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1
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DECISION & ORDER
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EXTRACTED KEY WORDS
FEDERAL TRADE COMMISSION CHARGES COMPLAINT GATEWAY REIMBURSEMENT LOCAL ACCESS SUBSCRIBER TRADE COMMISSION ACT AGREEMENT CONSUMERS THEREAFTER JURISDICTIONAL FACTS DISCLOSURE REQUEST INTERNET ACCESS SERVICE CONSENT REPRESENTATION ADVERTISEMENTS REIMBURSEMENT NOTIFICATION PROMOTION INTERACTIVE ELECTRONIC MEDIUM UNITED STATES CHAIRMAN SHEILA PRACTICES DRAFT COMPLAINT VIOLATION ADMISSION SETTLEMENT PURPOSES SUCCESSORS TERMINATE |
992-3276
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
COMMISSIONERS:
Timothy J. Muris, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary
In the Matter of
GATEWAY, INC., a corporation.
DOCKET NO. C-4015
DECISION AND ORDER
The Federal Trade Commission having initiated an investigation of
certain acts and practices of the respondent named in the caption
hereof, and the respondent having been furnished thereafter with a
copy of a draft complaint which the Western Region proposed to present
to the Commission for its consideration and which, if issued by the
Commission, would charge respondent with violation of the Federal
Trade Commission Act; and
The respondent, its attorneys, and counsel for the Commission having
thereafter executed an agreement containing a consent order, an
admission by the respondent of all the jurisdictional facts set forth
in the aforesaid draft of complaint, a statement that the signing of
said agreement is for settlement purposes only and does not constitute
an admission by respondent that the law has been violated as alleged
in such complaint, or that the facts as alleged in such complaint,
other than jurisdictional facts, are true and waivers and other
provisions as required by the Commission's Rules; and
The Commission having thereafter considered the matter and having
determined that it had reason to believe that the respondent has
violated the said Act, and that a complaint should issue stating its
charges in that respect, and having thereupon accepted the executed
consent agreement and placed such agreement on the public record for a
period of thirty (30) days, now in further conformity with the
procedure prescribed in § 2.34 of its Rules, the Commission hereby
issues its complaint, makes the following jurisdictional findings and
enters the following order:
1. Respondent Gateway, Inc. ("Gateway"), is a Delaware
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2
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ANALYSIS
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EXTRACTED KEY WORDS
CONSUMERS INTERNET ACCESS SERVICE CHARGES FEES TOLL-FREE CONSENT ORDER AGREEMENT DISCLOSE PROVISIONS LOCAL TELEPHONE GATEWAY ADVERTISES COMPLAINT ALLEGES PROPOSED COMPLAINT CUSTOMERS COST CONTROL PAID PLAN COMMISSION PUBLIC RECORD PURCHASE FLAT FEE DISTANCE MISREPRESENTATIONS REPRESENTATIONS TOLL FREE PRICE DOLLAR AMOUNTS HOURLY SURCHARGES |
_________________________________________________________________
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 Gateway, Inc.
("Gateway").
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.
Gateway advertises and sells personal computers, computer peripherals,
software, and Internet services to the public. This matter concerns
allegedly false and deceptive advertising of Gateway's Internet access
service, "Gateway.net." The Commission's proposed complaint alleges
that Gateway advertised that with the purchase of certain computer
models, Gateway.net Internet access service would be included for free
for one year, or could be purchased for a flat fee, such as $14.95 a
month. In fact, for many consumers one year of Gateway.net was not
free or obtainable for a flat fee, because these customers incurred
long distance charges to access Gateway.net, or were charged $3.95 per
hour by Gateway for the use of a "toll-free" telephone number to
access the service. The Commission's proposed complaint challenges
these "free" or "flat-fee" ads as both misrepresentations and as
failures to disclose material facts under Section 5 of the FTC Act.
Further, the complaint alleges that Gateway falsely represented that
the use of its "toll free" 1-888 number to connect to the Internet was
free to consumers. In fact, Gateway charged consumers $3.95 per hour
for the use of this "toll-free" number.
The proposed consent order contains provisions designed to prevent
Gateway from engaging in similar acts and practices in the future.
Part I of the proposed order prohibits the company from
misrepresenting the price or cost of any Internet access service, or
of any "toll-free" telephone number. Under the order, the term
"Internet access service" is defined as "any service that enables a
consumer to access the Internet or any other electronic network."
Part II of the order prohibits representations regarding the price or
cost of any "1-800" or "toll-free" telephone number provided to the
consumer by Gateway unless it discloses, clearly and conspicuously,
the dollar amounts of any hourly surcharges and any other fees it
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3
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EXHIBITS A-F
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EXTRACTED KEY WORDS
DRIVES DELUXE PCS VIDEO INTEL EXPAND PORTABLES ULTRA ATA HARD WINDOWS SDRAM PAD MODEM SUPPORT SOUND EXHIBIT DROVE ION BATTERY PACK SOLO SPEAKERS CUSTOMIZE INTERNET ACCESSORIES PENTIUM TFT COLOR ACCELERATOR MICROSOFT USB PORTS STEREO |
,-
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Thanks, Gateway owners, for making us #l
in customer loyalty.**
Connect with us. -
EXHIBIT A-l
The GatewayEssential
powerful PCs at practical prices.
