FTC Cracks Down on Deceptive Computer Advertising Practices

Strategic Insights -

Three major retailers, Buy.com, Value America, and Office Depot, have agreed to stop advertising computers at greatly reduced prices without disclosing the true up-front costs and requirements to customers. The Federal Trade Commission (FTC) issued cease-and-desist orders against the companies, citing deceptive advertising practices in their promotions, which often failed to mention additional costs, restrictions, and qualifications attached to the offers. The FTC requires the retailers to clearly and prominently disclose pricing information in future ads, enabling customers to make informed decisions about the real costs of bundled PC sales.

Key Takeaways:

  • The FTC has issued cease-and-desist orders against three retailers, Buy.com, Value America, and Office Depot, for engaging in deceptive advertising practices.
  • The companies advertised computer systems at prices ranging from $269 to "free," but failed to disclose the real costs and restrictions attached to the offers.
  • The FTC requires the retailers to clearly and prominently disclose pricing information in future ads, including additional costs, restrictions, and qualifications.
  • The companies will face civil fines of $11,000 per incident if they fail to comply with the FTC's demands.
  • Value America faced additional charges for violating mail-order rules and failing to deliver rebate checks within a reasonable timeframe.
  • The companies have not been fined or penalized, but they must improve their customer communication and disclosure practices.

Statistics:

  • The FTC has issued cease-and-desist orders against three companies for deceptive advertising practices.
  • The companies advertised computer systems at prices ranging from $269 to "free."
  • The true up-front costs and requirements attached to the offers were not disclosed to customers.
  • The average additional cost per computer system was $600-$700.
  • Value America customers waited as long as 17 weeks to receive their rebate checks.
  • The FTC requires the retailers to clearly and prominently disclose pricing information in future ads.

Sources:

  • Newsbytes.com, http://www.newsbytes.com (website)
  • Federal Trade Commission (FTC), http://www.ftc.gov (website)
  • Reported by Newsbytes.com, 12:24 CST (20000629/Press Contact: Michael Dershowitz, Federal Trade Commission, 202-326-3206/WIRES ONLINE, BUSINESS, LEGAL, PC/)