[Federal Register Volume 59, Number 88 (Monday, May 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11108]
[[Page Unknown]]
[Federal Register: May 9, 1994]
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FEDERAL TRADE COMMISSION
[File No. 922 3332]
Hayes Microcomputer Products, Inc.; Proposed consent agreement
With Analysis to Aid Public Commentg
AGENCY: Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit, among other things, a Georgia manufacturer and distributor of
computer communications products from making certain representations
regarding any modem-related product, unless the respondent possesses
and relies upon competent and reliable substantiating evidence.
DATES: Comments must be received on or before July 8, 1994.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
Linda Badger, FTC/San Francisco Regional Office, 901 Market St., Suite
570, San Francisco, CA. 94103. (415) 744-7920.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given
that the following 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 sixty (60) days. Public comment is invited. Such comments or
views will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Agreement Containing Consent Order To Cease and Desist
In the Matter of: Hayes Microcomputer Products, Inc., a
corporation.
The Federal Trade Commission having initiated an investigation of
certain acts and practices of Hayes Microcomputer Products, Inc., a
corporation (``proposed respondent''), and it now appearing that the
proposed respondent is willing to enter into an agreement containing an
order to cease and desist from the use of the acts and practices being
investigated,
It is hereby agreed by and between Hayes Microcomputer Products,
Inc., by its duly authorized officer, and its attorney, and counsel for
the Federal Trade Commission that:
1. Proposed respondent Hayes Microcomputer Products, Inc., is a
corporation organized, existing and doing business under and by virtue
of the laws of the State of Georgia, with its office and principal
place of business located at 5835 Peachtree Corners East, in the City
of Norcross, State of Georgia.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint here attached.
3. Proposed respondent waives:
a. Any further procedural steps;
b. The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law; and
c. All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement.
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission, it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the proposed respondent, in which event
it will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
5. This agreement is for settlement purposes only and does not
constitute an admission by the proposed respondent of facts, other than
jurisdictional facts, or of violations of law as alleged in the draft
of complaint here attached.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to proposed
respondent, (a) issue its complaint corresponding in form and substance
with the draft of complaint here attached and its decision containing
the following order to cease and desist in disposition of the
proceeding and (b) make information public in respect thereto. When so
entered, the order to cease and desist shall have the same force and
effect and may be altered, modified or set aside in the same manner and
within the same time provided by statute for other orders. The order
shall become final upon service. Delivery by the U.S. Postal Service of
the complaint and decision containing the agreed-to order to proposed
respondent's address as stated in this agreement shall constitute
service. The proposed respondent waives any right it may have to any
other manner of service. The complaint may be used in construing the
terms of the order, and no agreement, understanding, representation, or
interpretation not contained in the order or the agreement may be used
to vary or contradict the terms of the order.
7. The proposed respondent has read the proposed complaint and
order contemplated hereby. The proposed respondent understands that
once the order has been issued, it will be required to file one or more
compliance reports showing that it has fully complied with the order.
The proposed respondent further understands that it may be liable for
civil penalties in the amount provided by law for each violation of the
order after it becomes final.
Order
Definitions
For the purposes of this Order, the following definitions shall
apply:
A. The term Improved Escape Sequence with Guard TIme means the
escape method technology described, among other things, in United
States Patent Number 4,549,302, titled as ``Modem With Improved Escape
Sequence With Guard Time Mechanism.''
B. The term Time Independent Escape Sequence, or Ties, means an
escape sequence consisting of three escape characters (eg., ``+++'')
followed by a valid AT command, which can be followed by additional at
commands, and ended with another character, typically a carriage
return.
C. The term modem-related product means any modem, any component of
any modem, or any hardware or software used in the operation of any
modem.
I
It is ordered that respondent, Hayes Microcomputer Products, Inc.,
a corporation, its successors and assigns, and its officers, and
respondent's agents, representatives and employees, directly or through
any corporation, subsidiary, division or other device, in connection
with the manufacturing, labelling, advertising, promotion, offering for
sale, sale, or distribution of products containing the Improved Escape
Sequence with Guard Time, in or affecting commerce, as ``commerce'' is
defined in the Federal Trade Commission Act, do forthwith cease and
desist from representing, in any manner, directly or by implication,
that:
A. Because a modem does not incorporate the Improved Escape
Sequence with Guard Time, the use of that modem creates a substantial
risk of data destruction;
B. When incorporated in modems, the ``Time Independent Escape
Sequence'' (``TIES'') creates a substantial risk of data transmission
failure;
C. The Improved Escape Sequence with Guard Time is the only escape
method that does not create a substantial risk of data transmission
failure; or
D. The use of any modem that does not incorporate the Improved
Escape Sequence with Guard Time entails a data transmission problem
that can be solved only by replacing it with a modem that incorporates
the Improved Escape Sequence with Guard Time;
unless such representation is true, and at the time of making such
representation, respondent possesses and relies upon competent and
reliable evidence, which when appropriate must be competent and
reliable scientific evidence, that substantiates such representation.
For purposes of this Order, ``competent and reliable scientific
evidence'' shall mean tests, analyses, research, studies or other
evidence based on the expertise of professionals in the relevant area,
that has been conducted and evaluated in an objective manner by persons
qualified to do so, using procedures generally accepted in the
profession to yield accurate and reliable results.
