Dell, you’re getting a lawsuit

Marketplace Contributor May 16, 2007

SCOTT JAGOW:Dell Computer is being accused of fraud, false advertising and deceptive business practices. The New York Attorney General has filed a lawsuit against the company. Our innovations reporter Janet Babin is following this for us this morning. She’s at North Carolina Public Radio.

Janet, exactly what is Dell accused of doing?

JANET BABIN:Well Scott, details of the lawsuit were reported last night on the Wall Street Journal’s Web site. The company makes it pretty easy for customers to buy a computer — they offer rebates, lines of credit… But according to the lawsuit, Dell offers misleading financial terms for those loans and rebates, and ends up sticking customers with high interest rates on the lines of credit. The suit also claims that Dell avoids giving customers rebates, ignores warranties on its PCs and service contracts, and makes it difficult for customers to find tech support help.

JAGOW:What does the company say?

BABIN:Well, in a written statement, a spokesman says Dell’s conduct has been honorable, and the company is going to vigorously defend itself in court.

JAGOW:Dell has had a series of problems, so this really doesn’t come at a great time, I would imagine.

BABIN:Right, I mean last year the company went through the whole battery recall issue. And also, the government is investigating Dell’s accounting practices. Meanwhile, Scott, there’s been a shake-up at the top — Michael Dell returned as CEO recently. Also, according to market analysts, Dell’s PC sales continued to decline worldwide in the first quarter of this year.

It’s still the leading seller of PCs in the U.S., but Hewlett-Packard and other companies are closer than ever before. So Dell’s trying to orchestrate a turnaround at the moment. It doesn’t need the attention this lawsuit is going to bring.

JAGOW:OK, Marketplace’s Janet Babin, thanks. I don’t know what this says about Dell investors, but the stock is actually up 3 percent this morning.

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