[Federal Register Volume 64, Number 97 (Thursday, May 20, 1999)]
[Notices]
[Pages 27544-27545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12660]


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FEDERAL TRADE COMMISSION

[File No. 9823563 & 9823565]


Dell Computer Corporation and Micron Electronics, Inc.; Analysis 
To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreements.

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SUMMARY: The consent agreements in these matters settle 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 
complaints that accompany the two consent agreements and the terms of 
the consent orders--embodied in the consent agreements--that would 
settle these allegations.

DATES: Comments must be received on or before July 19, 1999.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Sally Forman Pitofsky or Rolando 
Berrelez, FTC/S-4429, 601 Pennsylvania Avenue, NW., Washington, DC 
20580, (202) 326-3224.

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 agreements containing consent orders 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, have 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 agreements, and the 
allegations in the complaints. Electronic copies of the full text of 
the consent agreement packages can be obtained from the FTC Home Page 
(for May 13th, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' Paper copies can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Two paper copies of each comment should be filed, 
and should be accompanied, if possible, by a 3\1/2\ inch diskette 
containing an electronic copy of the comment. 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

    Summary: The Federal Trade Commission has accepted separate 
agreements, subject to final approval, from Dell Computer Corporation 
(``Dell'') and Micron Electronics, Inc. (``Micron'') (collectively 
referred to as ``respondents''). The proposed consents resolve 
allegations that respondents created and disseminated computer lease 
advertisements that violate the Federal Trade Commission Act (``FTC 
Act''), the Consumer Leasing Act (``CLA''), and Regulation M.
    Section 5 of the FTC Act prohibits false, misleading, or deceptive 
representations or omissions of material information in advertisements. 
In addition, Congress established statutory disclosure requirements for 
lease advertising under the CLA and directed the Federal Reserve Board 
(``Board'') to promulgate a regulation implementing such statute--
Regulation M. See 15 U.S.C. 1667-1667e; 12 CFR Part 213.
    The proposed consent orders have been placed on the public record 
for sixty (60) days for receipt 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 
agreements and the comments received and will decide whether it should 
withdraw from the agreements or make final the agreements' proposed 
orders.

[[Page 27545]]

I. Dell and Micron Complaints

A. FTC Act Violations--Lease Advertising
    1. Failure to Disclose Adequately that Transaction Advertised is a 
Lease.
    Count I of the Dell complaint alleges that respondent Dell, in 
lease advertisements, represents that consumers can purchase the 
advertised computer systems for the monthly payment amounts prominently 
stated in the advertisements. These advertisements allegedly do no 
adequately disclose that each advertised monthly payment amount is a 
component of a lease offer. The Dell complaint alleges that the 
existence of this additional information would be material to consumers 
in deciding whether to lease or purchase a computer from Dell. Count I, 
therefore, alleges that the failure to disclose adequately this 
additional information, in light of the representation made, was, and 
is, a deceptive practice in violation of Section 5 of the FTC Act.
    2. Failure to Disclose, and/or Failure to Disclose Adequately, 
Lease Terms.
    Count II of the Dell complaint and Count I of the Micron complaint 
allege that respondents' lease advertisements represent that consumers 
can obtain the advertised computer systems at the terms prominently 
stated in the advertisements, including but not limited to the monthly 
payment amount. These advertisements allegedly fail to disclose, and/or 
fail to disclose adequately, additional terms pertaining to the lease 
offers, such as the total amount of any payments due at lease inception 
and/or the term of the lease. The existence of this additional 
information would be material to consumers in deciding whether to lease 
the advertised computer systems from respondents, according to the 
complaints, These practices, according to the complaints, constitute 
deceptive acts or practices in violation of Section 5(a) of the FTC 
Act.
B. CLA and Regulation M Violations
    Dell and Micron's lease advertisements also allegedly violate the 
CLA and Regulation M. According to the complaints, these respondents' 
computer lease advertisements state a monthly payment amount but fail 
to disclose, and/or fail to disclose clearly and conspicuously, certain 
additional terms required by the CLA and Regulation M, including one or 
more of the following terms: that the transaction advertised is a 
lease; the total amount due prior to or at consummation or by delivery, 
if delivery occurs after consummation, and that such amount: (1) 
excludes third-party fees, such as taxes, licenses, and registration 
fees, and discloses that fact or (2) includes third-party fees based on 
a particular state or locality and discloses that fact and the fact 
that such fees may vary by state or locality; whether or not a security 
deposit is required; and the number, amount, and timing of scheduled 
payments.
    Respondents' television, Internet, and/or print disclosures are not 
clear and conspicuous because they appear in fine print at the bottom 
of the advertisements. The Dell and Micron complaints, therefore, 
allege that these practices violate Section 184 of the CLA, 15 U.S.C. 
1667c, as amended, and Section 213.7 of Regulation M, 12 CFR 213.7 as 
amended.

