Online store Buy.com has agreed to pay $575,000 to settle one of the first court disputes over a mistakenly priced item in a Web store.
The payment is part of a tentative agreement the Costa Mesa, Calif.-based company reached earlier this year with attorneys for a group of customers who attempted to buy a mistakenly priced monitor last year. Class-action attorneys began notifying customers of the settlement in recent weeks in the wake of a provisional approval of the agreement by the Superior Court of Orange County, California.
Gary Sodikoff, an attorney who represented customers in the suit, said e-tailers need to take "reasonable" steps to prevent publishing mistaken prices or risk lawsuits from angry customers.
"Buy.com knew when it posted its price that it would be disseminated to millions of people instantly," Sodikoff said. "The tremendous reach of the Internet is such that this impacts on the concept of reasonable safeguards. You better have a system in place that stops or checks what you say on the Internet before it gets out."
But Buy.com attorney Michael Hornak said the settlement was more about the e-tailer cutting its losses. After paying attorneys' fees and court costs, approximately 7,000 affected customers would each receive about $50 under the agreement, which still needs a final approval from the court.
Although Buy.com believed it had a strong case, the relatively small size of the settlement seemed more reasonable than paying for an expensive defense if the case had gone to trial, Hornak said.
"It's important to recognize that this was an honest human error," Hornak said. "I don't think you can prevent honest mistakes from happening in the future. This was effort to resolve case and get on with things."
The settlement comes on the heels of a slew of pricing glitches at online retailers. In recent months,
Amazon.com and Staples.com have posted incorrect prices on DVDs, toys and a briefcase, leading to dozens of orders for drastically discounted items. However, the companies shipped only a fraction
of the orders they received.
The glitch in Amazon's toy store enraged customers enough that several filed complaints with the Federal Trade Commission and the Better Business Bureau.
The lawsuit against Buy.com stems from a 19-inch Hitachi computer monitor that the company mistakenly priced in February 1999. During a four-day period that month, Buy.com listed the monitor for $164.50, some $400 less than its normal list price.
Buy.com agreed to honor the discounted price for the 143 monitors it had in stock, but refused to ship more monitors at the lower price. Upset with how the company was handling the problem, several customers accused Buy.com of a "bait-and-switch"--intentionally pricing products lower than it intended to sell them in order to draw customers into its store.
Buy.com said that the price difference was due to a data entry error. Despite that, a group of customers filed suit against the company in March 1999.
Buy.com did not admit wrongdoing under the terms of the settlement. However, as part of the agreement, the company has taken steps to double-check its prices and improve its customer service.
The customers' attorneys would receive $190,000 in fees out of the settlement and would also be reimbursed for court costs and expenses. All of the customers would receive the same amount under the settlement, regardless of the number of monitors they ordered.
A final hearing on the settlement is scheduled for early December.