992-3276

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION

COMMISSIONERS:
Timothy J. Muris, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary

In the Matter of

GATEWAY, INC., a corporation.

DOCKET NO. C-4015

DECISION AND ORDER

The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft complaint which the Western Region proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and

The respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, now in further conformity with the procedure prescribed in 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Gateway, Inc. ("Gateway"), is a Delaware corporation with its principal office or place of business at 610 Gateway Drive, North Sioux City, South Dakota 57049.
 
2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER

DEFINITIONS

For the purposes of this order, the following definitions shall apply:

1. Unless otherwise specified, "respondent" shall mean Gateway, Inc., its successors and assigns and its officers, agents, representatives, and employees.
 
2. "Clear(ly) and conspicuous(ly)" shall mean as follows:
 
a. In an advertisement communicated through an electronic medium (such as television, video, radio, and interactive media such as the Internet, online services and software), the disclosure shall be presented simultaneously in both the audio and visual portions of the advertisement if the claim triggering the disclosure is presented by both audio and visual means. In any claim presented solely through visual or audio means, the disclosure may be made through the same means in which the claim is presented. Any audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. Any visual disclosure shall be of a size and shade, with a degree of contrast to the background against which it appears, and shall appear on the screen for a duration and in a location, sufficiently noticeable for an ordinary consumer to read and comprehend it.
 
b. In a print advertisement, promotional material, or instructional manual, the disclosure shall be in a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears.
 
c. On a product label, the disclosure shall be in a type size and location on the principal display panel sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears.
 
The disclosure shall be in understandable language and syntax. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement or on any label.
 
3. In the case of advertisements disseminated by means of an interactive electronic medium, such as software, the Internet, and online services, a disclosure made "through the use of a hyperlink" shall mean a hyperlink that in itself is clear and conspicuous, is clearly identified as a hyperlink, is labeled to convey the nature and relevance of the information it leads to, is on the same Web page, online service page or other electronic page, and proximate to the triggering representation, and takes the consumer directly to the disclosure on the click-through electronic page or other display window or panel.
 
4. "Internet access service" shall mean any service that enables a consumer to access the Internet or any other electronic network.
 
5. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. 44.

I.

IT IS ORDERED that respondent, directly or through any corporation, partnership, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Internet access service, in or affecting commerce, shall not misrepresent, in any manner, expressly or by implication:

A. the price or cost to consumers of such service or what is included in the price of any such service; or
 
B. the price or cost incurred by consumers, if any, for the use of "1-800," "1-877," or "1-888" telephone numbers, or any other telephone numbers for which respondent is the toll free subscriber.

II.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Internet access service, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the use of "1-800," "1-877," or "1-888 " telephone numbers, or any other telephone numbers for which respondent is the toll free subscriber unless it discloses, clearly and conspicuously, the dollar amounts of any hourly surcharges and any other fees charged by respondent for use of such numbers.

III.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Internet access service, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the price or cost to consumers of such service, unless it discloses, clearly and conspicuously:

A. that consumers may have to pay long distance telephone charges, hourly surcharges, and other fees in excess of local telephone service charges to access the service, if that is the case;
 
B. the dollar amounts of any such hourly surcharges and any other such fees, other than fees which are not within the control of respondent or any of its promotional partners providing the service; and
 
C. a means for each consumer to ascertain whether he or she would incur such fees or charges to access the service, such as a list of local access numbers available on the Internet or other electronic network; and
 
D. that consumers should contact their local telephone company to determine whether using the access telephone number for the location closest to them will incur charges in excess of local telephone service charges.

Provided, that in the case of advertisements disseminated through an interactive electronic medium, respondent may make the disclosures required by Part III. A through D above through the use of a hyperlink labeled: "Additional Phone Charges May Apply. Click Here."

