IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, NORTHERN DIVISION

UNITED STATES OF AMERICA, Plaintiff,

v.

IOMEGA CORPORATION, Defendant.

Case No.

CONSENT DECREE AND ORDER FOR
CIVIL PENALTIES, INJUNCTIVE
AND OTHER RELIEF

WHEREAS plaintiff, the United States of America, has commenced this action by filing the Complaint herein; defendant has waived service of the Summons and Complaint; the parties have been represented by the attorneys whose names appear hereafter; and the parties have agreed to settlement of this action upon the following terms and conditions, without adjudication of any issue of fact or law and without defendant admitting liability for any of the matters alleged in the Complaint;

THEREFORE, on the joint motion of plaintiff and defendant, it is hereby ORDERED, ADJUDGED, and DECREED as follows:

  1. This Court has jurisdiction of the subject matter and of the parties.
  2. The Complaint states a claim upon which relief may be granted against the defendant under Sections 5(a)(1), 5(m)(1)(A), 9, 13(b) and 16(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1), 45(m)(1)(A), 49, 53(b) and 56(a).

DEFINITION

For the purposes of this Consent Decree, the term "Mail Order Rule" means the Federal Trade Commission's Trade Regulation Rule Concerning Mail or Telephone Order Merchandise, 16 C.F.R. Part 435, or as the Rule may hereafter be amended.

CIVIL PENALTY

1. Defendant Iomega Corporation, its successors and assigns, shall pay to plaintiff a civil penalty, pursuant to section 5(m)(1)(A) of the Federal Trade Commission Act, 15 U.S.C. 45(m)(1)(A), in the amount of $900,000. Defendant shall make this payment within five (5) days of the date of entry of this Consent Decree by electronic fund transfer in accordance with the instructions provided by the Office of Consumer Litigation, Civil Division, U.S. Department of Justice, Washington, D.C. 20530, for appropriate disposition.

2. In the event of any default in payment, which default continues for ten days beyond the due date of payment, the entire unpaid penalty, together with interest, as computed pursuant to 28 U.S.C. 1961 from the date of default to the date of payment, shall immediately become due and payable.

INJUNCTION

3. Defendant, its successors and assigns, and its officers, agents, servants, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Consent Decree by personal service or otherwise, are hereby enjoined from ever violating, directly or through any corporation, subsidiary, division or other device, any provision of the Mail Order Rule, including but not limited to:

a. Soliciting orders for the sale of telephone or mail order merchandise when they have no reasonable basis to expect that they will be able to ship some or all of such merchandise within the time stated in the solicitation or, if no time is stated clearly and conspicuously in the solicitation, within thirty (30) days after receipt of a properly completed order, as required by 16 C.F.R. 435.1(a)(1);
 
b. Providing to the buyer a revised shipping date when they have no reasonable basis for making such representation, as required by 16 C.F.R. Part 435.1(a)(2);
 
c. Failing to offer to the buyer, clearly and conspicuously and without prior demand, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, as required by 16 C.F.R. 435.1(b)(1);
 
d. Failing to offer to the buyer a prepaid means of exercising the buyer's options as described in 16 C.F.R. 435.1(b)(1), as required by 16 C.F.R. 435.1(b)(3); and
 
e. Having failed to offer the option to consent to a delay or to cancel the order and receive a prompt refund, as required by 16 C.F.R. 435.1(b)(1), and also having failed to ship the merchandise within the applicable time, failing to deem the order canceled and to make a prompt refund, as required by 16 C.F.R. 435.1(c)(5).

4. In the event the Mail Order Rule is hereafter amended or modified, defendant's compliance with that Rule as so amended or modified shall not be deemed a violation of this injunction. A copy of the Mail Order Rule is attached hereto as "Appendix A" and incorporated herein as if fully set forth verbatim.

5. Defendant, its successors and assigns, and its officers, agents, servants, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Consent Decree by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale or distribution, in or affecting commerce, of any personal computer product, are hereby permanently restrained and enjoined from:

a. Misrepresenting the shipping time of any cash rebate or service offered in connection with the purchase of such product;
 
b. Failing to provide any cash rebate within the time specified, or, if no time is specified, within thirty days; and
 
c. Failing to provide any merchandise, service, or other inducement (other than a cash rebate) offered in connection with the purchase of such product within the time specified, or, if no time is specified, within thirty days, unless defendant offers to the buyer the following options:

i. Consent to the delay;

ii. Cancel the order and promptly receive reasonable compensation for the customer's contribution; or

iii. Cancel the order, return the product, and receive a prompt refund for the product.

6. Defendant, its successors and assigns, and its officers, agents, servants, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Consent Decree by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale or distribution, in or affecting commerce, of any personal computer product, are hereby permanently restrained and enjoined from offering any cash rebate, merchandise, service, or other inducement in connection with the purchase of such product unless defendant either:

a. Clearly and conspicuously discloses the closing date for the offer; or
 
b. Honors requests for such cash rebate, merchandise, service, or other inducement for a reasonable period of time after:

I. Defendant ceases to promote the offer; and

ii. It is reasonable to expect that product boxes or other point-of-sale materials advertising the offer are generally no longer available.

