Will More Fully Disclose Its Limitations

Palm Agrees To Be More Open-Handed

Palm • Palm Settles Defective Phone Suit • Lawsuit Challenges Palm's Treo Claims • Palm Settles FTC Charges • Consumer Complaints

WASHINGTON, March 6, 2002 -- The Federal Trade Commission today announced a proposed settlement agreement with Palm, Inc. Palm has been claiming that its Personal Digital Assistants (PDAs) come with built-in wireless access to the Internet and e-mail, as well as other common business functions.

Only problem is, the FTC charged, many of those claims were not true for many models of the popular PDAs. Under the terms of the settlement, Palm would be required to disclose, clearly and conspicuously, when consumers have to buy add-ons in order to perform advertised functions (such as the need for a modem to access e-mail or the Internet).

In its complaint against Palm, the Commission said the company's claims that its PDAs come with built-in wireless access to the Internet and e-mail, as well as other common business functions, such as viewing Microsoft Word and Excel documents, were deceptive.

In fact, to wirelessly access the Internet and their email accounts using most Palm PDAs, consumers must purchase and carry a separate wireless modem or a device to connect the PDA to certain mobile telephones, and in order to perform the claimed business functions using Palm PDAs, consumers must purchase and install additional software.

In addition, the FTC alleged that the company's advertisements failed to disclose that purchasers of one model line that comes with built-in wireless Internet and e-mail access must subscribe to Palm's proprietary "Palm.Net" Internet service and pay significant monthly service fees for e-mail and Internet access.

Under the terms of the proposed consent agreement, Palm would be prohibited from misrepresenting that products covered by the order - PDAs and other handheld Internet or e-mail access devices - can perform any common business function that they cannot perform without additional products or services that must be purchased by consumers.

The agreement also would require Palm to make clear and conspicuous disclosures when making claims about the ability of such products to perform any function that requires the purchase of additional products or services. If the function being advertised involves accessing the Internet or e-mail, Palm would have to disclose any other products (such as a modem or mobile telephone, or adapter) or special Internet or e-mail services that consumers must buy in order to get access using Palm's product.

When the functions being advertised do not involve accessing the Internet or e-mail, Palm would have to disclose that additional products must be purchased to perform such functions.

In addition, Palm would be barred from misrepresenting any performance characteristic of any non-wireless PDA regarding its ability to access the Internet or e-mail. The agreement would also prohibit Palm from misrepresenting that its wireless Internet or e-mail service coverage is available everywhere or almost everywhere in the United States.

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