[Federal Register Volume 59, Number 88 (Monday, May 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11108]


[[Page Unknown]]

[Federal Register: May 9, 1994]


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FEDERAL TRADE COMMISSION
[File No. 922 3332]

 

Hayes Microcomputer Products, Inc.; Proposed consent agreement 
With Analysis to Aid Public Commentg

AGENCY: Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
prohibit, among other things, a Georgia manufacturer and distributor of 
computer communications products from making certain representations 
regarding any modem-related product, unless the respondent possesses 
and relies upon competent and reliable substantiating evidence.

DATES: Comments must be received on or before July 8, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Linda Badger, FTC/San Francisco Regional Office, 901 Market St., Suite 
570, San Francisco, CA. 94103. (415) 744-7920.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

    In the Matter of: Hayes Microcomputer Products, Inc., a 
corporation.

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of Hayes Microcomputer Products, Inc., a 
corporation (``proposed respondent''), and it now appearing that the 
proposed respondent is willing to enter into an agreement containing an 
order to cease and desist from the use of the acts and practices being 
investigated,
    It is hereby agreed by and between Hayes Microcomputer Products, 
Inc., by its duly authorized officer, and its attorney, and counsel for 
the Federal Trade Commission that:
    1. Proposed respondent Hayes Microcomputer Products, Inc., is a 
corporation organized, existing and doing business under and by virtue 
of the laws of the State of Georgia, with its office and principal 
place of business located at 5835 Peachtree Corners East, in the City 
of Norcross, State of Georgia.
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft of complaint here attached.
    3. Proposed respondent waives:
    a. Any further procedural steps;
    b. The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law; and
    c. All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement.
    4. This agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
agreement is accepted by the Commission, it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either withdraw its acceptance 
of this agreement and so notify the proposed respondent, in which event 
it will take such action as it may consider appropriate, or issue and 
serve its complaint (in such form as the circumstances may require) and 
decision, in disposition of the proceeding.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by the proposed respondent of facts, other than 
jurisdictional facts, or of violations of law as alleged in the draft 
of complaint here attached.
    6. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Sec. 2.34 of the Commission's 
Rules, the Commission may, without further notice to proposed 
respondent, (a) issue its complaint corresponding in form and substance 
with the draft of complaint here attached and its decision containing 
the following order to cease and desist in disposition of the 
proceeding and (b) make information public in respect thereto. When so 
entered, the order to cease and desist shall have the same force and 
effect and may be altered, modified or set aside in the same manner and 
within the same time provided by statute for other orders. The order 
shall become final upon service. Delivery by the U.S. Postal Service of 
the complaint and decision containing the agreed-to order to proposed 
respondent's address as stated in this agreement shall constitute 
service. The proposed respondent waives any right it may have to any 
other manner of service. The complaint may be used in construing the 
terms of the order, and no agreement, understanding, representation, or 
interpretation not contained in the order or the agreement may be used 
to vary or contradict the terms of the order.
    7. The proposed respondent has read the proposed complaint and 
order contemplated hereby. The proposed respondent understands that 
once the order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the order. 
The proposed respondent further understands that it may be liable for 
civil penalties in the amount provided by law for each violation of the 
order after it becomes final.

Order

Definitions

    For the purposes of this Order, the following definitions shall 
apply:
    A. The term Improved Escape Sequence with Guard TIme means the 
escape method technology described, among other things, in United 
States Patent Number 4,549,302, titled as ``Modem With Improved Escape 
Sequence With Guard Time Mechanism.''
    B. The term Time Independent Escape Sequence, or Ties, means an 
escape sequence consisting of three escape characters (eg., ``+++'') 
followed by a valid AT command, which can be followed by additional at 
commands, and ended with another character, typically a carriage 
return.
    C. The term modem-related product means any modem, any component of 
any modem, or any hardware or software used in the operation of any 
modem.
I
    It is ordered that respondent, Hayes Microcomputer Products, Inc., 
a corporation, its successors and assigns, and its officers, and 
respondent's agents, representatives and employees, directly or through 
any corporation, subsidiary, division or other device, in connection 
with the manufacturing, labelling, advertising, promotion, offering for 
sale, sale, or distribution of products containing the Improved Escape 
Sequence with Guard Time, in or affecting commerce, as ``commerce'' is 
defined in the Federal Trade Commission Act, do forthwith cease and 
desist from representing, in any manner, directly or by implication, 
that:
    A. Because a modem does not incorporate the Improved Escape 
Sequence with Guard Time, the use of that modem creates a substantial 
risk of data destruction;
    B. When incorporated in modems, the ``Time Independent Escape 
Sequence'' (``TIES'') creates a substantial risk of data transmission 
failure;
    C. The Improved Escape Sequence with Guard Time is the only escape 
method that does not create a substantial risk of data transmission 
failure; or
    D. The use of any modem that does not incorporate the Improved 
Escape Sequence with Guard Time entails a data transmission problem 
that can be solved only by replacing it with a modem that incorporates 
the Improved Escape Sequence with Guard Time;

