FTC and Dell File Consent Decree

(April 3, 1998)  PC manufacturer Dell Computer Corp. and the Federal Trade Commission filed papers today with the U.S. District Court whereby Dell agreed to have a Consent Decree entered against it.  The Decree would bar Dell from selling computer systems over the phone or by telephone, that is bundled with software that is not ready to be shipped.  The Decree would also fine Dell $800,000.

In late 1995, according to the FTC’s complaint, the "Dell Software Suite" was advertised as being an included component of the Dell Dimension systems. The FTC alleged that consumers who called and purchased a Dell Dimension system were not informed that the "Dell Software Suite" would not be included when their product was shipped. Instead, the company included a coupon for the software "when available." The FTC said, that in numerous instances, consumers who purchased a Dell Dimension system did not receive the software until well after their computers had arrived. The FTC also charged that Dell did not offer consumers the option of either consenting to the delay or canceling their orders and receiving a prompt refund, as required by the Rule.

The Consent Decree Would Bar Dell From the Following:

• "Soliciting orders for the sale of telephone or mail order merchandise when it has no reasonable basis to expect that it will be able to ship some or all of such merchandise within the time stated in the solicitation or, if no time is stated clearly and conspicuously in the solicitation, within thirty (30) days after receipt of a properly completed order, as required by 16 C.F.R. §  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, as required by 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), as required by 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 canceled and to make a prompt refund, as required by 16 C.F.R. § 435.1(c)(5);"

"Hundreds of consumers order products and services through the mail and over the phone," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection, in an FTC press release. "The FTC enforces the Mail and Telephone Order Sales Rule vigorously to ensure that consumers have confidence in these transactions."

The Complaint and proposed Consent Decree were filed April 2 by the U.S. Department of Justice on behalf of the FTC, in the U.S. District Court for the Western District of Texas, in Austin.  The case has been assigned the number A-98-CA-0210.  The Commission vote to refer the complaint and proposed settlement to DOJ for filing was 4-0, with Commissioner Mary L. Azcuenaga not participating.  The FTC's regional office in San Francisco conducted the investigation in this matter.

According to the FCC, "This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation."  However, the Consent Decree states that "the facts as alleged in the Complaint file with this Consent Decree shall be taken as true in any subsequent litigation filed by the United States to enforce its rights pursuant to this consent Decree."

Sources: Complaint; proposed Consent Decree; FTC Press Release; FTC website; Dell website.