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Complaint in FTC v. Dell Computer Corp.
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Source: FTC.

RAYMOND A. NOWAK
Chief, Civil Division
Assistant United States Attorney
Texas Bar No. 15121490
601 N.W. Loop 410, Suite 600
San Antonio, TX 78216
(210) 530-6110; (210) 530-6108 (Fax)

ELIZABETH STEIN
Attorney
Office of Consumer Litigation
Civil Division
U.S. Department of Justice
Washington, DC 20530
(202) 307-0486; (202) 514-8742 (Fax)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS

UNITED STATES OF AMERICA, Plaintiff,

v.

DELL COMPUTER CORPORATION, a corporation, Defendant.

Civil Action No.

COMPLAINT FOR CIVIL PENALTIES,
INJUNCTIVE AND OTHER RELIEF

Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission ("Commission"), for its complaint alleges that:

1. Plaintiff brings this action under Sections 5(a)(1), 5(m)(1)(A), 9, 13(b) and 16(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a)(1), 45(m)(1)(A), 49, 53(b) and 56(a), to obtain monetary civil penalties and injunctive and other relief for defendant's violations of the Commission's Trade Regulation Rule Concerning the Sale of Mail or Telephone Order Merchandise (the "Mail Order Rule" or "Rule"), 16 C.F.R. Part 435.

JURISDICTION AND VENUE

2. This court has jurisdiction over this matter under 28 U.S.C. §§ 1331, 1337(a), 1345, and 1355 and under 15 U.S.C. §§ 45(m)(1)(A), 49, 53(b) and 56(a). This action arises under 15 U.S.C. § 45(a)(1).

3. Venue in the Western District of Texas is proper under 15 U.S.C. § 53(b) and 28 U.S.C. §§ 1391(b-c) and 1395(a).

DEFENDANT

4. Defendant Dell Computer Corporation is a Delaware corporation with its principal office or place of business in the Western District of Texas at One Dell Way, Round Rock, Texas 78768. Dell transacts business in the Western District of Texas.

VIOLATIONS OF THE MAIL ORDER RULE

5. The Mail Order Rule was promulgated by the Commission on October 22, 1975, under the FTC Act, 15 U.S.C. § 41 et seq., and has been in full force and effect since that date. The Commission amended the Rule on September 21, 1993, under Section 18 of the FTC Act, 15 U.S.C. § 57(a) (effective on March 1, 1994).

6. At all times material herein, defendant has engaged in the mail order sale and telephone order sale of personal computer systems in commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

7. Defendant advertises, offers for sale, sells and distributes personal computer systems, including its "Dell Dimension" personal computer systems, bundled with a variety of third party software products and hardware peripherals and components manufactured by outside vendors. Such third party software products have included a set of software applications, collectively referred to by Dell as the "Dell Software Suite," which defendant packaged on a CD-ROM. During October through December of 1995, defendant disseminated or caused to be disseminated advertisements for its Dell Dimension systems that depicted the Dell Software Suite as an included component of the system.

8. In many instances during November and December of 1995, consumers who called Dell to purchase a Dell Dimension system were not informed that the Dell Dimension system that they were purchasing would not include the Dell Software Suite at the time it was shipped, but would instead include a coupon for the Dell Software Suite "when available." In numerous instances, consumers who purchased a Dell Dimension system did not timely receive the Dell Software Suite CD-ROM until after timely shipment of a Dell Dimension system.

9. In numerous instances during November and December of 1995, after having solicited mail orders and telephone orders for merchandise and received "properly completed orders," as that term is defined in Section 435.2(d) of the Mail Order Rule, 16 C.F.R. § 435.2(d), and having been unable to ship some or all of the ordered merchandise to the buyer within the Mail Order Rule's applicable time, as set out in Section 435.1(a)(1) of the Mail Order Rule, 16 C.F.R. § 435.1(a)(1) (the "applicable time"), defendant has violated the Mail Order Rule by:

• Soliciting orders for the sale of telephone or mail order merchandise when it had no reasonable basis to expect that it would be able to ship some or all of such merchandise within the time stated in the solicitation or, if no time was stated clearly and conspicuously in the solicitation, within thirty (30) days after receipt of a properly completed order, thereby violating 16 CFR §  435.1(a)(1);
• Failing to offer to the buyer, clearly and conspicuously and without prior demand, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, thereby violating 16 C.F.R. § 435.1(b)(1);
• Failing to offer to the buyer a prepaid means of exercising the buyer's options as described in 16 C.F.R. § 435.1(b)(1), thereby violating 16 C.F.R. § 435.1(b)(3); and
• Having failed to offer the option to consent to a delay or to cancel the order and receive a prompt refund, as required by 16 C.F.R. § 435.1(b)(1), and also having failed to ship the merchandise within the applicable time, failing to deem the order cancelled and to make a prompt refund, thereby violating 16 C.F.R. § 435.1(c)(5).

10. A violation of the Mail Order Rule also is an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C. § 45(a)(1).

CIVIL PENALTIES AND INJUNCTION

11. Defendant has violated the Mail Order Rule as described above with knowledge as set forth in Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. § 45(m)(1)(A).

12. Each sale or attempted sale, during the five years preceding the filing of this complaint, in which defendant has violated the Mail Order Rule in one or more of the ways described above constitutes a separate violation for which plaintiff seeks monetary civil penalties.

13. Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. § 45(m)(1)(A), authorizes the Court to award monetary civil penalties of not more than $10,000 for each such violation of the Mail Order Rule occurring before November 20, 1996, and Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461, as amended, authorizes the Court to award civil penalties of not more than $11,000 for each such violation of the Mail Order Rule occurring on or after November 20, 1996.

14. Under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), this Court is authorized to issue a permanent injunction against defendant's violating the FTC Act.

PRAYER

WHEREFORE, plaintiff requests this Court, pursuant to 15 U.S.C. §§ 45(a)(1), 45(m)(1)(A), 49, 53(b) and 57b, and pursuant to the Court's own equity powers to:

(1) Enter judgment against defendant and in favor of plaintiff for each violation alleged in this complaint;

(2) Enjoin defendant from violating the Mail Order Rule in connection with the offering for sale and sale of personal computer systems;

(3) Award plaintiff monetary civil penalties from defendant for each violation of the Mail Order Rule;

(4) Order defendant to pay the costs of this action; and

(5) Award plaintiff such additional relief as the Court may deem just and proper.

DATED: