The New York attorney general has filed a lawsuit charging that Dell used fraud and false advertising to increase profits on PC sales.
A report in The Wall Street Journal, said that the lawsuit alleges that Dell misled its customers by applying high credit rates to their computer purchases although it had promised cheap financing. The suit also alleges that Dell failed to deliver rebates, warranties and technical support as simply as it had promised, the report said.
Dell denies the charges and plans to fight the suit, a spokesman said. "Dell will vigorously defend itself in court.
"We are confident that our practices will be found to be fair and appropriate. While even one dissatisfied customer is too many, the allegations in the attorney general filing are based upon a small fraction of Dell's consumer transactions in New York,"said the spokesman
The charges strike directly at the improved marketing image Dell has tried to build up in recent months. After several quarters of disappointing sales in 2006, Dell promised to rebuild itself by investing $100m (£50m) to improve customer service and by eliminating its complex rebate system in favour of more predictable prices.
Dell also fell behind rival Hewlett-Packard in market share last year, dismissed its chief executive in January and struggled with a financial investigation by the US Securities and Exchange Commission. The company has missed the deadlines for filing its last two quarterly earnings reports, and admitted in March that its own internal investigators had found evidence of accounting misconduct.
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