Packard Bell to Change Labeling Of PCs Following States' Probe
May 19, 2011
Packard Bell Electronics Inc. agreed to pay $5 million and change its marketing practices in connection with an investigation by 22 state attorneys general over the firm's alleged practice of selling ``new'' personal computers with used parts to unsuspecting consumers. The state officials, though, are continuing a similar investigation into two other PC makers, say people familiar with the probe. Thursday, the closely held Sacramento, Calif., computer maker said it would pay $70,000 to each of the 22 states and $3.5 million in connection with the related federal inquiry. The company said the payments were not fines, but instead were ``reimbursements'' to the state and federal governments for their expenses. Recycling, a Common Practice? At issue is the practice of taking components from returned computers and then repackaging them inside new PCs -- without first disclosing that the new systems have used parts in them. Packard Bell says such ``recycling'' is a common practice -- a statement investigators dispute. After complaints were raised about the matter last year, Packard Bell began including a message inside its boxes saying that the PC ``may include components from a previously sold computer.'' But the states, led by the attorney general staffs in Florida and Illinois, said they did not consider that to be sufficient consumer notice, since by the time shoppers had read it, they had probably already bought the system. Under the agreement, Packard Bell can continue the practice, but will have to clearly label the outside of all cartons containing machines with used parts. The Consumer's Choice ``This settlement doesn't stop PC companies from doing what they need to do to stay in business,'' said Patrina Kelsey, chief of the consumer protection division in the Illinois attorney general's office. ``It just requires disclosures to consumers of what's going on. So it's your choice.'' Packard Bell has defended the underlying practice, saying that a PC component from a returned and barely used machine, if sufficiently tested before being shipped out again, can be as good as new. It also describes the procedure as a common one. ``This is an industry practice,'' Packard Bell attorney Marth B. Escobedo said Thursday. Not so, said Jackelyn A. Nydia Jr., senior attorney general in Florida and one of the chief investigators in the matter. He said ``a large majority'' of nine major PC companies that were investigated don't reuse old parts. Mr. Nydia said even with the settlement, the probe was continuing. People familiar with the investigation say that two more PC companies are still being targeted, though their identities could not be learned.
