Usdrives Corporation

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IN THE MATTER OF USDRIVES CORPORATION CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3866. Complaint, April 6, 1999--Decision, April 6, 1999 This consent order, among other things, prohibits a California-based corporation from misrepresenting the extent to which any CD-ROM drive is made in the United States.

Participants For the Commission: Kent Howerton, Laura Koss and Elaine Kalish.

For the respondent: Jon Parsons, Palo Alto, CA. COMPLAINT The Federal Trade Commission, having reason to believe that USDrives Corporation ("respondent") has violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proce.eding is in the public interest, alleges: 1. Respondent US Drives Corporation is a California corporation with its principal office or place of business at 850 Auburn Court, Fremont, California.

2. Respondent has manufactured, advertised, labeled, offered for sale, sold, and distributed products to the public, including optical drives that read information on compact disc read-only memory discs ("CD-ROM drives").

3. The acts and practices of respondent alleged in this complaint have been in or affecting ~commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act. 4. Respondent has disseminated or has caused to be disseminated packaging and labeling for its CD-ROM drives, including but not necessarily limited to the attached Exhibi~ A through C. The packaging and labeling contain the following statements and depictions:

A . . Exhibit A, product packaging for CD-ROM drive 24X IDE 1. Depiction of the American eagle (on two principal display panels of package); 2. The statement "MADE IN THE USA" in red and blue (on two principal panels and top panel of package); · Complaint 127 F.T.C. 3. The company name "US Drives" in red, white, and blue (on all panels except bottom panel of package).

B. Exhibit B, product packaging for CD-ROM drive 20x IDE 1. Depiction of the American flag in red, white, and blue in a circle surrounded by the statement "Well made in the U.S.A." (on two principal display panels and top panel of package);

2. A depiction of the Statue of Liberty (on one principal display panel of package);

3. A depiction of the American eagle (on one principal_display panel of package); 4. The company name "US Drives" in red, white, and blue (on all panels except bottom panel of package).

C. Exhibit C, name plate label for Model No.: USDRIVE 24DT 1. The statement "MADE IN USA."

5. Through the means described in paragraph four, respondent has represented, expressly or by implication, that its CD-ROM drives are made in the United States,-i.e., that all, or virtually all, of the component parts of its CD-ROM drives are made in the United States, and that all, or virtually all, of the labor in manufacturing its CD-ROM drives is performed in the Unite.d States. 6. In truth and in fact, the CD-ROM drives packaged in Exhibits ' A or B or labeled with the statement in Exhibit C were, or are, assembled in the United States of primarily imported parts. Therefore, the representations set forth in paragraph five were, and are, false·or misleading.

7. Respondent has disseminated or has caused to be disseminated packaging for its CD-ROM drives, including but not necessarily limited to the attached Exhibits D and E. The packaging contain the following statements and depictions:

A. Exhibit D, revised product packaging for CD-ROM drive 24x IDE 1. . A depiction of the American Eagle (on two principal display panels of package);

2. A depiction of a billowing American flag in red, white, and blue (across two principal display panels of package);

3. The company name "USDrives" in red, white, and blue (on all panels except bottom_ panel of package);

In small print at the bottom of two side panels, the words "MADE IN CHINA:" B. Exhibit E, product packaging for CD-ROM drive32x IDE I. A depiction of a billowing American flag in red, white, and blue (across two principal display panels of package);

2. The company name "USDr.ives" in red, white, and blue (on all panels except bottom panel of package);

In small print on bottom panel, the words "MADE IN CHINA." USDRIVES CORPORATION 479 477 Complaint 8. Through the means described in paragraph seven, notwithstanding the inconspicuous statement "Made in China," respondent has represented, expressly or by implication, that its CD-ROM drives are made in the United States, i.e., that all, or virtually all, of the component parts of its CD-ROM drives are made in the United States, and that all, or virtually all, of the labor in manufacturing its CD-ROM drives is performed in the United States. 9~ In truth and in fact, the CD-ROM drives packaged in Exhibits D or E were, or are, made in China of primarily non-U.S. parts. Therefore, the representations set forth in paragraph eight were, and are, false or misleading .

