FTC and Gateway 2000 Enter Consent Agreement

(July 23, 1998)  The Federal Trade Commission announced that it has entered into a consent agreement with leading computer manufacturer, Gateway 2000.  Under the agreement, Gateway will pay a fine of $290,000.  The FTC had alleged that Gateway had made "false statements in advertising its refund policy and its on-site warranty service."

According to the complaint detailing the charges, the FTC alleges that Gateway falsely advertised that: "it provides a "money back guarantee" of a "full refund," when, in fact, it deducted the cost of shipping the merchandise to consumers, an average cost of over $62, from the refund amount; and consumers would be provided free "on-site service" upon request, when, in fact, the on-site service was not provided until Gateway diagnosed the problem over the telephone and determined that the consumer could not make the repair."

According to FTC legal counsel, while the announcement was made on July 22, the fine and consent decree were actually negotiated last year.  However, the considerable delay in publicly announcing the arrangement resulted from the Commission's failure to promptly ratify the deal.  The vote of the Commission was 3 to 0, with Commissioner Sheila Anthony not voting because of recusal.

The action is part of a trend of increasing FTC involvement in the computer industry.   Last April, the FTC entered into a similar arrangement with Dell regarding its sales practices.  The FTC also entered into a consent decree in late April with DEC regarding licensing of Alpha chip technology.  Many companies faced with FTC investigations negotiate to enter into consent agreements whereby the company pays a modest fine, admits nothing, but agrees not to do something or other.

However, the FTC's investigation of Intel is more serious, and the chip maker is not giving in.  This has lead the FTC to file a full-blown administrative antitrust complaint, which Intel is vigorously challenging.