PeoplePC to Pay $100,000 Penalty

PeoplePC • PeoplePC Settles Deceptive Marketing Case • PeoplePC to Pay $100,000 Penalty --- • Consumer Complaints

WASHINGTON, Aug. 23, 2002 -- PeoplePC, will pay a $100,000 civil penalty to settle Federal Trade Commission charges that it failed to tell thousands of consumers in advance that their deliveries would be delayed, provide them with an opportunity to cancel or consent to the delay, or send them cancellation refunds within the time-frame required.

The San Francisco company sells personal computers, computer peripherals, software, and Internet service.

In addition to these alleged violations of the Mail or Telephone Order Merchandise Rule (Mail Order Rule), the FTC's complaint contended the company violated the Pre-Sale Availability of Written Warranty Terms Rule by not "clearly and conspicuously" providing consumers with the warranties covering the products or services they purchased, or information on how the warranties could be obtained, before the purchases were made.

It marks the second time the FTC has brought a Pre-Sale Availability Rule complaint against a company selling a product over the Internet.

"Whether you're selling merchandise through the mail, on the phone, or over the Internet, you've got to meet your shipment or delivery promises," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "If you can't, you've got to give consumers a chance to cancel their order or agree to the delay. Additionally, merchants offering a warranty must provide it in full text - or at least let your customers know where to get a copy for free."

Beales noted that warranty terms are particularly important to PC purchasers given the expense and complexity of the equipment, and the wide array of service and repair options offered. Fortunately, he noted, warranty information is also particularly easy and cheap to provide to consumers in the Internet environment.

Under the Rule, for consumer products costing more than $15, either the full text of the written warranty must be provided pre-purchase, or it must be noted that the written warranty can be obtained free upon written request, and a contact address provided. By failing to comply with the Rule's provisions, the Commission contended, PeoplePC engaged in a deceptive act or practice in violation of the FTC Act.

In its allegations that the company violated the Mail Order Rule, the Commission said that while People PC made express delivery representations to consumers over the phone, on the Internet, and in brochures and contracts - including the claim that "your computer will arrive in two or three weeks" - thousands of consumers received shipments beyond this time-frame, and many received no notice that their order would be delayed. In addition, the FTC stated that during this delay, PeoplePC did not inform consumers of their right to cancel due to the delay or provide refunds when the Mail Order Rule would have required cancellation.

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