Best Buy? Read Fine Print

Does Retailer Have Deceptive Warranty Practices?

Best Buy is one of America's fastest growing retailers. And why not? It has gleaming stores, tons of merchandise, great prices.

But when you shop at some Best Buy stores, you may hear an aggressive sales pitch for something you may not even want - not an appliance or a computer, but a Best Buy performance service plan, a kind of extended warranty.

48 Hours and officials in Florida have found that Best Buy's salespeople have misled their customers about the value of a manufacturer's warranty vs. Best Buy's paid one. And if you do buy one, it might not do exactly what you think it will do. CBS News Correspondent Bill Lagattuta reports.
Former Best Buy employees from three different states shared their stories if 48 Hours agreed to obscure their identities.

"You definitely are just looking to prey on their fears," said a former employee. "So that they're more likely to buy that service plan."

"I would blatantly lie to the customer, to be honest," another explained.

"Just shoot down the manufacturer's warranty with blatant lies," offered one.

Allegations of a warranty ripoff have led to an investigation of Best Buy by Florida officials.

Cici Dykus, an assistant deputy attorney general, said Best Buy employees were often misleading Florida consumers about the company's product warranties:

"Frequently, they would denigrate the manufacturer's warranty or explain something about the Best Buy warranty that in fact wasn't true," Dykus said.

The former workers spoke of immense pressure from their bosses to convince consumers to ignore free warranty plans from manufacturers and pay sometimes hundreds of dollars for Best Buy service plans.

"You definitely feel always that your job is in jeopardy if you don't have the numbers to perform," said one former employee. "It's definitely suggested that we downtalk the manufacturer's warranty."

Price Check
See Best Buy's stock performance at CBS Marketwatch.com.

But Llowell Peters, senior vice president of services for Best Buy, maintained, "That is very much in violation of our policy and obviously our training."

"We never want to disparage a manufacturer's warrant," he added.

Yet this was a fairly common practice, according to Florida investigators. They collected statements from more than 100 former Best Buy employees.

Dykus found "the same refrain from a whole variety of people that didn't know each other, worked at different stores," he said.

Best Buy says its service plans offer consumers added protection for their purchases, like replacement of the product if it can't be fixed. But why are the plans so important to the company?

"In some cases, a service agreement is more profitable than the profit they make on the product they sold you in the first place," explained Bill Fromm, a service expert who works with major retail chains.

For Best Buy, it comes out to close to half a billion dollars in service contract sales, in the last year alone.

This may help explain the pressure on employees to sell them and the lengths to which they say they've often gone.

"If a customer comes in and you have the idea that they're not going to buy the service plan, you'll tell them you don't have the product in stock," a former employee said.

"It is not our intent to walk customers out of the store. And employees that are found in violation of that we literally dismiss from the company," said vice president Peters.

But even if you buy a service plan, you can run into trouble.

"I'm very, very aggravated," says Stewart Weisser, a Los Angeles attorney who bought a three-year service plan when he purchased an Acer computer at Best Buy in 1998.

He said he was terribly misled. "I purchased a computer that was supposed to run Windows 98," Weisser said. But when he loaded Windows 98, the computer started breaking down, he claimed.

He made three trips to the Best Buy repair shop. What Best Buy told him made him furious: "Well, that's a software problem."

That means this is not covered in his extended warranty.

Did the attorney read the fine print? No, I didn't....I don't have time to read the fine print," he said. "I don't think anybody does."

Best Buy's position? Weisser got more than his money's worth from his service plan, in getting his computer repaired three times. But what about Weisser not being able to arrange an upgrade to Windows 98?

"The manufacturer is really responsible for the product that's being sold," said Best Buy vice president Peters. "We're not responsible for the representations they make."

And when it comes to the things Best Buy salesmen say, you may not be able to count on them to tell you exactly what their service plans cover. This is what a 48 Hours producer was told as he priced computers, undercover, in a New Jersey store:
    Salesman: "The Best Buy policy is something we definitely recommend."

    48 Hours: "So you totally cover me for any problem?"

    Salesman: "If you get tat service? Any problem,...printer, monitor, or computer, if the hard drive fails or, like, the printer breaks...or anything.

    48 Hours: "Anything goes wrong, you guys are there for me?"

    Salesman: "Yeah, three years."
Well, not exactly. The salesman failed to mention that software problems, the most common computer problem, are not covered in the plan, as Weisser discovered.

"We heard that you went into a couple of stores, and you ran into the situation you did," said Best Buy vice president Peters. "We have lots and lots of information that says that we're doing very well in that particular regard."

"It is something we...certainly want to police," he added.

Best Buy called the problems in Florida "an isolated case." Without admitting anything, the company agreed to take steps to prevent deceptive practices in the future. And a recent check by officials showed, in Florida, Best Buy is keeping its word.

For Weisser, there was finally some good news. 48 Hours contacted the manufacturer of his Acer computer on his behalf, and officials there were able to install Windows 98 successfully for him.

For consumers, some words of advice: If you want a "best buy," read the fine print.

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  • CBSNews.com staff CBSNews.com staff

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