II. Proposed Consent Orders

    The proposed consent orders contain provisions designed to remedy 
the violations charged and to prevent respondents from engaging in 
similar acts and practices in the future. Specifically, subparagraph 
I.A. of the Dell proposed order prohibits Dell from failing to disclose 
clearly and conspicuously that any advertised lease terms, including 
but not limited to a monthly payment amount or downpayment, pertain to 
a lease offer.
    Subparagraph I.B. of the Dell proposed order and subparagraph I.A. 
of the Micron proposed order prohibit respondents, in any lease 
advertisements, from making any reference to any charge that is part of 
the total amount due at lease signing or delivery or that no such 
amount is due, not including a statement of the periodic payment, 
unless the advertisement also states with equal prominence the total 
amount due at lease inception. The ``equal prominence'' requirement 
prohibits respondents from running deceptive advertisements that 
highlight low amounts ``down,'' with inadequate disclosures of actual 
total inception fees. This ``Equal prominence'' requirement for lease 
inception fees also is found in Regulation M.
    Moreover, subparagraph I.C. of the Dell proposed order and 
subparagraph I.B. of the Micron proposed order prohibit respondents, in 
any lease advertisement, from stating the amount of any payment, or 
that any or no initial payment is required at consummation of the 
lease, unless the advertisement also states, clearly and conspicuously, 
all of the terms required by Regulation M, as follows: (1) that the 
transaction advertised is a lease; (2) the total amount due at lease 
signing or delivery; (3) whether or not a security deposit is required; 
(4) the number, amounts, and timing of scheduled payments; and (5) that 
an extra charge may be imposed at the end of the lease term where the 
liability of the consumer at lease end is based on the anticipated 
residual value of the leased property.
    The information required by subparagraphs I.C. and I.B. of the Dell 
and Micron proposed orders, respectively, must be disclosed ``clearly 
and conspicuously'' as defined in the proposed orders. The ``clear and 
conspicuous'' definition requires respondents to present such lease 
information, as applicable, within the advertisement so that an 
ordinary consumer can read, or hear, and comprehend it. This definition 
is consistent with the ``clear and conspicuous'' requirement for 
advertising disclosures in Regulation M that require disclosures that 
consumers can see and read (or hear) and comprehend. It is also 
consistent with prior Commission orders and statements interpreting 
Section 5 to require that advertising disclosures be readable (or 
audible) and understandable to reasonable consumers.
    Finally, subparagraph I.D. of the Dell proposed order and 
subparagraph I.C. of the Micron proposed order enjoin respondents from 
failing to comply in any other respect with Regulation M, 12 CFR 213, 
as amended, and the CLA, 15 U.S.C. 1667-1667e, as amended.
    Like prior Commission orders involving lease advertising, these 
orders refer to Regulation M and the CLA, as amended, Thus, these 
orders contemplate that any modification to the advertising disclosure 
requirements provided in Regulation M or the CLA will be incorporated 
automatically into those parts of the orders referencing those laws.
    The purpose of this analysis is to facilitate public comment on the 
proposed orders. It is not intended to constitute an official 
interpretation of the agreements and proposed orders or to modify in 
any way their terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-12660 Filed 5-19-99; 8:45 am]
BILLING CODE 6750-01-M