WILLIAM E. KOVACIC
General Counsel

DAVID M. NEWMAN
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, California 94103
(415) 848-5123; (415) 848-5184(fax)
Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA

FEDERAL TRADE COMMISSION, Plaintiff,

vs.

GEORGE L. CAPELL, Defendant.

No.

COMPLAINT FOR CIVIL PENALTIES, INJUNCTIVE AND OTHER RELIEF

Plaintiff, the Federal Trade Commission ("Commission"), for its complaint alleges that:

1. Plaintiff brings this action under Sections 5(a)(1), 13(b), and 16(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 45(a)(1), 53(b), and 56(a), to obtain injunctive and other relief for defendant's violations of the Commission's Trade Regulation Rule Concerning the Sale of Mail or Telephone Order Merchandise (the "Mail Order Rule"), 16 C.F.R. Part 435, and injunctive relief for violations of Section 5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1).

JURISDICTION AND VENUE

2. This Court has jurisdiction over this matter under 28 U.S.C. 1331, 1337(a), 1345, and 1355 and under 15 U.S.C. 45(m)(1)(A), 49, 53(b), 56(a) and 57b. This action arises under 15 U.S.C. 45(a)(1).

3. Venue in the Eastern District of Pennsylvania is proper under 15 U.S.C. 53(b) and under 28 U.S.C. 1391(b-c) and 1395(a).

DEFENDANTS

4. Defendant George Capell has been an officer, director and shareholder of Computer Personalities Systems, Inc. ("CPSI"), a Pennsylvania corporation with its office and principal place of business located within the Eastern District of Pennsylvania at 6907 Easton Road, Suite 1, Pipersville, Pennsylvania 18947. CPSI transacts business in the Eastern District of Pennsylvania. Individually or in concert with others, George Capell has formulated, directed, controlled, and participated in the business activities, policies, acts, and practices of CPSI, including the acts and practices alleged in this Complaint. His office and principal place of business are the same as those of CPSI.

DEFENDANT'S COURSE OF CONDUCT

5. CPSI has sold personal computer systems, consisting of a computer and monitor, other peripherals, including a scanner, a printer and digital camera, and bundled applications software. CPSI has advertise its systems over the Internet and on infomercials, which it has run on television and cable systems throughout the United States. CPSI has typically advertised that its systems will be delivered within two to four weeks. CPSI's systems have typically been offered with one or more promotional rebates on various components of the system, which have been offered either directly by CPSI or by the manufacturers of the system components.

6. Consumers may order CPSI's computer systems over the Internet or by calling an 800-number listed in the infomercial. In either case, consumers can pay for the systems by check, by credit card, or by financing that has been arranged by CPSI pursuant to an agreement with MBNA Bank. If a consumer elected to pay by check, the order has not been placed until the check has cleared. If a consumer elected to pay by credit card, the order has been placed as soon as the credit card charge has been authorized. If a consumer elected to finance the purchase, the order has been placed as soon as MBNA Bank has accepted the financing agreement.

7. On numerous occasions, CPSI has failed to ship one or more components within the stated shipping times. Prior to July, 1999, in violation of the Mail Order Rule, defendant did not provide any delay notice and did not offer consumers the option of cancelling their orders. After July, 1999, CPSI did provide a delay notice, but did not offer consumers the option of cancelling their order.

8. CPSI has advertised that the rebates that it has offered directly will be paid to consumers within eight to ten weeks after purchase. In numerous instances, however, defendant did not provide the rebates within eight to ten weeks. In many instances, consumers did not receive rebates for more than eight to ten months, and in some instances have not received rebates at all.

9. CPSI has also advertised that rebates were available from the manufacturers of certain of the peripheral components of its computer systems. CPSI has not routinely provided the forms that consumers needed to apply for those rebates. Rather, CPSI has required its customers to submit a form before it provided the forms. In many cases, CPSI has taken eight to ten weeks to provide the rebate request forms to consumers, by which time the manufacturers' rebate programs have expired. As a consequence, numerous consumers have been unable to obtain the advertised manufacturers' rebates.

UNFAIR OR DECEPTIVE ACTS OR PRACTICES
IN VIOLATION OF THE FTC ACT

10. Section 5(a) of the FTC Act, 15 U.S.C. 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful."

11. CPSI has advertised, offered for sale, sold and distributed personal computer systems, typically including a computer, monitor, printer, scanner and related software. These computer systems have been designed to provide home personal computer users with a complete personal computer package. In addition, as an inducement to prospective customers, CPSI has advertised promotional rebates to purchasers of these computer systems. Said rebates have included both cash rebate offers from defendant and cash rebate offers from manufacturers of certain of the components included in CPSI's computer systems.

12. The acts and practices of CPSI alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act.

13. CPSI has disseminated or has caused to be disseminated advertisements for its personal computer systems, which contain the following statements and statements substantially similar thereto:

VC Store Rebate Breakdown
This package includes $310 in mail-in
rebates. The following is a breakdown
of how the rebates work.