Provided, further, that in the case of television advertisements, respondent may comply with Part III. A through D above by making the audio and visual disclosures through the use of the phrase "Additional Phone Charges May Apply. Call [a telephone number which is free to consumers] for Details," and by clearly and conspicuously disclosing the information required by Part III. A through D above at the time consumers contact respondent through the telephone number.

IV.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, promotion, offering for sale, sale or distribution of any Internet access service, in or affecting commerce, shall prior to consumers incurring any financial obligation for such service or any other product or service sold in connection with such service, maintain adequate customer support to respond to consumer inquiries, including but not limited to, an adequately staffed, telephone number which is free to consumers and a directory on the Internet, to determine the telephone numbers available for accessing any such service and the town or city where those numbers are located.

V.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, shall offer reimbursement to certain local access subscribers to Gateway.net services as provided in this Part.

A. Respondent shall reimburse any Gateway.net local access subscriber, within thirty (30) days of receipt of the subscriber's "Reimbursement Notification and Request," attached as Appendix A to this order, as required under subpart B of this Part, who:
 
1. between January 19 and April 1, 1999 registered as a local access subscriber to the Gateway.net service;
 
2. between January 19, 1999 and August 15, 1999 incurred charges for the use of a "1-800," "1-877," or "1-888" telephone number while registered as a local subscriber;
 
3. has not been previously reimbursed for these charges; and
 
4. within sixty (60) days of receipt of Appendix A provides respondent with a signed statement that s/he requests reimbursement and has not previously been reimbursed for these charges.
 
B. Respondent shall send, within forty-five (45) days after the date of service of this order, by first class mail, exact copies of the "Reimbursement Notification and Request" attached hereto as Appendix A to the last known address of any Gateway.net local access subscriber who, according to respondent's records, paid any fee for the use of a "1-800," "1-877," or "1-888" telephone number between January 19, 1999 and August 15, 1999 and has not received full reimbursement for such use. Respondent shall include a pre-addressed, postage paid envelope for consumers to return a signed "Reimbursement Notification and Request."
 
The front of the envelope transmitting Appendix A shall be in the form set forth in Appendix B to this order. The phrase "ATTENTION: REIMBURSEMENT OFFER" shall appear on the front of the envelope in typeface equal or larger in size to 14 point. The words "FORWARD & ADDRESS CORRECTION REQUESTED" shall appear in the upper left-hand corner, one-quarter of an inch beneath the return address. Except as otherwise provided by this order, no information other than that required by this Part shall be included in or added to the above items, nor shall any other material be transmitted therewith.
 
Respondent shall also mail the "Reimbursement Notification and Request" and a pre-addressed, postage paid envelope, to any such local access subscriber whose mailing is returned by the U.S. Postal Service as undeliverable and for whom respondent thereafter obtains a corrected address via the National Change of Address ("NCOA") registry. Respondent shall retain a NCOA licensee to update its list of such local access subscribers under this subpart by processing the list through the NCOA database. The mailing required by this subpart shall be made within ten (10) days of respondent's receipt of a corrected address or information identifying each such local access subscriber.
 
C. Respondent shall send reimbursement checks to local access subscribers, under subpart B of this Part, who complete and return to respondent the "Reimbursement Notification and Request" set forth in Appendix A to this order, postmarked within sixty (60) days of receiving it, and who fulfill the requirements set forth in subpart A of this Part. Respondent shall send each reimbursement check by first-class mail, postage prepaid, within thirty (30) days of receipt of each local subscriber's completed "Reimbursement Notification and Request." The front of the envelope transmitting reimbursement checks shall be in the form set forth in Appendix C to this order.
 
D. Within one (1) year after the date of service of this order, respondent shall furnish to the Commission a list of the local access subscribers who have applied for reimbursement pursuant to subparts B and C of this Part, the amount of each reimbursement request, and the date of mailing and amount of the reimbursement provided to each applicant.
 