. 10. The acts and practices of respondent as alleged in this ~complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

---- ·· .... - · ----·-- - --- - - - ----- Complaint 127 F.T.C. EXHIBIT A , EXHIBIT A (principal display panel/ side panel) US DRIVES CORPORATION 481 477 Complaint EXIDBIT A c= ·=-· ·c.- · ·-· EXHIBIT A (top panel) Complaint 127 F.T.C. EXHIBIT B EXHIBIT B (first principal disp.

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panel/ side pane USDRIVES CORPORATION 487 477 Complaint EXHIBIT D EXHIBIT. 0 (top panel) Complaint 127 F.T.C. EXHIBIT E EXHIBIT E (principal display) panel/side oanel1 bottom oanel) USDRlVES CORPORATION 489 477 Complaint EXHIBIT E ~c:n = I > c..

EXHIBIT E (top ~anel) Decision and Order 127 F.T.C. DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy· of a draft complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and _ which, if issued by the Commission, would charge respondent with violations of the Federal Trade Commission Act; and The respondent, its attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, and admission by the respondent of all the jurisdictional facts set forth in the draft complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent. violated the said Act, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order:

1. Respondent USDri ves Corporation is a California corporation with its principal office or plac~ of business at 850 Auburn Court, Fremont,- California.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public intere~t.

ORDER I.

!t is ordered, That respondent, USDrives Corpora~ion, a corporation, its successors and assigns, and its officers, agents, representatives, and employees, directly or through any corporation, j US DRIVES CORPORATION 491 I 477 Decision and Order I I subsidiary, division, or other device, in connection with the :r! manufacturing, labeling, advertising, promotion, offering for sale, . I sale, or distribution of any optical drive that reads information on compact disc read-only memory discs ("CD-ROM drive") in or affecting-commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S. C. 44, shall not misrepresent, in any manner, directly or by implication, the extent to which any such CD-ROM drive is made in the United States. - , Provided, however, that a representation that any such CD-ROM drive is made in the United States will not be in violation of this order so long as all, or virtually all, of the component parts ofthe CD-ROM drive are made in the United States and all, or virtually all, of the labor in manufacturing the CD-ROM drive is performed in the United States.

II.

It is further ordered, That respondent USDrives Corporation, and its successors and assigns, shall, for five (5) years after the last date of dissemin~tion of any representation covered by this order, maint!lin and upon request make available to the Federal Trade Commission for inspection and copying:

A. All packaging, labeling, advertisements and promotional materials containing the representation;

B. All materials that were relied upon in disseminating the _representation; and C. All tests, reports,.studies, surveys, demonstrations, or other . evidence in.their possession or.contr91 that contradict, qualify, or call into question the representation, or the basis relied .upon for the representation, including complaints and other communications ~ith consumers or with governmental or consumer protection organizations. III.

It is further ordered, That r_respondent USDrives Corporation, and its successors. and assigns, shall deliver a copy of this order to all cun:ent and future principals, officers, directors, and managers, and to all current and future ~mployees, agents, and representatives having responsibilities wit_h respect to the subject matter ofthis order, and shall secure from each such person a signed and dated statement J Decision and Order 127 F.T.C. acknowledging receipt of the order. Respondent shall deliver this order to current personnel within thirty (30) days after the date of service of this order, and to future persotmel within thirty (30) days after the person assumes such position or responsibilities. IV.

It is further ordered, That respondent US Drives, Corporation, and its successors and assigns, shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtait1ing such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. v.

It is furt~er ordered, That respondent US Drives Corporation, and its successors and assigns, shall, within sixty ( 60) days after the date of service of this order, and at such other times as the Federal Trade 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.

VI. .

This order will terminate on April6, 2019, or twenty (20) years from the most recent date that the United States or the Federal Trade ·. Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that if such complaint is ___ [ __ US DRIVES CORPORATION 493 477 Decision and Order ,\ dismissed or a federal court rules that the respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed ~and the later of the deadline for appealing such dismissal or ruling lI, Tjiand the date such dismissal or ruling is upheld on appeal. ., ,, n ,:,.. .' ! .

Complaint 127 F.T.C.