GameStop CEO George Sherman has been ordered by the Federal Trade Commission (FTC) to pay $985,320 in penalties for alleged violations of a 2020 agreement related to the company’s “fraudulent” customer loyalty program. The news comes just days after GameStop announced a disappointing Q1 2023 financial report, which saw its stock price tumble.
The FTC alleges that GameStop failed to honor its commitment to “reward customers for their loyalty” through the program, which promised discounts, free games, and other perks. The commission claims that the company instead “misled consumers about the value of their loyalty points” and made it “extremely difficult for them to redeem their rewards”.
“Consumers deserve to be treated fairly, and GameStop’s actions undermined that,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will hold companies accountable when they fail to live up to their promises.”
The $985,320 penalty is the largest ever levied against a company for violating a customer loyalty program agreement with the FTC. The company is also required to “take steps to ensure future compliance” with the commission’s regulations.
Following the announcement, GameStop stock (GME) fell by approximately 3% in after-hours trading. The company’s shares have been under pressure in recent months, with investors concerned about its long-term prospects.
While the FTC’s action is focused on past customer loyalty program violations, it comes at a time when GameStop is facing increasing scrutiny from regulators and investors. The company has been criticized for its “aggressive” business strategy and its reliance on meme-stock hype to drive its stock price.
With the FTC’s penalty and its recent financial struggles, GameStop is facing mounting challenges. Whether the company can overcome these obstacles and turn its fortunes around remains to be seen.