Okay, maybeyou don't need an astrophysics supercomputer. But you still want a fast
space. Look no further than Gateway Essential PCs. With video, sound and Intela
compromise-free PCs. Each one includes a year on the Internet.' Pick a model, and we'll
Intel* Celeron'" Processor 400MHz Intel Celeron Processor 466MHz
50MHz
with 128K Cache with 128K Cache
32MB SDRAM 64MB SDdAM
EV500 15" Monitor (13.9" vrewablei EV700 17" Monitor (15.9"
)
8MB AGP Graphics 8MB AGP Graphrcs
cs
6.8GB Ultra ATA Hard Drive 13.6GB Ultra ATA Hard Drove
40X Max' Varrable CD-ROM 40X Max' Variable CD-ROM
SoundBlaster AudloPCI'" 64D SoundBlaster AudioPCl64D
GCS-200 Speakers by Cambrldge"SoundWorks GCS-200 Speakers by Cambrrdge
ndWorks
56K' Internet/Fax Modem 56K' Internet/Fax Modem
Macro-Tower Case Micro-Tower Case
MIcrosoft" WmdowsR 98 Second EdItion MIcrosoft Windows 98 Second
MIcrosoft Works Suite 99 Microsoft Works Suite 99
n
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4
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COMPLAINT
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EXTRACTED KEY WORDS
INTERNET ADVERTISEMENT RESPONDENT EXHIBIT FEE CHARGES FEDERAL TRADE COMMISSION DELIVERY PURCHASE REPRESENTATION CONSUMERS ACT DEPICTION COMPUTER MODELS PRACTICES BOTTOM PRINT DISCLOSURES MONTHLY FEE REGISTER W/30 PARAGRAPH FOOTNOTE1 RURAL ACCESS LOCAL ACCESS SUPER TOLL FREE IMPLICATION COST PCS CUSTOMERS |
9923276
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
In the Matter of
GATEWAY, INC., a corporation.
DOCKET NO. C-4015
COMPLAINT
The Federal Trade Commission, having reason to believe that Gateway,
Inc., a corporation ("respondent"), has violated the provisions of the
Federal Trade Commission Act, and it appearing to the Commission that
this proceeding is in the public interest, alleges:
1. Respondent Gateway, Inc. is a Delaware corporation with its
principal office or place of business at 610 Gateway Drive, North
Sioux City, South Dakota 57049.
2. Respondent has manufactured, advertised, labeled, offered for sale,
sold, and distributed products and services to the public, including
personal computers, computer peripherals, software, and Internet
services.
3. The acts and practices of respondent alleged in this complaint have
been in or affecting commerce, as "commerce" is defined in Section 4
of the Federal Trade Commission Act.
4. Respondent has disseminated or has caused to be disseminated
advertisements for certain of its personal computers, including but
not necessarily limited to the attached Exhibits A through F. These
advertisements contain the following statements and depictions:
A. (MAGAZINE ADVERTISEMENT)
"The Gateway Essential Line: powerful PCs at practical prices.
Okay, maybe you don't need an astrophysics supercomputer. But
you still want a fast processor and ample memory and drive
space. Look no further than Gateway Essential PCs. With video,
sound and Intel processors - and affordable prices - they're
compromise-free PCs. Each one includes a year on the Internet.1
Pick a model, and we'll customize it the way you want.
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5
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AGREEMENT
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EXTRACTED KEY WORDS
FEDERAL TRADE COMMISSION DRAFT COMPLAINT GATEWAY PROPOSED RESPONDENT AGREEMENT REPRESENTATION REIMBURSEMENT LOCAL ACCESS SUBSCRIBER CONSUMER CONSENT ORDER COUNSEL JURISDICTIONAL FACTS DISCLOSURE CHARGES REQUEST INTERNET ACCESS SERVICE DULY AUTHORIZED OFFICERS ADVERTISEMENTS REIMBURSEMENT NOTIFICATION PROMOTION ELECTRONIC MEDIUM UNITED STATES PRACTICES PRINCIPAL OFFICE NORTH SIOUX CITY PROPOSED RESPONDENT WAIVES SUCCESSORS POSTAGE PAID ENVELOPE TERMINATE |
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
In the Matter of
GATEWAY, INC., a corporation.
FILE NO. 992 3276
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission has conducted an investigation of certain
acts and practices of Gateway, Inc., a corporation ("proposed
respondent"). Proposed respondent, having been represented by counsel,
is willing to enter into an agreement containing a consent order
resolving the allegations contained in the attached draft complaint.
Therefore,
IT IS HEREBY AGREED by and between Gateway, Inc., by its duly
authorized officers, and counsel for the Federal Trade Commission
that:
1. Proposed respondent Gateway , Inc. ("Gateway"), is a Delaware
corporation with its principal office or place of business at 610
Gateway Drive, North Sioux City, South Dakota 57049.
2. Proposed respondent admits all the jurisdictional facts set forth
in the draft complaint.
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
complaint, will be placed on the public record for a period of thirty
(30) days and information about it publicly released. The Commission
thereafter may either withdraw its acceptance of this agreement and so
notify 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.
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