[Federal Register Volume 65, Number 211 (Tuesday, October 31, 2000)]
[Notices]
[Pages 64950-64951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27952]


-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 972 3162]


WebTV Networks, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles 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 
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 November 24, 2000.

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

FOR FURTHER INFORMATION CONTACT: Joel Winston or Dean Forbes, FTC/S-
4002, 600 Pennsylvania Ave., NW, Washington, D.C. 20580, (202) 326-3153 
or 326-2831.

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 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 Homes Page 
(for October 25, 2000), on the World Wide Web, at ``http://www.ftc.gov/
os/2000/10/index.htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room H-130, 600 Pennsylvania Avenue, NW, 
Washington, D.C. 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, D.C. 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

[[Page 64951]]

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

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a consent order from WebTV Networks, 
Inc. (``WNI'').
    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.
    WNI advertises and promotes the WebTV system, consisting of a set-
top box and an Internet service which, together, allows users to 
connect to the Internet through a telephone line and a television. WNI 
licenses the set-top box technology to various companies, including 
Sony, Philips Electronics, and Mitsubishi, which manufacture and sell 
the boxes. WNI sells the Internet service for a flat monthly fee.
    This matter concerns allegedly false and deceptive advertising for 
the WebTV system. The Commission's proposed complaint alleges that WNI 
falsely claimed that:
    <bullet> The WebTV system provides access to all of the Internet's 
content, including all of the entertainment and information available 
on the Internet. In fact, WebTV users are unable, for example, to 
access files on Web sites that use popular formats or programming 
languages, including technologies for Web site audio, video, 
interactivity, and multimedia used for online entertainment and 
information communication.
    <bullet> The WebTV set-top box is equivalent to a personal computer 
with respect to its Internet-related performance. In fact, in contrast 
to a computer, WebTV users are unable, for example, to download, store, 
or run software available on the Internet; display certain Web pages or 
play certain Web pages or play certain Web files; or open email 
attachments in certain common formats.
    <bullet> WNI's upgrades to the WebTV system keep users current with 
the latest Internet technology. In fact, those upgrades have failed to 
provide certain commonly used Internet technologies for audio, video, 
interactivity, and multimedia.
    The complaint also alleges that, in advertising the total cost of 
using the WebTV system, WNI failed to disclose adequately that a 
significant percentage of U.S. consumers will incur long distance 
telephone toll charges while connected to the Internet through the 
WebTV Internet service. The complaint alleges that this is a deceptive 
practice.
    The proposed consent order contains provisions designed to prevent 
WNI from engaging in similar acts and practices in the future.
    Part I of the proposed order prohibits the three alleged false 
representations, as well as any false representation related to access 
to Internet content or functionality of any Internet access product or 
service.
    Part II of the proposed order prohibits WNI from making any 
representation about the cost of any Internet access product or service 
unless it discloses certain material information. If using such product 
or service to access the Internet may result in telephone toll charges, 
this fact must be disclosed, clearly and conspicuously, along with how 
consumers can determine whether they would be subject to these charges.
    Part III of the proposed order requires that WNI make clear and 
conspicuous disclosures about long distance charges on a log-on screen, 
dialog box, or other similar device that appears prior to any Internet 
access product dialing a telephone number for which there is a toll 
charge. The disclosures must state the following: (a) That the user 
will or will likely incur such a charge while connected to the Internet 
access service; (b) how the user can determine whether in fact (s)he 
will incur such a charge, and the amount of the charge; and (c) a 
source of information about means, if any, of avoiding the charge. 
Under this provision, WNI must use a procedure designed to ensure that 
the user expressly consents to connecting on a toll basis, before a 
toll charge is incurred.
    Part IV of the proposed order requires that WNI clearly and 
conspicuously disclose in its Terms of Service and introductory kit, or 
the equivalent documents it provides to new subscribers, that users may 
incur toll charges while using the Internet service, if that is the 
case, and how users can determine whether they would incur these 
charges.
    Part V of the proposed order requires that WNI offer reimbursement 
to certain former subscribers to its Internet service for toll charges 
they incurred. Subscribers eligible for reimbursement are those who: 
(a) Incurred toll charges before March 1, 1999, and within sixty days 
of subscribing to the service; (b) have not been previously reimbursed; 
(c) canceled their subscription before April 1, 1999, and within ninety 
days of subscribing to the service; (d) identified toll charges as a 
reason for canceling; and (e) provide proof of the charges. Eligible 
subscribers may receive reimbursement for toll charges incurred in the 
first two months of their subscription. subscribers who cannot provide 
phone bills as proof of the charges would receive reimbursement up to a 
maximum dollar amount, which depends on the type of proof submitted.
    Part VI of the proposed order requires WNI to notify its 
advertising agencies, manufacturers, and retailers to discontinue 
making any of the advertising claims prohibited by the order. WNI must 
also set up, staff, and refer consumers to a toll-free customer service 
telephone number (or a similar mechanism that is free to consumers) 
that would handle inquiries regarding telephone toll charges.
    Part VII describes a consumer education campaign that WNI must 
undertake to inform consumers about the limitations of Internet access 
devices as compared to computers. The campaign will include one-half 
page advertisements in three national magazines, as well as a brochure 
that WNI will (a) distribute to retailers selling WebTV set-top boxes 
for posting in the stores and (b) post on its Web site.
    Parts VIII through XI of the proposed order are reporting and 
compliance provisions. Part XII is a provision ``sunsetting'' the order 
after twenty years, with certain exceptions.
    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. 00-27952 Filed 10-30-00; 8:45 am]
BILLING CODE 6750-01-M