against the companies, or who file complaints within 90 days of the filing of today’s agreed judgments. After providing restitution to their customers, the defendants must provide the Attorney General’s Office a list of all customers to whom it made refunds and the amount of each refund.

In November 2008, the Attorney General’s Office charged the two online digital camera and electronics retailers with relying upon unlawful bait-and-switch sales schemes to market their products online. According to state investigators, Broadway Photo and Starlight Camera & Video, both of Brooklyn, attempted to attract customers by offering the lowest retail prices on price-comparison websites such as Everyprice.com and Shopcartuse.com. Both of these entities were cited in enforcement actions that the Attorney General’s Office filed in 2009.

According to State investigators, customers who selected merchandise and made credit card purchases via the defendants’ websites were notified that their orders had been processed. Despite the defendants’ confirmation notice, customers were subsequently asked to call a specified telephone number to reconfirm their orders.

However, customers who made the requested confirmation call were confronted with aggressive, high-pressure sales pitches that the defendants used to promote overpriced accessories, including memory cards and batteries. The defendants’ telemarketers claimed that these upgraded accessories were required for the customers’ confirmed merchandise to function normally.

When customers refused the defendants’ offers, they were told their purchase was used, refurbished, or a foreign gray market model that would be inoperable in the United States. The defendants’ telemarketers used this tactic to encourage customers to purchase a new, higher-priced U.S. version. If customers refused to upgrade their purchase, the defendants canceled the customers’ orders, claiming the products were indefinitely back-ordered. When the defendants actually did ship orders, customers who intended to purchase new merchandise often received used or refurbished products.