[Federal Register Volume 63, Number 144 (Tuesday, July 28, 1998)]
[Notices]
[Pages 40287-40288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20105]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 932-3275]


Gateway 2000, Inc.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before September 28, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C 20580.

FOR FURTHER INFORMATION CONTACT:
Michael Rose or Brenda Doubrava, Federal Trade Commission, Cleveland 
Regional Office, 1111 Superior Ave., Eaton Center, Suite 200, 
Cleveland, OH 44114. (216) 263-3455.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 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 
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

[[Page 40288]]

the consent agreement, and the allegations in the complaint. An 
electronic copy of the full text of the consent agreement package can 
be obtained from the FTC Home Page (for July 22, 1998), on the World 
Wide Web, at ``http://www.ftc.gov/os/actions97.htm.'' A paper copy can 
be obtained from the FTC Public Reference Room, Room H-130, Sixth 
Street and Pennsylvania Avenue, N.W., Washington, D.C. 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 Section 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 to a 
proposed consent order from Gateway 2000, Inc. (``Gateway''), a 
manufacturer and direct marketer of personal computers.
    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 will decide whether it should withdraw from the agreement 
or make final the agreement's propose order.
    The Commission's complaint charges that the proposed respondent 
violated Section 5 of the FTC Act by deceptively advertising its 
provision of on-site warranty service and its refund policy, and by its 
use of deceptive language in its written warranties. Additionally, the 
complaint alleges that Gateway has violated the Magnuson-Moss Warranty 
Act (``Warranty Act'') \1\ and two Rules promulgated thereunder: the 
Rule concerning the Disclosure of Written Consumer Product Warranty 
Terms and Conditions (``Disclosure Rule''),\2\ and the Rule concerning 
the Pre-Sale Availability of Written Warranty Terms (``Pre-Sale 
Rule'').\3\ Under Section 110(b) of the Warranty Act, U.S.C. 2310(b), 
violations of the Act or its Rules are also violations of Section 5 of 
the FTC Act.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 2301 et seq.
    \2\ 16 CFR 701.
    \3\ 16 CFR 702.
---------------------------------------------------------------------------

    The draft Complaint charges that Gateway violated section 5 of the 
FTC Act in three ways. First, that the respondent falsely advertised 
its policy of ``money-back'' guarantees by deducting a shipping charge 
from a full refund to the consumer. Second, that the respondent falsely 
advertised that consumers would be provided with free ``on-site 
service'' upon request. Third, the draft Complaint charges the 
respondent with falsely representing, in its written warranties, the 
remedies available to a consumer seeking incidental or consequential 
damages.
    The draft Complaint also alleges: that the respondent violated the 
Pre-Sale Rule by failing to make the text of the written warranty 
readily available to prospective buyers prior to sale through one or 
more of the means specified by the Rule; that Gateway failed to comply 
with requirements of the Disclosure Rule that certain language be 
included in written warranties pertaining to the exclusion or 
limitation of consequential or incidental damages, and a notice that 
the rights of the purchaser with respect to the warranty may vary from 
state to state such that the exclusion or limitation may not apply to a 
particular consumer; and, that Gateway's warranties disclaimed all 
implied warranties and, therefore, failed to comply with the Warranty 
Act's prohibition against the disclaimer of implied warranties, 15 
U.S.C. 2308.
    Gateway has agreed to a one-time payment to the U.S. Treasury of 
$289,429.05 to settle allegations that it falsely and deceptively 
advertised that a consumer's shipping charges would be refunded if they 
exercised their 30-day money-back guarantee option. The draft Order 
prohibits the respondent from failing to make a full refund of the 
purchase price unless it has disclosed, in close proximity to the 
guarantee, that deductions will be made. The draft Order prohibits the 
respondent from misrepresenting its provision of ``on-site service.'' 
The draft Order prohibits the respondent from failing to make the text 
of the written warranty readily available to prospective buyers prior 
to sale through one or more of the means specified in 16 CFR 702.3(c). 
The draft Order prohibits the respondent from failing to comply with 
the provisions of the Disclosure rule, 16 CFR Part 701.3 and from 
failing to comply with the provisions of U.S.C. 2308.
    The proposed Consent order contains provisions designed to remedy 
the violations charged and to prevent the proposed respondent from 
engaging in similar acts and practices in the future. The remainder of 
the proposed order consists of a five year record keeping provision and 
other standard compliance provisions.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify in any 
way their terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-20105 Filed 7-27-98; 8:45 am]
BILLING CODE 6750-01-M