[Federal Register Volume 66, Number 98 (Monday, May 21, 2001)]
[Notices]
[Pages 27972-27973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12677]


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FEDERAL TRADE COMMISSION

[File No. 992 3276]


Gateway, 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 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 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 June 14, 2001.

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

FOR FURTHER INFORMATION CONTACT: Linda Badger, Federal Trade 
Commission, Western Region--San Francisco Office, 901 Market St., Suite 
570, San Francisco, CA 94103. (415) 848-5151.

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 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 May 15, 2001), on the World 
Wide Web, at http://www.ftc.gov/os/2001/05/index.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 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 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

[[Page 27973]]

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 
charges for the use of such numbers. Part III of the proposed order 
requires that Gateway clearly and prominently disclose that consumers 
may have to pay long distance telephone charges, hourly surcharges, or 
other costs in excess of local telephone service charges to access any 
Internet access service. Gateway must disclose the dollar amounts of 
any such fees within its control or the control of any of its 
promotional partners providing the service. It must also provide a 
means for each consumer to ascertain whether he or she would incur such 
fees to access the service, and inform consumers that they should 
contact their local telephone company to determine whether using the 
access telephone number for the location closet to them will result in 
charges in excess of local telephone service charges.
    Part IV of the order requires that Gateway maintain customer 
support to answer consumer inquiries regarding any Internet access 
service, including but not limited to, an adequately staffed toll-free 
number where consumers can determine whether they have a local access 
number for such service.
    Part V is a redress provision requiring that Gateway refund all 
charges for ``toll-free'' numbers paid by local access plan gateway.net 
customers who registered for the plan between January 19, and April 1, 
1999, and who paid such fees up until August 15, 1999. Parts VI through 
IX of the proposed order contain the usual reporting and compliance 
provisions, and, Part X 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. 01-12677 Filed 5-18-01; 8:45 am]
BILLING CODE 6750-01-M