Investor Alert

Feb. 16, 2004, 4:20 p.m. EST

Bally settles probe of ad, sales tactics

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By Carolyn Pritchard, CBS MarketWatch.com

SAN FRANCISCO (CBS.MW) -- Bally Total Fitness Holding agreed Monday to a number of reforms of its sales and advertising practices, settling an investigation by New York Attorney General Eliot Spitzer's office.

Since 1999, hundreds of consumers have complained that deceptive ads and high-pressure sales tactics used by Bally tricked them into signing long-term contracts and misrepresented the total price of the memberships, according to a statement released by Spitzer's office.

Others complained that Bally denied their requests for cancellation even though they were exercising their rights under state law, Spitzer said.

Spitzer said that as part of the agreement, Bally must implement substantial sales, training, and advertising reforms "far greater than the law requires;" improve its cancellation policies and better monitor its compliance with those policies.

The Chicago-based health club operator also agreed to provide pro-rata refunds to certain consumers who were misled about their contract or were improperly denied the right to cancel, according to Spitzer.

Bally issued a statement regarding the agreement. "In essence, we didn't do anything we haven't been doing already," said company spokesperson Jon Harris in the statement. "This is actually old news, as most of the inquiries date back several years and do not reflect the company's operations today."

"In fact, many of the policies referred to in this agreement were voluntarily and independently changed by Bally several years ago," the statement said.

Shares of Bally closed Friday at $6.62, down 8 cents.

Carolyn Pritchard is a reporter for CBS.MarketWatch.com in San Francisco.

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