II
It is further ordered that respondent, Hayes Microcomputer
Products, Inc., a corporation, its successors and assigns, and its
officers, and respondent's agents, representatives and employees,
directly or through any corporation, subsidiary, division or other
device, in connection with the manufacturing, labelling, advertising,
promotion, offering for sale, sale, or distribution of any modem-
related product in or affecting commerce, as ``commerce'' is defined in
the Federal Trade Commission Act, do forthwith cease and desist from
representing, in any manner, directly or by implication, the risk of
experiencing data destruction, data loss or data transmission problems
due to any escape method, unless, at the time of making such
representation, respondent possesses and relies upon competent and
reliable evidence, which when appropriate must be competent and
reliable scientific evidence, that substantiates such representation.
III
It is further ordered that for five (5) years after the last date
of dissemination of any representation covered by this Order,
respondent, or its successors and assigns, shall maintain and upon
request make available to the Federal Trade Commission for inspection
and copying:
A. All materials that were relied upon in disseminating such
representation; and
B. All tests, reports, studies, surveys, demonstrations or other
evidence in its possession or control that contradict, qualify, or call
into question such representation, or the basis relied upon for such
representation including complaints from consumers.
IV
It is further ordered that respondent shall notify the Commission
at least thirty (30) days prior to the effective date of any proposed
change in the respondent that may effect compliance obligations under
this Order such as dissolution, assignment, or sale resulting in the
emergence of successor corporation(s), the creation or dissolution of
subsidiaries, or any other change in the corporation(s).
V
It is further ordered that respondent shall, within ten (10) days
from the date of service of this Order upon it, distribute a copy of
this Order to each of its officers, agents, representatives,
independent contractors, and employees involved in the preparation and
placement of advertisements or promotional materials, to all company
executives, and to all marketing and sales managers; and for a period
of three (3) years, from the date of issuance of this Order, distribute
a copy of this Order to all of respondent's future such officers,
agents, representatives, independent contractors, and employees.
VI
It is further ordered that respondent shall, within sixty (60) days
from the date of service of this Order upon it, and at such other times
as the Commission may require, file with the Commission a report, in
writing, setting forth in detail the manner and form in which it has
complied with this Order.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted an agreement, subject to
final approval, to a proposed consent order from respondent Hayes
Microcomputer Products, Inc., (``Hayes'') a Georgia corporation.
The proposed consent order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received and will decide whether it should
withdraw from the agreement and take other appropriate action or make
final the agreement's proposed order.
Hayes manufactures and distributes products for computer
communications, including modems, local area networks, and software.
This matter concerns a patented ``escape sequence'' which Hayes
developed for use in its modems, and licenses to other companies. An
escape sequence is a mechanism by which modems end a data transmission.
The name of the Hayes escape sequence at issue is the ``Improved Escape
Sequence with Guard Time.'' The Commission's complaint charges that
respondent's advertising contained false representations that the use
of other escape methods creates a substantial risk of experiencing data
transmission problems. For example, the complaint charges that Hayes
made false representations regarding the Time Independent Escape
Sequence (``TIES''), an escape method developed by several of Hayes'
competitors. Specifically, the complaint alleges that the respondent
falsely represented that:
(1) Because a modem does not incorporate the Improved Escape
Sequence with Guard Time, the use of that modem creates a substantial
risk of data destruction;
(2) When incorporated in modems, the ``Time Independent Escape
Sequence'' (``TIES'') creates a substantial risk of data transmission
failure;
(3) The Improved Escape Sequence with Guard Time is the only escape
method that does not create a substantial risk of data transmission
failure; and
(4) The use of any modem that does not incorporate the Improved
Escape Sequence with Guard Time entails a data transmission problem
that can be solved only by replacing it with a modem that incorporates
the Improved Escape Sequence with Guard Time.
The proposed consent order contains provisions designed to remedy
the violations charged and to prevent the respondent from engaging in
similar acts and practices in the future. Part I of the proposed order
would prohibit the company from making any of the false claims
delineated above, unless they are true, and at the time of making them,
the respondent possesses and relies upon competent and reliable
evidence, which when appropriate must be competent and reliable
scientific evidence.
Part II of the proposed order includes fencing-in relief,
prohibiting the company from making representations relating to any
modem-related product, regarding the risk of experiencing data loss,
data destruction, or data transmission problems due to any escape
method, unless, at the time of making such representations, the company
possesses and relies upon a reasonable basis, which when appropriate,
must include competent and reliable scientific evidence. It is to be
noted that this fencing-in provision relates to any method used to
switch a modem to the command mode--this would include out-of-band
escape sequences as well as in-band escape sequences such as TIES or
Hayes' Improved Escape Sequence with Guard Time.
The proposed order also requires the respondent to maintain
materials relied upon to substantiate claims covered by the order; to
provide a copy of the consent agreement to all employees or
representatives involved in the preparation and placement of the
company's advertisements, as well as to all company executives and
marketing and sales managers; to notify the Commission of any changes
in corporate structure that might affect compliance with the order; and
to file one or more reports detailing compliance with the order.
The proposed of this analysis is to facilitate public comment on
the proposed order. It is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 94-11108 Filed 5-6-94; 8:45 am]
BILLING CODE 6750-01-M
