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Dell guilty of defrauding New York customers

Likely to appeal false advertising ruling

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A New York state judge says Dell and its finance wing are guilty of making false promises to stir up more sales.

State Supreme Court Justice Joseph Teresi ruled the #2 computer maker repeatedly engaged in fraud, deceptive advertising, and failure to honor its warranties, service contracts, and rebates.

His judgment bars Dell from any further service contract deception and orders the company to pay customers and the state a yet-undetermined amount in restitution.

The lawsuit was filed one year ago by Andrew Cuomo, the New York Attorney General, on behalf of the state's consumers.

"For too long at Dell the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all," said Cuomo in a statement today. "We have won an important victory that will force Dell to live up to its responsibilities and pay back its customers for profits that were pocketed but not deserved."

Justice Teresi ruled that Dell did not give customers the technical support that were entitled to under warranty or service contract. Dell's bag of tricks included failing to provide on-site repair to customers who purchased the service; pressuring customers with onsite service contracts to repair the boxes themselves; and discouraging customers from seeking technical support with lengthy wait times, frequent transfers and disconnections. Also, Dell had an "alarming pattern" of failing to provide rebates that were promised.

Justice Teresi determined Dell frequently lured customers to purchase products with "no interest" or "no payment" financing promotions — for which even those with very good credit scores were denied. Dell then often failed to clearly inform the customers they were unqualified for the promotional terms, leaving them to unknowingly buy a system at high interest rates.

The next step in this case will be to identify each customer affected (that can't be easy), and to determine the amount of restitution that they and the state are entitled to. Teresi appointed a referee to sort through the issue and figure the cost of penalties to be imposed on Dell.

A spokesman for the New York Attorney General's office told El Reg that he couldn't say if the ruling would have implications for customers outside New York state until the discovery process is over. However, since most of the consumer complaints that had sparked the lawsuit came from New York state residents, it will likely be "focused" in the area.

Dell responded today saying the problem isn't as large as the Attorney General's office makes it out to be.

"We don't agree with this decision and will be defending our position vigorously," the company said in a statement. "Our goal has been, and continues to be, to provide the best customer experience possible. We are confident that when the proceedings are finally completed the court will determine that only a relatively small number of customers have been affected."

A copy of the ruling can be found here (PDF warning). The attorney general's office has until December 1, 2009 to present the court with evidence of the damages. ®

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