Manufacturer
Video Computer Store
Lexmark (Printer)
Microtek (Scanner)
AOC (Monitor)
SkyWizard (Internet)
Rebate Offered
$100
$50
$20
$40
$100

14. Through the means described in Paragraph 13, CPSI has represented, expressly or by implication, that purchasers of its computer systems would receive cash rebates from CPSI and from manufacturers of components of CPSI's computer systems, within the times stated in the advertisements, or, where no time was stated in the advertisements, within a reasonable period of time.

15. In truth and in fact, in numerous instances, purchasers of CPSI's computer systems did not receive a cash rebate within the times stated in the advertisements, or, where no time was stated in the advertisements, within a reasonable period of time. In many instances, consumers did not receive the cash rebate for over one year. Therefore, the representation set forth in Paragraph 14 was and is false and misleading and constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C.  45(a)(1).

16. Through the means described in Paragraph 13, CPSI has represented, expressly or by implication, that consumers could reasonably obtain cash rebates from manufacturers of components of CPSI's computer systems.

17. In truth and in fact, in numerous instances, consumers could not reasonably obtain cash rebates from manufacturers of components of CPSI's computer systems because CPSI failed to provide consumers with forms necessary to claim cash rebates from manufacturers of components of defendant's computer systems in a timely manner, thereby rendering it impossible for such consumers to claim such rebates. Therefore, the representation set forth in Paragraph 14 was and is false and misleading and constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C.  45(a)(1).

THE MAIL ORDER RULE

18. The Mail Order Rule was promulgated by the Commission on October 22, 1975, under the FTC Act, 15 U.S.C. 41 et seq., and has been in full force and effect since that date. The Commission amended the Rule on September 21, 1993, under Section 18 of the FTC Act, 15 U.S.C. 57a, and these amendments became effective on March 1, 1994.

VIOLATIONS OF THE MAIL ORDER RULE

19. At all times material herein, CPSI has engaged in the mail order sale and telephone order sale of personal computer products in commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

20. In numerous instances, after having solicited mail orders and telephone orders for merchandise and received "properly completed orders," as that term is defined in Section 435.2(d) of the Mail Order Rule, 16 C.F.R. 435.2(d), and having been unable to ship some or all of the ordered merchandise to the buyer within the Mail Order Rule's applicable time, as set out in Section 435.1(a)(1) of the Mail Order Rule, 16 C.F.R.  435.1(a)(1) (the "applicable time"), CPSI has violated the Mail Order Rule by:

a. Soliciting orders for the sale of telephone or mail order merchandise when it had no reasonable basis to expect that it would be able to ship some or all of such merchandise within the time stated in the solicitation or, if no time was stated clearly and conspicuously in the solicitation, within thirty (30) days after receipt of a properly completed order, thereby violating 16 C.F.R.   435.1(a)(1);
 
b. Providing to the buyer a revised shipping date when it had no reasonable basis for making such representation, thereby violating 16 C.F.R.  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, thereby violating 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), thereby violating 16 C.F.R.  435.1(b)(3);
 
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, thereby violating 16 C.F.R.  435.1(c)(5); and
 
f. Having received a request from consumers to cancel the order, failing to make a prompt refund, thereby violating 16 C.F.R.  435.1(c)(1).
21. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C.  57a(d)(3), a violation of the Mail Order Rule constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C.  45(a)(1).

INJUNCTIVE RELIEF

22. Under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), this Court is authorized to issue a permanent injunction and other relief, including consumer redress, against defendant's violating the FTC Act.

23. At all times relevant to this Complaint, defendant George Capell has been the President of CPSI and has been a director and the majority shareholder of CPSI. He has participated directly in the creation and dissemination of certain of the sales materials described in Paragraph 5.

In addition, defendant George Capell has the authority to control the acts and practices of CPSI. At all times relevant to this Complaint, he has had or should have had knowledge that CPSI was violating Section 5 of the FTC Act, as alleged in Paragraphs 13 through 17 of this Complaint and that CPSI was violating the Mail Order Rule, as alleged in Paragraphs 19-21 of this Complaint. He has failed to exercise his authority over the acts and practices of CPSI to control the violations of Section 5 and of the Mail Order Rule alleged in this Complaint. Defendant George Capell is, therefore, liable for CPSI's violations of Section 5 and of the Mail Order Rule at any time relevant to the allegations of this Complaint.

PRAYER

WHEREFORE, plaintiff requests this Court, pursuant to 15 U.S.C. 45(a)(1), 45(m)(1)(A), 49, 53(b) and 57b, and to the Court's own equity powers to:

(1) Enter judgment against defendant and in favor of plaintiff for each violation alleged in this complaint;
 
(2) Enjoin defendant from violating the Mail Order Rule;
 
(3) Enjoin defendant from violating Section 5(a) of the FTC Act, 15 U.S.C.  45(a), in connection with the offering for sale and sale of personal computer equipment;
 
(4) Award plaintiff such additional relief as the Court may deem just and proper.

FOR THE FEDERAL TRADE COMMISSION:

JEFFREY KLURFELD
Regional Director

______________________________
DAVID M. NEWMAN
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA 94103
Attorney for Plaintiff