Gateway 2000, the nation’s largest manufacturer and direct marketer of computers and related products, will pay $290,000 to resolve allegations of false advertising under an agreement approved last week by the Federal Trade Commission.
That agreement, in which the North Sioux City, SD, company did not admit to any wrongdoing, was unanimously approved by the FTC on Thursday (Jan. 7). It formalized a tentative accord the two reached last July after extensive negotiations.
A key provision of the settlement requires Gateway to turn the money over to the U.S. Treasury instead of the FTC because it was unable to determine which of the company’s thousands of customers paid shipping charges when returning products under the “money-back guarantee” for any reason.
The settlement also prohibits Gateway from promising customers free on-site service without disclosing the terms and from making promises for full refund or money-back guarantees without disclosing any limitations.
Calls to Gateway for a comment on the settlement were not returned by press time.
Last year the FTC launched administrative proceedings against the North Sioux City, SD, company alleging that its direct mail solicitations and direct response ads contained false and misleading statements about the company’s refund policy and on-site warranty service.
Specifically it alleged that although it advertisements claimed full refunds would be given for returned merchandise, Gateway only refunded the purchase price, not the cost of shipping which averaged out to $62 per order.
The FTC also alleged that Gateway only provided customers with free on-site service after its technicians “diagnosed the problem over the telephone and determined that the consumer could not make the repair.”
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