WebTV Settles FTC False Advertising Charges

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WebTV Networks, Mountain View, CA, a marketer of interactive television devices, last week agreed to settle Federal Trade Commission charges that advertising for its WebTV system was deceptive and in violation of federal law.

The settlement will bar WebTV Networks from making deceptive marketing claims regarding the Internet capabilities of WebTV; require clear and conspicuous disclosure of long-distance phone charges that customers may accrue while using the product; and require reimbursement to former WebTV subscribers for long-distance charges they accrued during use.

The WebTV system consists of a set-top box and an Internet service which enables consumers to connect to the Internet through a television set.

According to the FTC's complaint, advertisements for the WebTV system claimed that it offered users access to all of the Internet's content and equaled a computer's ability to provide the same. The company also claimed in its ads that it would provide upgrades to its system to compete with the most recent Internet technology.

The FTC complaint alleges that WebTV users are not able to access all content available on the Internet, including "late breaking" or archived news articles provided by Web sites in streaming video formats and games and chat rooms written in Java.

The complaint also alleges that WebTV users are not able to download, store or run software accessible through the Internet. In some instances users may not be able to display specific Web pages, open e-mail attachments and play online music files. The FTC also alleges that WebTV has not stayed current with the most recent Internet technology by not being able to offer the latest online audio, video, interactive and multimedia technology.

Finally, the allegations stated that ads for the system did not properly explain that a notable percentage of customers would incur long-distance phone charges while using the WebTV system.

In addition to barring deception about the capabilities of Internet devices and services, the proposed settlement requires that future claims about the cost of any Internet device or service must be accompanied by a clear disclosure about potential associated long-distance phone charges. These types of pricing disclosures also must appear in all introductory kits offered to new subscribers of Internet services as well as on a log-on screen that is featured before the product connects to a long-distance number.

WebTV is required by the FTC to reimburse all users who canceled their subscriptions within 90 days due to long-distance charges. It also must establish a toll-free customer service center to field questions regarding long-distance charges.

WebTV Networks is in the process of developing a consumer education ad campaign. The campaign explains that while Internet access devices may be less costly and easier to use than PCs, consumers must research the capabilities of such devices versus those of PCs before initiating a purchase.

The campaign will run print ads later this year in Good Housekeeping, Modern Maturity and Newsweek magazines. The company also will publish an educational brochure titled Getting Online: Using Internet Access Products.

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