Marketer of Computer Systems Settles FTC Charges

The FTC today announced a consent decree that will prohibit a Pennsylvania-based seller of computer systems from violating the Federal Trade Commission Act and the Mail Order or Telephone Order Merchandise Rule (Mail Order Rule or Rule) and require that he post a $400,000 bond before engaging in any business covered by the Rule.

The consent decree settles a complaint alleging violations of the FTC Act and Mail Order Rule by George L. Capell, the president and sole shareholder of Computer Personalities Systems, Inc., d/b/a Video Computer Store (CPSI). According to the complaint, between 1997 and 2000 CPSI failed to send proper delay notices, failed to offer refunds, and lacked a reasonable basis for its delivery time claims in connection with the computer systems that it shipped. The complaint also alleges that CPSI promised to pay its customers rebates in connection with the computer systems they bought, but failed to deliver the rebates in a timely manner and often didn't even provide consumers with the forms needed to request those rebates.

The company marketed its computer systems, which typically consisted of a CPU, monitor, printer, speakers, and occasionally other peripherals, bundled with an array of software, by means of infomercials and over the Internet. The infomercials were produced by Direct-2-U, an affiliated company also owned by Capell, and typically promised delivery of the systems within two to four weeks. The rebates offered ranged from $100 on a complete system to $50 on the purchase of a printer and monitor to $30 for a scanner, with "bonus rebates" also offered. Total sales during the time the company was in business topped $272 million.

The Commission's Complaint

The Commission's complaint alleges that Capell violated the FTC Act by 1) representing that rebates would be available within a specific time or within a reasonable time, when in fact rebates were available from manufacturers of peripherals supplied as part of its computer systems, when it fact it failed to provide consumers with the forms needed to request the rebates in a timely manner.

In addition, according to the complaint, Capell violated the Mail Order Rule by 1) failing to possess a reasonable basis for the shipping representations made to consumers; 2) failing to possess a reasonable basis for revised shipping representation made to consumers; 3) failing to offer consumers the option to agree to a delay in shipping or to receive a refund; 4) failing to offer buyers a prepaid means of cancelling their orders; 5) failing to provide prompt refunds when CPSI did not receive consumers' consent to delay and the company failed to ship on time; and 6) failing to provide refunds when consumers asked that their order be cancelled.

Under the terms of the consent decree, Capell or any company in which he is involved will be required to comply with the Mail Order Rule when conducting any business operations that involve the sale of a product or service. In addition, he is required to provide a $400,000 bond before entering any business whose activities would be covered by the Rule. The order also bars Capell or any company in which he is involved from making misrepresentations in connection with any rebate program, and requires him or the company to provide rebate request forms in a timely manner. Finally, the order contains standard monitoring and compliance provisions. The consent decree applies only to Capell, and not to CPSI, which has filed for bankruptcy protection.

The Commission vote to authorize staff to file the complaint and consent decree was 5-0. The consent decree was filed in the U.S. District Court for the Eastern District of Pennsylvania on November 14, 2001. The judgment requires the court's final approval and is not binding until signed by the judge.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law. Consent judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. They have the force of law when signed by the judge.

Copies of the documents mentioned in this release are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 002-3050)