UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION

In The Matter of

MICRON ELECTRONICS, INC., a corporation.

DOCKET NO.

COMPLAINT

The Federal Trade Commission, having reason to believe that Micron Electronics, Inc., a corporation ("respondent"), has violated the provisions of the Federal Trade Commission Act, 15 U.S.C. 45-58, as amended, the Consumer Leasing Act, 15 U.S.C.  1667-1667e, as amended, and its implementing Regulation M, 12 C.F.R.  213, as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Micron Electronics, Inc. is a Minnesota corporation with its principal office or place of business at 900 East Karcher Road, Nampa, Idaho 83687. Respondent markets computer systems for sale or lease to consumers.

2. Respondent has disseminated advertisements to the public that promote consumer leases, as the terms "advertisement" and "consumer lease" are defined in Section 213.2 of Regulation M, 12 C.F.R.  213.2, as amended.

3. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C.  44.

4. Respondent has disseminated or has caused to be disseminated consumer lease advertisements ("lease advertisements") for computer systems, including but not necessarily limited to the attached Micron Exhibits A, B, and C. Micron Exhibit A is a magazine advertisement. Micron Exhibit B is a newspaper advertisement. Micron Exhibit C is an electronic advertisement. These lease advertisements contain the following statements:

A.

"Millennia 300 Personal Edition . . .
$2,099
Consumer lease $84/mo.

. . .

Millennia 333 DVD Edition . . .
$2,999
Consumer lease $119/mo."

[A fine print disclosure at the bottom of the ad states:

". . .prices do not include shipping and handling and any applicable taxes. . . . Business lease prices based on 36-month lease, and consumer lease prices based on 30-month lease. . . ."] (Micron Exhibit A)

B.

[The ad states five lease offers, including:]

"Millennia LXE 166 . . .

Starting at: $1,199
Consumer lease $48/mo.

. . .

Millennia XKU 266 . . .

Starting at: $2,299
Consumer lease $92/mo.

 

[A fine print disclosure at the bottom of the ad states:

". . .prices do not include shipping and handling and any applicable taxes. . . . Business lease prices based on 36-month lease, and consumer lease prices based on 30-month lease. . . ."] (Micron Exhibit B)

C.

"TRANSPORT TREK.266.13.3"
A true desktop replacement you can actually afford

. . .

Total System Price as Configured:$2499
How would you like to purchase?

  • Order online with credit card (Secure)
  • Business Lease $86.72 per month* (Secure)
  • Consumer Lease $98.96 per month** (Secure) . . ."

[A fine print disclosure at the bottom of the ad, on the last screen in a series of screens, states:"** Based on 15% purchase option 30 month"](Micron Exhibit C).

FEDERAL TRADE COMMISSION ACT VIOLATIONS

COUNT I: Failure to Disclose, and/or Failure to Disclose Adequately, Lease Terms

5. In lease advertisements, including but not necessarily limited to Micron Exhibits A, B, and C, respondent has represented, expressly or by implication, that consumers can obtain the advertised computer systems at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount.

6. These lease advertisements have failed to disclose, and/or failed to disclose adequately, additional terms pertaining to the lease offer, such as the total amount of any payments due at lease inception and/or the term of the lease. This information would be material to consumers in deciding whether to lease a computer system from respondent. The failure to disclose, and/or to disclose adequately, these additional terms, in light of the representation made, was, and is, a deceptive practice.

7. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C.  45(a).

CONSUMER LEASING ACT AND REGULATION M VIOLATIONS

Count II: Failure to Disclose, and/or Failure to Disclose Clearly and Conspicuously, Required Information

8. Respondent's lease advertisements, including but not necessarily limited to Micron Exhibits A, B, and C, state a monthly payment amount, but fail to disclose, and/or fail to disclose clearly and conspicuously, certain additional terms required by the Consumer Leasing Act and Regulation M, including one or more of the following terms:

a. that the transaction advertised is a lease;
 
b. the total amount due prior to or at consummation, or by delivery, if delivery occurs after consummation. This total amount may: 1) exclude third-party fees that vary by state or locality, such as taxes, and disclose that fact or 2) provide a total that includes third-party fees based on a particular state or locality as long as that fact and the fact that such fees may vary by state or locality are disclosed;
 
c. whether or not a security deposit is required;
 
d. the number, amounts, and timing of scheduled payments; and
 
e. that an extra charge may be imposed at the end of the lease term in a lease where the liability of the consumer is based on the difference between the residual value of the leased property and its realized value at the end of the lease term.

9. Respondent's practices have violated Section 184 of the Consumer Leasing Act, 15 U.S.C.  1667c, and Section 213.7 of Regulation M, 12 C.F.R. 213.7.

THEREFORE, the Federal Trade Commission this ___ day of _________, 1999, has issued this complaint against respondents.

By the Commission.

Donald S. Clark
Secretary

SEAL: