02-5968. Palm, Inc.; Analysis To Aid Public Comment

AGENCY:

Federal Trade Commission.

ACTION:

Proposed consent agreement.

SUMMARY:

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint that accompanies the consent agreement and the terms of the consent order—embodied in the consent agreement—that would settle these allegations.

DATES:

Comments must be received on or before April 5, 2002.

ADDRESSES:

Comments filed in paper form should be directed to: FTC/Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments filed in electronic form should be directed to: [e-mail], as prescribed below.

FOR FURTHER INFORMATION CONTACT:

Michael Ostheimer, Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580, [phone].

SUPPLEMENTARY INFORMATION:

Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 2.34 of the Commission's rules of practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for March 6, 2002), on the World Wide Web, at http://www.ftc.gov/​os/​2002/​03/​index.htm. A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling [phone].

Public comments are invited, and may be filed with the Commission in either paper or electronic form. Comments filed in paper form should be directed to: FTC/Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains nonpublic information, it must be filed in paper form, and the first page of the document must be clearly labeled “confidential.” Comments that do not contain any nonpublic information may instead be filed in electronic form (in ASCII format, WordPerfect, or Microsoft Word) as part of or as an attachment to e-mail messages directed to the following e-mail box: [e-mail]. Such comments will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with § 4.9(b)(6)(ii) of the Commission's rules of practice, 16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Palm, Inc. (“Palm”).

The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.

This matter involves alleged misleading representations about Palm handheld computers or personal digital assistants (“PDAs”). This matter concerns allegedly false and deceptive advertising claims made in advertisements regarding the ability of Palm devices to wirelessly access the Internet and e-mail accounts and to perform other functions.

According to the FTC complaint, Palm misrepresented that Palm PDAs, as sold, contain everything that consumers need to wirelessly access the Internet and their e-mail accounts. In fact, in order to wirelessly access the Internet and e-mail accounts using Palm PDAs, other than the Palm VII model line, consumers must purchase and carry a separate wireless modem or a device to connect the Palm to certain mobile telephones; and, moreover, many mobile telephones currently in use in the U.S. are not compatible with Palm PDAs. The complaint also alleges that in representing that consumers can use Palm PDAs, as sold, to access the Internet and their e-mail accounts wirelessly, Palm failed to disclose or failed to disclose adequately that in order to wirelessly access the Internet and their e-mail accounts, consumers must purchase and carry a separate wireless modem or a device to connect the Palm to certain mobile telephones. The complaint alleges that the failure to disclose this material fact is a deceptive practice.

The proposed complaint also challenges as false the claim that Palm PDAs, as sold, can perform common business functions such as data base management, custom form creation, and viewing Microsoft Word and Excel documents. To perform these functions using Palm PDAs, consumers must purchase and install additional software. The complaint also alleges that in representing that consumers can use Palm PDAs, as sold, to perform these functions, respondent failed to disclose or failed to disclose adequately that in order to perform these functions using Palm PDAs, consumers must purchase and install additional software. The complaint alleges that the failure to disclose this material fact is a deceptive practice.

Finally, the complaint alleges that in representing that consumers can use the Palm VII model line to access the Internet and their e-mail accounts wirelessly, Palm failed to disclose or failed to disclose adequately that consumers must subscribe to Palm.Net, a proprietary for-fee service. The complaint alleges that the failure to disclose this material fact is a deceptive practice.

The proposed consent order contains provisions designed to prevent Palm from engaging in similar acts and practices in the future.

Part I of the proposed order prohibits respondent from making misrepresentations that any PDA or handheld Internet or e-mail access device can perform any common business function that it cannot perform without additional products or services that consumers must purchase. Part I also prohibits misrepresentations that wireless Internet or e-mail service coverage for the product is available everywhere or almost everywhere in the U.S.

Part II of the proposed order prohibits misrepresentations about performance characteristics relating to Internet or e-mail account access of any non-wireless PDA or handheld Internet or e-mail access device (i.e., one that requires the use of an additional device in order to access the Internet or e-mail accounts wirelessly).

Part III requires that when respondent makes any claims about the ability of any PDA or handheld Internet or e-mail access device to perform any function that requires the purchase of additional products or services, it must make a clear and conspicuous disclosure, depending upon the function being discussed. When the function involves accessing the Internet or e-mail accounts, respondent must disclose any other products (such as a modem, mobile telephone, or adapter) or Internet or e-mail access services (other than general-purpose ISP service, as defined in the order), that consumers must purchase in order to access the Internet or e-mail accounts. When the function does not involve accessing the Internet or e-mail accounts, respondent must disclose that additional products must be purchased in order to perform such function(s).

Part IV of the proposed order provides that, for up to 120 days after service of the order, respondent may continue to ship products from existing stock in packaging with nonconforming labeling, as long as the packaging was printed less than 30 days after the date respondent signed the consent agreement.

Parts VI through IX require Palm to keep copies of relevant advertisements and materials substantiating claims made in the advertisements, to provide copies of the order to certain of its personnel, to notify the Commission of changes in corporate structure, and to file compliance reports with the Commission. Part X provides that the order will terminate after twenty (20) years under certain circumstances.

The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.

By direction of the Commission.

Donald S. Clark,

Secretary.