unless such representation is true, and at the time of making such 
representation, respondent possesses and relies upon competent and 
reliable evidence, which when appropriate must be competent and 
reliable scientific evidence, that substantiates such representation. 
For purposes of this Order, ``competent and reliable scientific 
evidence'' shall mean tests, analyses, research, studies or other 
evidence based on the expertise of professionals in the relevant area, 
that has been conducted and evaluated in an objective manner by persons 
qualified to do so, using procedures generally accepted in the 
profession to yield accurate and reliable results.
II
    It is further ordered that respondent, Hayes Microcomputer 
Products, Inc., a corporation, its successors and assigns, and its 
officers, and respondent's agents, representatives and employees, 
directly or through any corporation, subsidiary, division or other 
device, in connection with the manufacturing, labelling, advertising, 
promotion, offering for sale, sale, or distribution of any modem-
related product in or affecting commerce, as ``commerce'' is defined in 
the Federal Trade Commission Act, do forthwith cease and desist from 
representing, in any manner, directly or by implication, the risk of 
experiencing data destruction, data loss or data transmission problems 
due to any escape method, unless, at the time of making such 
representation, respondent possesses and relies upon competent and 
reliable evidence, which when appropriate must be competent and 
reliable scientific evidence, that substantiates such representation.
III
    It is further ordered that for five (5) years after the last date 
of dissemination of any representation covered by this Order, 
respondent, or its successors and assigns, shall maintain and upon 
request make available to the Federal Trade Commission for inspection 
and copying:
    A. All materials that were relied upon in disseminating such 
representation; and
    B. All tests, reports, studies, surveys, demonstrations or other 
evidence in its possession or control that contradict, qualify, or call 
into question such representation, or the basis relied upon for such 
representation including complaints from consumers.
IV
    It is further ordered that respondent shall notify the Commission 
at least thirty (30) days prior to the effective date of any proposed 
change in the respondent that may effect compliance obligations under 
this Order such as dissolution, assignment, or sale resulting in the 
emergence of successor corporation(s), the creation or dissolution of 
subsidiaries, or any other change in the corporation(s).
V
    It is further ordered that respondent shall, within ten (10) days 
from the date of service of this Order upon it, distribute a copy of 
this Order to each of its officers, agents, representatives, 
independent contractors, and employees involved in the preparation and 
placement of advertisements or promotional materials, to all company 
executives, and to all marketing and sales managers; and for a period 
of three (3) years, from the date of issuance of this Order, distribute 
a copy of this Order to all of respondent's future such officers, 
agents, representatives, independent contractors, and employees.
VI
    It is further ordered that respondent shall, within sixty (60) days 
from the date of service of this Order upon it, and at such other times 
as the Commission may require, file with the Commission a report, in 
writing, setting forth in detail the manner and form in which it has 
complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted an agreement, subject to 
final approval, to a proposed consent order from respondent Hayes 
Microcomputer Products, Inc., (``Hayes'') a Georgia corporation.
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement and take other appropriate action or make 
final the agreement's proposed order.
    Hayes manufactures and distributes products for computer 
communications, including modems, local area networks, and software. 
This matter concerns a patented ``escape sequence'' which Hayes 
developed for use in its modems, and licenses to other companies. An 
escape sequence is a mechanism by which modems end a data transmission. 
The name of the Hayes escape sequence at issue is the ``Improved Escape 
Sequence with Guard Time.'' The Commission's complaint charges that 
respondent's advertising contained false representations that the use 
of other escape methods creates a substantial risk of experiencing data 
transmission problems. For example, the complaint charges that Hayes 
made false representations regarding the Time Independent Escape 
Sequence (``TIES''), an escape method developed by several of Hayes' 
competitors. Specifically, the complaint alleges that the respondent 
falsely represented that:
    (1) Because a modem does not incorporate the Improved Escape 
Sequence with Guard Time, the use of that modem creates a substantial 
risk of data destruction;
    (2) When incorporated in modems, the ``Time Independent Escape 
Sequence'' (``TIES'') creates a substantial risk of data transmission 
failure;
    (3) The Improved Escape Sequence with Guard Time is the only escape 
method that does not create a substantial risk of data transmission 
failure; and
    (4) The use of any modem that does not incorporate the Improved 
Escape Sequence with Guard Time entails a data transmission problem 
that can be solved only by replacing it with a modem that incorporates 
the Improved Escape Sequence with Guard Time.
    The proposed consent order contains provisions designed to remedy 
the violations charged and to prevent the respondent from engaging in 
similar acts and practices in the future. Part I of the proposed order 
would prohibit the company from making any of the false claims 
delineated above, unless they are true, and at the time of making them, 
the respondent possesses and relies upon competent and reliable 
evidence, which when appropriate must be competent and reliable 
scientific evidence.
    Part II of the proposed order includes fencing-in relief, 
prohibiting the company from making representations relating to any 
modem-related product, regarding the risk of experiencing data loss, 
data destruction, or data transmission problems due to any escape 
method, unless, at the time of making such representations, the company 
possesses and relies upon a reasonable basis, which when appropriate, 
must include competent and reliable scientific evidence. It is to be 
noted that this fencing-in provision relates to any method used to 
switch a modem to the command mode--this would include out-of-band 
escape sequences as well as in-band escape sequences such as TIES or 
Hayes' Improved Escape Sequence with Guard Time.
    The proposed order also requires the respondent to maintain 
materials relied upon to substantiate claims covered by the order; to 
provide a copy of the consent agreement to all employees or 
representatives involved in the preparation and placement of the 
company's advertisements, as well as to all company executives and 
marketing and sales managers; to notify the Commission of any changes 
in corporate structure that might affect compliance with the order; and 
to file one or more reports detailing compliance with the order.
    The proposed of this analysis is to facilitate public comment on 
the proposed order. It is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 94-11108 Filed 5-6-94; 8:45 am]
BILLING CODE 6750-01-M