E. Respondent shall, for three (3) years after the date of service of this order, maintain and upon request make available to the Federal Trade Commission or its staff for inspection and copying:
 
1. Sufficient records to identify:
 
a. The name and last known address of each person sent a notification pursuant to this order and the date the notification was mailed; and
 
b. The name and address of each person who is notified by respondent that his or her reimbursement application is deficient;
 
2. Sample copies of all letters, descriptions, applications and forms sent to local access subscribers or others pursuant to this order; and
 
3. Each and every reimbursement application received.

VI.

IT IS FURTHER ORDERED that respondent and its successors and assigns shall, for five (5) years after the last date of dissemination of any representation covered by this order, maintain and upon request make available to the Federal Trade Commission for inspection and copying:

A. All advertisements and promotional materials containing the representation, provided, however, that multiple versions of advertisements and promotional materials need not be maintained or submitted if they differ only in representations not at issue in this order; and
 
B. All materials that were relied upon in disseminating the representation.

VII.

IT IS FURTHER ORDERED that respondent and its successors and assigns, shall deliver a copy of this order to all current and future officers and directors, and to all current and future managing employees, agents, and representatives having responsibilities with respect to the subject matter of this order. Respondent shall deliver a copy of this order to current personnel within thirty (30) days after the date of service of this order, and, for a period of three (3) years from the date of service of this order, to future personnel within thirty (30) days after the person assumes such position or responsibilities.

VIII.

IT IS FURTHER ORDERED that respondent and its successors and assigns, shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.

IX.

IT IS FURTHER ORDERED that respondent and its successors and assigns, shall, within ninety (90) days after the date of service of this order, and at such other times as the Federal Trade Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this order.

X.

This order will terminate on June 22, 2021, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of:

A. Any Part in this order that terminates in less than twenty (20) years;
 
B. This order's application to any respondent that is not named as a defendant in such complaint; and
 
C. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

By the Commission, Chairman Muris not participating.

Donald S. Clark
Secretary

ISSUED: June 22, 2001

APPENDIX A

REIMBURSEMENT NOTIFICATION AND REQUEST

[Name and Address of Recipient]

Dear [NAME]:

Our records indicate that you registered as a local access subscriber to Gateway.net between January 19, 1999 and April 1, 1999, and that you incurred charges for the use of that service between January 19, 1999 and August 15, 1999. Gateway is offering reimbursement to certain Gateway.net subscribers who, by error, were not adequately warned that they would be charged $3.95 per hour for the use of a toll-free telephone number to access the service. Gateway initiated this reimbursement program in August, 1999 and is committed to providing refunds to customers who did not understand that a fee would be charged for the use of these numbers. We would, therefore, like to offer you reimbursement for the fees you paid, if we have not already done so.

Gateway recently settled a dispute with the Federal Trade Commission that dealt with, among other things, the adequacy of advertising disclosures to warn customers of possible phone charges for Internet access. Our agreement with the Commission provides that we continue the process we had already begun of refunding fees to customers such as you.

To request and receive your refund, simply sign the bottom of this letter, stating that you have not already received reimbursement from us, and return the entire letter within 60 days in the enclosed, postage pre-paid envelope. You should return this original letter, and make a copy for your records. If you have not been fully reimbursed already, we will be pleased to send you a check within one month after we receive your signed form. If you have any questions about this letter, please call us at [toll-free telephone number].

Sincerely,

[gateway.net]

REIMBURSEMENT REQUEST

I have not been reimbursed for the $3.95 per hour charges I incurred to access Gateway.net between January 19, 1999 and August 15, 1999; and

I request that a check be sent for the charges I paid.

Signed:

APPENDIX B

REIMBURSEMENT NOTICE LETTER ENVELOPE

Gateway, Inc.
[address]

FORWARD & ADDRESS CORRECTION REQUESTED

[Address or address window]

ATTENTION: NOTICE OF REIMBURSEMENT ENCLOSED

APPENDIX C

REIMBURSEMENT CHECK ENVELOPE

Gateway, Inc.
[address]

FORWARD & ADDRESS CORRECTION REQUESTED

Window Envelope

[Indicates a check is enclosed]