Washington, D.C. - The Federal Trade Commission is taking a dim view of the way some retailers have touted their supposedly free or low-cost PCs promotions.
In a move meant to send a message throughout the trade, the FTC has singled out three merchants - Buy.com, Office Depot and Value America - for running ads that it believes didn't adequately disclose the true cost of their PC giveaways to consumers.
The agency reached consent agreements with the retailers last month after filing complaints alleging deceptive advertising practices. It charged that the ads - which appeared in major newspapers and magazines, and on TV, radio and the Internet - failed to fully inform consumers of the up-front, pre-rebate cost of the computer systems, and that the deals included three-year commitments to Internet service.
Although no penalties were assessed, each company has agreed to prominently disclose any and all conditions that are attached to their PC promotions in future advertising.
According to the FTC, the hidden costs included penalties and rebate forfeiture for early cancellation of the ISP contracts, as well as long-distance telephone charges or expensive hourly surcharges for consumers whose ISPs lacked local access numbers in their area.
The FTC also charged that Value America customers had to wait up to 17 weeks to receive their rebates, and that both Office Depot and Value America falsely indicated that monitors were included in their "free PC" deals. In actuality, they had to be purchased separately at a cost of between $140 to $200.
Taken together, the hidden costs nearly quadrupled the price of one advertised PC system, from $269 to more than $1,000, the FTC said. The commission added that in most cases the true costs and important restrictions were either not disclosed at all in the advertising, or appeared in very small and inconspicuous disclaimers, sometimes in tiny four-point type.
"You shouldn't need a Ph.D. to figure out the cost of a PC," said Jodie Bernstein, director of the agency's Bureau of Consumer Protection. "These advertisers should have done a better job of disclosing the details so consumers could figure out the deal."
While none of the retailers admitted to any wrongdoing in agreeing to the agency's consent order, Value America acknowledged that it will change certain aspects of its advertising practices to help consumers make better-informed decisions about purchases involving rebates.
Said president/CEO Glenda Dorchak, "We are satisfied that our efforts with the FTC will ensure that our product descriptions, including information on rebates and shipping, are the most accurate and content-rich."