Wards Co. of Richmond, operators of the Circuit City electronics stores, agreed yesterday to pay $315,000 to settle a massive complaint of false advertising and unfair competition filed by the Los Angeles District Attorney's Office.
California authorities said an investigation that began last summer turned up more than 2,000 cases in which Wards' West Coast division allegedly used bait-and-switch sales tactics and sold used merchandise as new.
After lengthy negotiations, Wards yesterday agreed to settle the case by paying $189,000 in civil penalties and $126,000 in legal and investigative costs. Without admitting or denying the charges, Wards also agreed to abide by an injunction prohibiting future violations of California law.
The charges involved sales of microwave ovens, television sets and other appliances at 42 Zody's discount stores in which Wards Co. operates the appliance departments. Zody's was fined $60,000.
The Richmond firm, which is not affiliated with Montgomery Ward, also owns the Circuit City electronics stores in the Washington area and the Lafayette hi fi chain in the New York City market, neither of which were involved in yesterday's charges.
A spokesman for Los Angeles County District Attorney Robert H. Philibosian said the investigation of Wards' sales practice began after "an insider" complained to authorities last July. In August and September, undercover agents made 100 secret shopping visits to Zody appliance departments run by Wards and "got a very high hit rate on bait and switch," LA officials said. The investigation was disclosed in November after investigators obtained search warrants for Wards' sales records and other data.
Wards said in Richmond that it had "cooperated fully" with the investigation and agreed to settle the dispute "without conceding corporate wrongdoing" to avoid costly litigation.