A reliable Taiwanese source has recently disclosed that Dell Inc. (DELL) could be fined up to $758,000, if appropriate authorities decide that the company committed some online pricing errors which violated the law of the land.
As reported by the Taiwanese media, on June 25, Dell’s Taiwanese website listed its 19-inch LCD monitors at NT$500 ($15.16) and 20-inch LCD monitors at NT$999 ($30.29). In each case, that’s about NT$7,000, or $210, less than the real retail price.
Again on July 5, Dell erred by pricing its Latitude E4300 notebook at NT$18,558 ($562), but later corrected the same to NT$60,900 ($1,850). According to sources, Dell refused to honor the numerous orders that were reportedly placed online by consumers. However, it offered a NT$1,000 ($30) discount for the LCD monitors and a NT$20,000 ($600) reduction on the laptop.
We believe this can pose problems for Dell if proved correct by appropriate authorities. Taiwan’s Fair Trade Commission will determine whether Dell has violated the Fair Trade Law by not delivering orders as advertised.
If this goes against Dell, the company could be fined anywhere between of NT$50,000 to NT$25.0 million or between $1,500 and $758,000. We believe that these mistakes are the effect of administrative lapses in the company’s Taiwanese wing.
This will not only attract a financial penalty for the company but will be a big blow to its reputation, which may in turn affect Dell’s business prospects going forward.
We would like to see an organization like Dell to come out of this mess unscathed but cannot help being apprehensive about it. Until there is further clarity, we continue with a Sell rating on the stock.
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