Computer Retailers Settle With FTC over Advertising

Advertising for so-called “free” and “low-cost” computer systems was declared deceptive and misleading this week, as the Federal Trade Commission this week settled deceptive trade practices charges with online retailers Buy.com and Value America and the Office Depot retail chain.

The hubbub centered around advertisements and promotions that included rebates conditioned on the purchase of three years of Internet service. The FTC said the conditions weren’t displayed prominently enough, and it was too difficult for the average consumer to figure out the true costs of such a “free” or “low-cost” computer.

“You shouldn’t need a Ph.D. to figure out the cost of a PC,” said Jodie Bernstein, director of the Federal Trade Commission’s Bureau of Consumer Protection.

“These advertisers should have done a better job of disclosing the details so that consumers could figure out the deal. The fact is that consumers and businesses all benefit when disclosures are prominently placed and in plain English.”

The settlement is an important one in an age in which Internet service is increasingly bundled with a computer purchase, and when a continued subscription to an ISP is a condition of getting a low priced or free computer.

The FTC gave an example of one ad that featured a computer for $269. But the purchaser’s actual expenses would exceed $1,000, after paying for the Internet service for the length of the required contract.

In addition, consumers who cancelled their contracts before the term was up would be charged the “full price” of the computer, and, in some cases, face additional penalties. Computer buyers in some parts of the country also would face long distance charges, if they lived in a place where the ISP was a long-distance call. All of this information, according to the FTC, appeared in very small or inconspicuous disclaimers.

Both Office Depot and Value America were also charged with falsely representing that their “free” computer system offers included a monitor. The Value America complaint also alleged that the company violated regulations on “Mail or Telephone Order Merchandise” by failing to deliver within the promised delivery times.

As part of the settlements, the three companies agreed to disclose the true costs of the computer systems more prominently.

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