Piercing Pagoda and New York State Attorney General reach agreement

The New York State Attorney General’s Office and Zale Corp., Dallas, settled a dispute regarding the Piercing Pagoda retail chain that involved its “lifetime guarantee” policy and its “Jewelry Club” offer. Piercing Pagoda sells inexpensive gold jewelry, primarily from kiosks located in shopping malls.

Under the agreement, New York State Attorney General Eliot Spitzer said in a statement, that the Bethlehem, Pa.-based Piercing Pagoda (a division of Zale, which purchased it in September, 2000) must:

* Reinstitute its lifetime guarantee program for customers who bought their original piece of jewelry before the company changed its policy and after the same customers received replacement pieces.

* Agree to redeem receipts of consumers who participated in the original version of the “Jewelry Club” offer, also before the company changed its policy.

* Pay $10,000 in costs to the state.

* Post signs at its stores and kiosks clearly disclosing the terms of the agreement with the Attorney General’s office.

Susan Lanigan, senior VP and general counsel for Zale Corp., described the talks between Zale and Robert Vawter, associate attorney general of the consumer frauds and protection bureau attorney general’s office, as amicable. She said the agreement was reached in August, although the attorney general’s office didn’t release the statement announcing the agreement until Nov. 14. “We voluntarily entered into the agreement,” Lanigan said.

The two disputes centered on changes in Piercing Pagoda’s policies in Nov. 1999, prior to Zale buying the company.

In the first dispute, the high-volume retailer changed its three-decade-old policies regarding defective merchandise. For years, Piercing Pagoda provided a lifetime guarantee for the replacement or repair of defective jewelry. In November 1999, however, the company changed its policy and limited the warranty period to 90 days. Piercing Pagoda kiosks then refused to continue the lifetime warranty after faulty jewelry had been replaced.

Lanigan says that the lifetime guarantee policy was changed because customers took advantage of the offer by returning merchandise that they were tired of or that they broke themselves. Vendors began refusing to replace merchandise. Lanigan says that Piercing Pagoda believed it was within its rights to not continue the lifetime warranty for jewelry after the original piece was replaced.

“We always honored and still honor purchases made before Nov. 99. We still replace it,” Lanigan says. “The argument that the attorney general gave is that the replacement article after Nov. 1999 still should be covered for the life of the piece. We disagree with that. We said that once our policy changed the replacement piece was covered by the new policy.”

Under the new agreement, all replacement pieces will be honored until 2008. Consumers who turned in their original receipt to Piercing Pagoda after Nov. 1, 1999, must go to a Piercing Pagoda kiosk before Dec. 31 to receive a new receipt entitling them to continued free replacements of defective jewelry.

The second dispute involved Piercing Pagoda’s “Jewelry Club” offer. Through this club, the company provided repeat customers free jewelry after five purchases, based on a percentage of the cost of the product (for example, with a $50 purchase, $8 may go toward a free item). Again this policy changed as of Nov. 1, 1999, and the company did not honor its “no expiration date” policy and instead gave $10 gift certificates for each $100 spent, which expired in 90 days.

The company agreed to redeem receipts of consumers who participated in the original version of the offer. “It was another issue that was the right thing to do and good customer service,” Lanigan said.

Piercing Pagoda instituted these new policy changes nationwide.