7. Defendant, its successors and assigns, and its officers, agents, servants, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Consent Decree by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale or distribution, in or affecting commerce, of any personal computer product, are hereby permanently restrained and enjoined from:

a. Misrepresenting that any such product, or any cash rebate, merchandise, service or other inducement offered in connection with the purchase of such product, is reasonably obtainable; and
 
b. Offering any cash rebate, merchandise, service or other inducement in connection with the purchase of such product unless defendant takes reasonable steps to make the cash rebate, merchandise, service or other inducement reasonably obtainable, including, at a minimum, the following:

i. Providing, throughout the duration of the offer, sufficient information, coupons and/or other items that are necessary for consumers to redeem the offer and taking steps to make them readily available and accessible to consumers;

ii. Staffing telephone lines or other communication systems in a manner adequate to handle inquiries from consumers regarding the offer; and

iii. Establishing, maintaining and monitoring fulfillment systems adequate to respond to reasonably anticipated demand, including taking steps to prevent orders from being misplaced, processed incorrectly, or inappropriately denied.

PERSONS AFFECTED; CONTINUING JURISDICTION

8. Defendant, its successors and assigns, shall, within thirty (30) days of the entry of this Consent Decree, provide a copy of this Consent Decree, the Mail Order Rule, and the Statement of Basis and Purpose for that Rule to each of its officers, and to each of its sales representatives, employees, agents, servants and attorneys whose duties include the exercise of managerial or supervisorial responsibility regarding mail or telephone order sales, and secure from each such person a signed statement acknowledging receipt of a copy of this Consent Decree, and shall, within ten (10) days of complying with this paragraph, file an affidavit with the Regional Director, San Francisco Regional Office, Federal Trade Commission, 901 Market Street, San Francisco, CA 94103, setting forth the fact and manner of their compliance, including the name and title of each person to whom a copy of the Consent Decree has been provided.

9. For a period of five (5) years from the date of entry of this Consent Decree, defendant, its successors and assigns, shall provide a copy of this Consent Decree, the Mail Order Rule, and the Statement of Basis and Purpose for that Rule to each officer, and to each sales representative, employee, agent, servant and attorney whose duties include the exercise of managerial or supervisorial responsibility regarding mail or telephone order sales, within fifteen (15) days after such person commences his or her duties, and shall obtain from each such person a signed statement acknowledging receipt of this Consent Decree.

10. For a period of five (5) years from the date of entry of this Consent Decree, defendant, its successors and assigns, shall maintain and make available to the Federal Trade Commission, within fifteen (15) days of the date of receipt of a written request, business records demonstrating compliance with the terms and provisions of this Consent Decree.

11. Defendant, its successors and assigns, shall notify the Regional Director, San Francisco Regional Office, 901 Market Street, San Francisco, CA 94103, at least thirty (30) days prior to any change in defendant's business including, but not limited to, merger, incorporation, dissolution, assignment, sale which results in the emergence of a successor corporation, the creation or dissolution of a subsidiary or parent, or any other change which may affect defendant's obligations under this judgment.

12. This Court shall retain jurisdiction of this matter for the purposes of enabling any of the parties to this Consent Decree to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Consent Decree, for the enforcement of compliance therewith, or for the punishment of violations thereof.

JUDGMENT IS THEREFORE ENTERED in favor of plaintiff and against defendant, pursuant to all the terms and conditions recited above.

Dated this day of , 19 .

UNITED STATES DISTRICT JUDGE

The parties, by their respective counsel, hereby consent to the terms and conditions of the Consent Decree as set forth above and consent to the entry thereof. Defendant waives any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. 2412, concerning the investigation and prosecution of this action.

FOR THE UNITED STATES OF AMERICA:

_____________________
FRANK W. HUNGER
Assistant Attorney General
Civil Division
U.S. Department of Justice

_____________________
PAUL M. WARNER
United States Attorney
District of Utah
Assistant United States Attorney

_____________________
EUGENE THIROLF
Director
Office of Consumer Litigation

_____________________
ELIZABETH STEIN
Attorney
Office of Consumer Litigation
Civil Division
U.S. Department of Justice
Washington, D.C. 20530

FOR THE FEDERAL TRADE COMMISSION:

_____________________
JEFFREY KLURFELD
Regional Director
San Francisco Regional Office
Federal Trade Commission

_____________________
LAURA FREMONT
MATTHEW D. GOLD
Attorneys
San Francisco Regional Office
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA 94103

FOR THE DEFENDANT:

_____________________
LAURIE B. KEATING
Senior Vice President, General Counsel and Secretary
Iomega Corporation

_____________________
J. THOMAS ROSCH
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, CA 94111
Attorney for the Defendant