Mad Jack’s Agrees to Pay Fine in Probe of Advertising
Mad Jack’s, the hard-sell purveyor of stereos, televisions and other commercial electronic products, this week agreed to pay nearly $24,000 in fines and city attorney’s fees as a result of deceptive packaging and false advertising.
The company, one of the largest electronics chains in the county, and its president, Bruce Bart, approved the settlement Tuesday after an investigation by the consumer fraud unit of the San Diego city attorney’s office.
Along with the $21,000 in fines and $2,800 to cover the city attorney’s costs, Mad Jack’s Inc. agreed to stop or change several other business practices.
Those include disclosure that a minimum purchase is required to qualify for credit and prohibitions against selling products in inaccurate or deceptive packaging, advertising a sale as a liquidation when it is not, misrepresenting the effect of any new law on the price or availability of merchandise, and indicating that all items pictured in an advertisement are being sold under similar conditions when they aren’t.
Two Incidents
The case against Mad Jack’s--the second in eight years filed by the city attorney--was based on two separate incidents.
The first involves the sale of car stereos. During a seven-month period from last July to January, Mad Jack’s sold 300 to 400 Coustic RX 911 car stereos.
But, according to the city attorney’s office, the stereos pictured on the boxes were really a more expensive model, the RX 912. Additionally, the packages carried an inaccurate Mad Jack’s inventory control label.
As part of the settlement, Mad Jack’s will notify the purchasers of the car stereos and tell them they may be entitled to refunds of as much as $30.
David Strosty, Mad Jack’s sales manager, said Thursday that the packaging problem was an error by the Los Angeles-based manufacturer.
He claimed that most people don’t look at the box and that they select their stereos from those on display.
“We didn’t feel we were in a position to fight it (the city’s lawsuit) . . . so we’ll take our lumps on it,” Strosty said.
He also said that it will be up to the purchasers of the stereos to explain which features they thought they were buying before they will receive any kind of refund. Mad Jack’s, Strosty said, will not automatically pay people $30 without proof that they were misled.
Liquidation Ads
The second incident involved a series of “Japanese products liquidation” advertisements in April that implied that Japanese electronic merchandise had to be sold before prices rose as a result of tariffs imposed by President Reagan.
The ads, which ran in newspapers, radio and television--often in the breathless style for which the company is well-known locally--conveyed a “sense of urgency . . . that it would be difficult to get these sorts of products because of the tariffs,” said Anita Noone, a deputy city attorney who handled the case.
The liquidation sale advertisements included more than 30 Japanese-made products, from videocassettes and compact discs to large-screen television sets and tape recorders. Only one of them was subject to the tariff.
According to Noone, it was clear in late March that only a few Japanese electronic products would be subjected to increased tariffs and, moreover, by April 17 the Reagan Administration identified the products.
Those included 18-, 19- and 20-inch color television sets, hand-held power tools and lap-top computers, and nothing else.
Despite this, the city attorney’s office said, Mad Jack’s continued advertising its liquidation sale through the end of the month, including the Easter weekend.
“When the ad campaign began, it was possible to ascertain that not all products would be subject to the tariff,” Noone said.
The ads, she said, strongly implied, “Hurry, you have to buy now.”
Reasons for Sale
Strosty said that Mad Jack’s moved up its annual spring sale because it wanted to both make room for its new, 1988 products and because of concerns about the dollar’s status with the yen.
Mad Jack’s, he said, based its so-called Japanese products liquidation sale in part on news stories about the upcoming tariffs. He acknowledged, however, that Mad Jack’s became aware that the tariffs would apply only to a handful of products while the ads were still running.
“We didn’t react quickly enough,” he said, insisting that customers “didn’t pay more for products” during the sale.
As for the admonition concerning the advertising of $5,000 instant credit to customers, Strosty said it is an industry-wide practice that such credit is available only on minimum purchases of $200. Mad Jack’s will now be required to disclose that minimum.
This isn’t the first time that Mad Jack’s has been fined as a result of its business practices.
In August, 1979, the city attorney’s office filed a civil suit against Bart--the current company president--and Jack Cohen, who had formed a partnership doing business as Mad Jack’s. They were fined $18,000 in penalties and city attorney’s costs for engaging in unfair competition and false advertising, according to the city attorney’s office.
More recently, the city attorney’s office has filed lawsuits against two other consumer electronic outlets, both for false advertising.
In February, Dow Stereo was fined $5,000 plus $750 in attorney’s costs in a civil suit it settled.
Last month, Leo’s Stereo pleaded no contest in a criminal case that led to the company paying a $2,500 fine and setting up a $250 restitution fund.
