CompUSA Settles NY Case Over Internet Access Rebate

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CompUSA has agreed to change its advertising policy as part of a settlement with the New York attorney general's office over an online deceptive advertising case.


The company also agreed to pay $50,000 to cover the cost of the investigation. The settlement was announced this week.


Consumers notified New York Attorney General Eliot Spitzer's office in late 1999 that CompUSA's now-defunct subsidiary, Cozone.com, did not disclose upfront that rebates of up to $400 on computer products were only available to consumers who signed up for three years of CompuServe Internet access. The CompuServe membership cost about $20 a month, totaling more than $700 for three years.


The ads also did not clearly disclose that early cancellation of the Internet service would result in substantial cancellation and repayment fees, depending on when customers terminated their service.


The attorney general's office said Cozone's disclosures were insufficient because consumers were required to click through multiple Web page links to locate the rebate's conditions.


In the settlement, CompUSA agreed to "fully and conspicuously" disclose the cost of its goods or services in online ads and to provide clear disclosure of conditions for rebate offers.


"Some industry advocates ... have promoted a standard that would deem certain online disclosures to be sufficient so long as they are simply accessible or reviewable by the consumers," according to a statement from the attorney general's office.


However, Spitzer said that standard might permit companies to place important disclosures or disclaimers behind multiple links, making it difficult for online consumers to locate them.


"This agreement sets a more stringent standard, requiring that important disclosures appear adjacent to offers, or, in some cases through a single, conspicuous Web site link," the statement said.


CompUSA did not comment on the settlement.


America Online, its CompuServe subsidiary and Prodigy came to a similar agreement with the Federal Trade Commission in 1998 after their "free trial" offers resulted in unexpected charges for many consumers. The three ISPs did not make it clear that consumers had to cancel service before a free trial period ended, according to the FTC.


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