Deceptive advertising is rampant and worsening in the high-tech industry, with more tech firms making outlandish product claims and promising free personal computers and Internet access, regulators and consumer advocates say.
Consumers irate about tech ads are flooding the Federal Trade Commission with several hundred complaints a year, more than any other industry.
In recent months, the FTC has ordered several companies to stop their allegedly misleading advertising. The agency is investigating several more computer and Internet firms and retail chains, government officials say.
- In April, the FTC settled with Hewlett-Packard and Microsoft, ordering them to stop running national ads that it said deceived consumers into thinking H-P's Jornada pocket PC came with built-in wireless links to the Net. The ads led consumers to believe they could get e-mail and the Internet anytime, anywhere. But a separate, $350 wireless modem, mentioned in tiny print at the bottom of the ad, is needed. And the modem must be connected to a phone.
- Gateway Computer and Juno Online Services this month settled FTC charges of deceptive advertising by agreeing to stop plugging "free" Internet service. Juno claimed that consumers would get free "premium" Internet access for a trial period but charged them and tacked on long-distance fees. Gateway claimed that access to its Gateway.net portal was free, but many consumers were charged $3.95 an hour to use Gateway's "toll-free" number to call the service. The FTC ordered the firms to reimburse some consumers for costs.
- Buy.com, Value America and Office Depot ran ads promising free or low-cost PCs but failed to mention the full costs of the deals. Three-year Internet contracts costing up to $800 were part of the "bargain." The companies settled the FTC charges last summer.
- Sharp Electronics falsely advertised that its handheld PCs could be upgraded to a later version of Microsoft Windows CE when the software became available, the FTC charged. Sharp settled with regulators in January.
"The high-tech industry plays fast and loose with their marketing claims, promising something for nothing," says Ed Mierzwinski of the U.S. Public Interest Research Group, a consumer-rights organization in Washington.
Regulators say the competitive market for PCs and Internet services is tempting more firms to mislead. And while many Internet firms are young and new to consumer-protection laws, regulators say that's no excuse. "We're putting the industry on notice," warns FTC official Darren Bowie.
Jim Sneed, an attorney at McDermott Will & Emery who represents tech firms, says "the industry now has (legal) guidance from the FTC on advertising practices and they would be well-advised to follow that guidance."
Edward Iwata, USA TODAY. May 28, 2001
Copyright © 2001 USA TODAY. All rights reserved.