[Federal Register Volume 65, Number 131 (Friday, July 7, 2000)]
[Notices]
[Pages 41995-41997]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17222]


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FEDERAL TRADE COMMISSION

[File No. 992 3282]


BUY.COM Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of

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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 July 31, 2000.

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

FOR FURTHER INFORMATION CONTACT: Joel Winston or Michael Dershowitz, 
FTC/S-4002, 600 Pennsylvania Ave., NW., Washington, DC 20580. (202) 
326-3153 or 326-3158.

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 thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of 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 June 29, 2000), on the World Wide Web, at ``http://www.ftc.gov/
ftc/formal.htm.'' A paper copy 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 Ave., 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 principle 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, subject to final 
approval, an agreement containing a consent order from BUY.COM Inc. 
(``respondent'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    Respondent advertises, sells, and distributes books, music and 
video recordings, personal electronic devices, computer software, 
personal computers and other products through its Internet Website, 
www.buy.com. This matter concerns allegedly false and deceptive 
advertising claims regarding the sale of a $269 Compaq Presario 5304 
computer system based upon a $400 rebate that required consumers to 
enter into a three year contract for Internet service.
    The Commission's proposed complaint alleges that respondent falsely 
claimed that the total cost of a Compaq Presario 5304 computer system 
was $269. In fact, in order to obtain the computer system for $269, 
consumers were required to subscribe to CompuServe 2000 Internet 
service for three years at an additional cost of $21.95 per month or a 
full payment of $790.20. The Complaint also alleges that in 
representing that the total cost of the computer system was $269, 
respondent failed to disclose or failed to disclose adequately: (a) 
That consumers were required to subscribe to CompuServe 2000 Internet 
service for three years at an additional cost of $21.95 per month or a 
total cost of $790.20; (b) the amounts of the rebates, $200 and $400, 
and the total price of the computer system before rebates, $869; (c) 
that consumers who cancel the Internet service within three years must 
repay all or a portion of the $400 rebate and pay a $50 cancellation 
fee; and (d) that CompuServe does not provide local access telephone 
numbers for its Internet service in all areas, and therefore, that many 
consumers must either pay long distance telephone charges or surcharges 
of $6.00 per hour to access its Internet service. The complaint alleges 
that the failure to disclose these material facts is a deceptive 
practice.
    The proposed consent order contains provisions designed to prevent 
respondent from engaging in similar acts and practices in the future.
    Part I of the proposed order prohibits respondent from making any 
misrepresentations as to the price or cost to consumers of any 
computer, computer-related product, or internet access service.
    Part II of the proposed order prohibits respondent from making any 
representation about the price or cost to consumers of any computer, 
computer-related product, or Internet access service, when that price 
or cost, or any rebate, is conditioned upon the purchase of another 
product or service, unless respondent discloses clearly and 
conspicuously, and in close proximity to the price, cost or rebate 
representation that consumers must purchase the additional product or 
service in order to obtain the advertised price or rebate. In addition, 
Part II requires respondent to disclose the cost of the other product 
or service that must be purchased. Furthermore, if the advertised 
product or service is sold together with a service, respondent is also 
required to disclose the length of time that consumers are required to 
purchase that service. Part II also contains a proviso that permits 
respondent to use the terms ``rebate'' or ``discount'' without making 
the additional cost disclosures, as long as respondent does not 
describe or characterize the rebate or discount in any way.
    Part III of the proposed order prohibits the respondent from making 
a claim about the after-rebate price or cost of any computer, computer-
related product, or Internet access service, unless it discloses, 
clearly and conspicuously, and in close proximity to the after-rebate 
price or cost representation, the amounts of any rebates offered, and 
the total cost of the computer product or service, excluding any rebate 
amounts (i.e., the before-rebate price). Part III also contains a 
proviso that states that if there is only one rebate involved in the 
offer, and no other reductions in the total price of the product or 
service, respondent need only disclose the amount of that one rebate, 
and need not also disclose the before-rebate price.
    Part IV of the proposed order prohibits the respondent from making 
any representation about the price or cost of any Internet access 
service it offers for sale, unless it discloses certain material facts. 
If consumers have to pay additional fees, charges, rebate repayments, 
or other costs to cancel the Internet access service, the amounts of 
such costs must be disclosed. If consumers may have to pay long 
distance telephone charges, hourly surcharges, or other costs in excess 
of local telephone fees to access the Internet service, this fact must 
be disclosed, along with a means for consumers to ascertain whether or 
not

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they would have to incur such costs and the amounts of any such costs. 
These disclosures must be clear and conspicuous.
    Part IV of the proposed order also contains a proviso, that 
together with the definition of ``through the use of a hyperlink,'' 
provides a way in which the disclosures required by Part IV can be made 
on the Internet with hyperlinks. These disclosures may be made through 
the use of hyperlinks, as long as each hyperlink label contains 
sufficient information about the nature and importance of the required 
disclosure, is, itself, clear and conspicuous, is on the same Web page 
and proximate to the Internet service price or cost representation, and 
leads directly to the full disclosure. According to the proviso, if a 
hyperlink is used to disclose information about Internet cancellation 
terms, it must be labeled as follows: ``Early Cancellation of the 
Internet Service Will Result in Substantial Penalties. Click Here.'' 
Similarly, if a hyperlink is used to disclose information about 
Internet access costs, it must be labeled: ``You May Have to Pay 
Significant Telephone Charges to Use the Internet Service. Click 
Here.''
    Part V of the proposed order contains a document retention 
requirement, the purpose of which is to ensure compliance with the 
proposed order. It requires that respondent maintain copies of ads and 
promotional material that contain representations covered by the 
proposed order, and materials that were relied upon by respondent in 
complying with the proposed order.
    Part VI of the proposed order requires respondent to distribute 
copies of the order to various officers, agents and employees of 
respondent.
    Part VII of the proposed order requires respondent to notify the 
Commission of any changes in corporate structure that might affect 
compliance with the order.
    Part VIII of the proposed order requires respondent to file with 
the Commission one or more reports detailing compliance with the order.
    Part IX of the proposed order is a ``sunset'' provision, dictating 
that the order will terminate twenty years from the date it is issued 
or twenty years after a complaint is filed in federal court, by either 
the United States or the FTC, alleging any violation of the order.
    The purpose 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.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-17222 Filed 7-6-00; 8:45 am]
BILLING CODE 6750-01-M