Dell - Lawsuit risk could propogate along the supply chain

According to report, Dell has mispriced some products on its online shop, and refused to honor it. The consumers in return sued it, and frozen its bank account temporary, thus affecting in turn affecting Dell's payment to its suppliers.

This is quite surprising, considering that the amount involved is pretty small. In Tech space, many companies are involved in multiple lawsuits, particularly in IP litigations. If the bank accounts could be frozen easily, it could mean that many Tech companies at the downstream of suppliers could be affected negatively.



Dell account frozen over pricing mishaps

Publication Date：07/24/2009
Source： China Times
U.S. Computer giant Dell Inc. reportedly faces a charge of price fraud with its Citibank account frozen temporarily by court order, sources said.

Dell’s online shopping Web site in early July mislabeled Latitude E4300 laptops and other products at very low prices. As a result, 26,000 consumers made orders via the Internet within a week, but Dell only agreed to compensate laptop buyers with coupons for NT$20,000(US$610) each, and purchasers of other products with coupons for NT$1,000 each.

This response dismayed several big consumers, who reportedly ordered computers and monitors worth a couple of million NT dollars at the mislabeled prices, and transmitted money to Dell’s bank account. They sued Dell for price fraud because the company would not fill the orders. The Chungli Criminal Police Bureau accepted the case and submitted it to the court, which then ordered a freeze on Dell’s Citibank account in Taiwan.

Compal Electronics Co. Ltd and Foxconn Technology Group, two major product suppliers for Dell, reportedly were affected financially by the account-blocking.

According to a local supplier for Dell, only a small part of Dell’s cash flow in its Taiwan account comes from online orders. Most of the capital is remitted by company headquarters to pay panel providers. Local provider companies, worried that they would not receive payment, reportedly called Premier Liu Chao-shiuan for help after they learned of the account-freezing.

Some argued that a consumer dispute should not be exaggerated into an online fraud case, especially when online orders for Dell products in Taiwan are usually at a very low volume.

Francis Huan, public relations manager of Dell Asia Pacific and Japan, would not comment on the account-freezing incident, but stressed “it has all passed now.” Dell’s operations in Taiwan have returned to normal, although Huan believes that “no ordinary consumer would place such a large order.”

Dell will refund money to all online purchasers who have already made payments, Huan said. But as many of them use pseudonyms to order and only leave cell phone numbers, it will take some time before all refunds can be made. (TYH-THN)