[Federal Register Volume 62, Number 47 (Tuesday, March 11, 1997)]
[Notices]
[Pages 11199-11201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6056]


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FEDERAL TRADE COMMISSION

[File No. 952-3275]


Apple Computer, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to

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final Commission approval, would require, among other things, the 
Cupertino, California-based computer hardware and software manufacturer 
to offer Power PC Upgrade Kits, at less than half the original price, 
to each consumer who purchased one of three of the company's entry-
level ``Performa'' model personal computers. Apple has already agreed 
to rebate $776 of the original price to consumers who have already 
purchased the upgrade. The complaint accompanying the consent agreement 
alleges that Apple misrepresented that the upgrade was available to 
consumers at the time that they purchased a Performa or within a 
reasonable period of time thereafter.

DATES: Comments must be received on or before May 12, 1997.

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:
Matthew Gold, San Francisco Regional Office, Federal Trade Commission, 
901 Market Street, Suite 570, San Francisco, CA 94103. (415) 356-5276.
    Linda Badger, San Francisco Regional Office, Federal Trade 
Commission, 901 Market Street, Suite 570, San Francisco, CA 94103. 
(415) 356-5275.

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 above-captioned 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. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the accompanying complaint. An electronic copy of the 
full text of the consent agreement package can be obtained from the 
Commission Actions section of the FTC Home Page (for March 3, 1997), on 
the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A paper 
copy can be obtained from the FTC Public Reference Room, Room H-130, 
Sixth Street and Pennsylvania Avenue, NW., Washington, DC 20580, either 
in person or by calling (202) 326-3627. 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)).

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 Apple Computer, Inc. 
(hereinafter ``Apple'' or ``respondent''). Apple is a major manufacture 
and marketer of personal computer hardware and software products.
    The proposed consent order has been placed on the public record for 
sixty (60) days for the 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 any 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.
    This matter has focused on Apple's advertisements for the 
``Performa 550,'' ``Macintosh LC 550,'' and ``Performa 560'' personal 
computers. The Performa 550, Macintosh LC 550, and Performa 560 models 
are based on the Motorola 680030 microprocessor. While continuing to 
promote the sale of these computers, respondent introduced a new series 
of computers based on the faster, more powerful ``PowerPC'' 
microprocessor.
    Beginning on or about April 1, 1994, subsequent to the introduction 
of the PowerPC microprocessor, respondent advertised Performa 550, 
Macintosh LC 550, and Performa 560 computers as upgradeable to PowerPC 
performance. A PowerPC upgrade, however, was not offered for at least 
one year after Apple began representing that these computers were 
upgradeable. Further, by the time Apple made the upgrade available, its 
price approached the cost of an entirely new computer with a PowerPC 
microprocessor.
    The proposed complaint alleges that Apple made false claims that: 
(1) A PowerPC upgrade was available to consumers at the time that they 
purchased a Performa 550 or Performa 560 computer; and (2) a PowerPC 
upgrade would be available within a reasonable period of time after the 
purchase of a Performa 550, Macintosh LC 550, or Performa 560 computer.
    The proposed complaint further alleges that Apple deceptively 
failed to disclose that the PowerPC upgrade package for the Performa 
550, Macintosh LC 550, or Performa 560 computers would include not only 
a PowerPC upgrade card, but also a new logic board. As a result, the 
complaint alleges, consumers were not aware that they would have to 
incur the cost and inconvenience associated with the replacement of the 
logic board.
    Part I of the proposed order prohibits Apple from misrepresenting 
the availability of any microprocessor upgrade product. Part II of the 
proposed order prohibits Apple from representing that any computer 
hardware product is currently upgradeable, unless at the time such 
representation is made, the upgrade is then available, in reasonable 
quantities to the public, given good-faith projections of anticipated 
demand.
    Parts III and IV of the proposed order address Apple's failure to 
disclose that the upgrade product for the Performa 550, Macintosh LC 
550, or Performa 560 computers would include a new logic board in 
addition to an upgrade card. Part III provides that Apple, when 
marketing any microprocessor upgrade product that incorporates a new 
logic board, may not represent that such product is an ``upgrade'' 
unless it clearly and prominently discloses that a new logic board is a 
component of the upgrade product.
    Part IV of the proposed order prescribes a redress program under 
which Apple is required to offer a PowerPC Upgrade Kit for the reduced 
price of $599 to consumers who purchased a Performa 550, or Macintosh 
LC 550 computer after Apple began advertising them as upgradeable. 
Under Part IV, the kit will include all of the hardware necessary for 
the upgrade, as well as four megabytes of RAM, two essential pieces of 
PowerPC software, and a coupon for free installation of the upgrade 
redeemable at any authorized Apple service location.
    Under Part IV, Apple has the option of providing eligible consumers 
with a new PowerPC system in lieu of the upgrade kit. This provision is 
designed to protect consumers if Apple runs out of the hardware 
necessary to build the upgrade kits. Any consumer who receives a new 
system will have to return the old computer to an authorized Apple 
dealer. Apple will then be responsible for arranging for the dealer to 
transfer all the consumer's data and peripherals to the new PowerPC, 
and for testing the new system to make certain that it is functional.
    To compensate the consumers who have already purchased an upgrade 
for one of the relevant computers, Part IV of the proposed order 
requires Apple to rebate $776.00 of the original purchase price of 
$1,375.00.
    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

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representatives with duties affecting compliance with the terms of the 
order; 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 purpose of this analysis is to facilitate public comment on the 
proposed order, and 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. 97-6056 Filed 3-10-97; 8:45 am]
BILLING CODE 6750-01-M