Agency Challenges Deceptive Internet Lease Ads
Dell Computer Corp. and Micron Electronics, Inc. have agreed to settle Federal Trade Commission charges that their computer lease advertisements violated federal laws. According to the agency, both Dell and Micron disseminated misleading ads for consumer leases by placing material cost information in inconspicuous or unreadable fine print or omitting such information altogether. The proposed settlements with Dell and Micron would require the companies to provide consumers with clear, readable, and understandable information in their lease advertising.
The settlements, announced today for public comment, focus on misleading lease advertising over the Internet. They follow similar FTC cases against automobile manufacturers and dealerships aimed at eliminating deceptive auto leasing and credit advertising.
"Whether we're talking about leasing computers, cars, or other products, consumers want to know what's what and advertisers have an obligation to tell them," said Jodie Bernstein, Director of the Bureau of Consumer Protection. "This settlement underscores the importance of clearly disclosing essential cost information in ads, whether they are in print, on television, or online. The simple truth is that consumers depend on it."
Dell, based in Roundrock, Texas, designs, manufactures, and markets computer systems. According to the FTC, Dell's Internet ads stated that consumers could purchase a new computer system by making low monthly payments. The complaint alleges that these Internet ads failed to disclose adequately that the low monthly payments actually applied to a lease and not to a purchase. In addition, the complaint alleges that Dell's Internet and television ads placed important information about the terms of the lease or any inception fees due in inconspicuous print (Internet) or unreadable fine print (television).
Micron, headquartered in Nampa, Idaho, also designs, manufactures, and markets computer systems. The FTC charges that Micron's magazine, newspaper, and Internet lease ads were deceptive because they omitted or failed to disclose adequately important cost information about the leases. Like Dell, Micron placed much of this important information in blocks of fine print at the bottom of its ads, the agency said.
The FTC alleges that the computer companies violated Section 5 of the FTC Act, as well as the Consumer Leasing Act and its implementing Regulation M, which govern lease transactions.
The FTC complaints cite several examples of lease advertisements that fail to disclose adequately the required information. For example:
** A Dell Internet ad states:
"DELL DIMENSION XPSR . . .
Configured Price $2,288
$86/month . . ."
A fine print disclosure, at the bottom of the ad, however, contains material information that the advertised monthly payment pertains to a lease. This inadequate disclosure also provides the term of the lease -- information necessary for consumers to calculate the total of payments required under the lease and to compare leasing to buying -- and other cost information. According to the FTC, to piece together the costs involved and the true nature of the transaction advertised, consumers would have to scroll diligently through a number of complicated, densely-filled screens. In addition, consumers could have clicked at numerous points in the ad on a number of "buttons" or "hyperlinked" words that took them to other portions of the web site, bypassing important information regarding the advertised transaction and the term of the lease.
** A Dell television ad highlights a Dell computer for "just $99 a month" for 24 months. However, an unreadable block of fine print appearing on the screen for approximately 30 seconds details other material cost information, including that consumers must pay almost $200 prior to delivery.
** A Micron Internet ad advertises a Transport Trek. 266.13.3 for "Total System Price as Configured:$2499 ... Consumer Lease $98.96 per month** (Secure) . . ." However, the ad omits information about fees due at lease signing (about $250) and buries information about the term of the lease in small print at the bottom of the ad, far removed from the monthly payment amount. In addition, the FTC said that consumers could have clicked on "hyperlinked" words that took them to other portions of the web site before they could read the material information at the bottom of the ad.
The proposed consent agreements that the FTC negotiated with Dell and Micron would settle the charges and prevent the companies from engaging in similar acts and practices in the future. Under the proposed order, Dell would be prohibited from failing to disclose clearly and conspicuously (in a manner that an ordinary consumer could read [or hear] and comprehend) that any advertised terms pertain to a lease offer. Both Dell and Micron would be prohibited from making any reference to any charge that is part of the total amount due at leasing signing or that no such amount is due, unless the ad also states with equal prominence the total amount due at lease inception. The companies also would be prohibited from running ads that highlight low monthly payments, unless the ads also state, clearly and conspicuously that (1) the advertised transaction is a lease; (2) the total amount due at lease signing; (3) whether or not a security deposit is required; (4) the number, amount, and timing of scheduled payments; and (5) that, for open-end leases, an extra charge may be imposed at the end of the lease term.
Finally, the proposed orders prohibit the companies from failing to comply in any other respect with Regulation M, 12 C.F.R. § 213, as amended, and the CLA, 15 U.S.C. §§ 1667-1667e, as amended.
Both settlements also contain various record keeping and reporting requirements that are designed to assist the FTC in monitoring the companies' compliance.
The Commission vote to announce the proposed consent agreements for public comment was 4-0.
A summary of each of the proposed consent agreements will be published in the Federal Register shortly. They will be subject to public comment for 60 days, after which the Commission will decide whether to make them final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such order may result in a civil penalty of $11,000.
Copies of the complaints, proposed consent orders, and an analysis of the proposed consent orders to aid public comment are available from the FTC's web site: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 982 3563,65)
Office of Public Affairs
Bureau of Consumer Protection
Sally Forman Pitofsky,
Bureau of Consumer Protection