Memtek Products, Inc.

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IN THE MATTER OF MEMTEK PRODUCTS, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATIONS OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3927; File No. 9923114 Complaint, February 17, 2000--Decision, February 17, 2000 This consent order prohibits Respondent, Memtek Products, Inc., from misrepresenting the time in which any cash rebate, or rebate in the form of credit towards purchases will be mailed to purchasers. It also prohibits Respondent from failing to provide any offered rebate within the promised time specified, or if no time is specified, within thirty days. The consent order also prohibits Respondent from violating the Commission=s Mail Order Rule which also prohibits marketers from failing to provide rebates in the form of merchandise or service for products within specified time or, if time is not specified, within thirty days unless they offer consumers the option of consenting to the delay and receiving compensation for the offered rebate. Participants For the Commission: Michael Dershowitz, Michael Ostheimer, Mark Eichorn, C. Lee Peeler, and BE. For the Respondents: Robert A. Padway, Bullivant Houser Bailey.

COMPLAINT The Federal Trade Commission, having reason to believe that Memtek Products, Inc., a corporation ("respondent"), has violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:

VOLUME 129 Complaint 1. Respondent Memtek Products, Inc., is a California corporation with its principal office or place of business at 10100 Pioneer Blvd., Santa Fe Springs, CA 90670. 2. Respondent has repackaged, advertised, labeled, offered for sale, sold, and distributed products to the public, including Memorex computer diskettes and blank audiotapes and videotapes.

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 labeling and rebate coupons for packages of Memorex computer diskettes, including but not necessarily limited to the attached Exhibits A and B. The labeling and rebate coupons contain the following statements: A.

" $15 REBATE "Please allow 12 weeks With Proof of Purchase" for delivery." (Exhibit A, front of label (Exhibit A, back of label attached to packages of attached to packages of Memorex computer Memorex computer diskettes). diskettes) B.

"29.99 Rebate by Mail on specially marked 100 Pack Diskettes (Exhibit B, front of Purchased at Staples" rebate coupon for MEMTEK PRODUCTS, INC. 697 Complaint Memorex computer . . . diskettes).

Please allow 12 weeks for delivery."

"Buy a Memorex MXR 100 Pack Diskettes (Exhibit B, back of rebate (Part#3210-5430) and Bulk coupon for Memorex 100 Pack Diskettes computer diskettes). (Part# 3210-5400) 5. Through the means described in Paragraph 4, respondent has represented, expressly or by implication, that purchasers of packages of Memorex computer diskettes would receive cash rebates within 12 weeks of respondent's receipt of their requests. 6. In truth and in fact, in numerous instances, purchasers of packages of Memorex computer diskettes did not receive cash rebates within 12 weeks of respondent's receipt of their requests. In many instances, consumers experienced delays of one to two months in receiving their cash rebates. Therefore, the representation set forth in Paragraph 5 was, and is, false or misleading.

7. Respondent has disseminated or has caused to be disseminated labeling for packages of blank Memorex audiotapes and videotapes, including but not necessarily limited to the attached Exhibit C. The labeling contains the following statements:

C. Good for purchase at "BUY THIS Best Buy of any pre- MEMOREX PRODUCT recorded video tape or AND RECEIVE A $10 music CD."

Best Buy Gift Check (by mail) VOLUME 129 Complaint (Exhibit C, front of label "Please allow 8 weeks for attached to packages of delivery." blank Memorex audiotapes and videotapes).

(Exhibit C, back of label attached to packages of blank Memorex audiotapes and videotapes).

8. Through the means described in Paragraph 7, respondent has represented, expressly or by implication, that purchasers of packages of blank Memorex audiotapes and videotapes would receive $10 Best Buy gift checks, entitling them to a $10 discount off a future purchase from Best Buy retail stores of any prerecorded videotape or music CD, within 8 weeks of respondent's receipt of their requests.

9. In truth and in fact, in numerous instances, purchasers of packages of blank Memorex audiotapes and videotapes did not receive $10 Best Buy gift checks within 8 weeks of respondent's receipt of their requests. In many instances, consumers experienced delays of one to three months in receiving their $10 Best Buy gift checks. Therefore, the representation set forth in Paragraph 8 was, and is, 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.

MEMTEK PRODUCTS, INC. 699 Complaint THEREFORE, the Federal Trade Commission this seventeenth day of February, 2000, has issued this complaint against respondent.

By the Commission.

VOLUME 129 Complaint Exhibits Exhibit A MEMTEK PRODUCTS, INC.

Complaint Exhibits Exhibit B $29." Rebate by Mail on specially marked 100 Pack Diskettes Purchased at Staples Must complete purchase between 1/11/98 thru 7/iaee limit 1 revund per name, household or address. Requestsmust be post marked 2/1/58 ‘Here's How To Receive Your Memorex Rebate: 1. Buy.a Memorex MFX 100 Paak Diskettes |Parv3710-5430] ang Sut 100 Pack Ciekettes |Pat#3202 54001 yma from the eriginalpackape.and the Staples caeh register receipe as ror!-of-perchase id purenase 3. Mall ese required tems. along wih this completes req Memorex MFX100 Pack Dishetes end Bulk 100 Fact Ol PO, BOK S255 24, Phoenix, AZ. SOT? 2345. 4. inorder em your request please prnt he following informanon Name MOOSE City State Up Adaitiona Tarms of Ofer.

Mose commie perchese by IN Posvest mete ponimecked by N/M. Te COMDIEE fam asl HLCONEUMP AgsEsT AP mayrothe meonaricaly FED OUCEM [wat | refune pernema, nowcenaidor eddrens. Finace strw!? weeks lov fevery Yor amare protitheddy lew, taaee. ikense¢ or rectrioted. Group and ergerivational equt notte honoree Iter geotenlya {0 UEA Notuesgombe foro or miecrected mat. roomie redemptonrequtsts atl nate honered Ths tM" rat t be weed Intersection atts any other ole Ofler good ware cuppiiec inet Farquesicnnrnpardiegthe statis pour rabates,plvnsacoM|RIIS- 8% Prone ~~ Exhibit B, enlarged VOLUME 129 Complaint Exhibits Exhibit C MEMTEK PRODUCTS, INC. 703 Decision and Order 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 of 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 violation of the Federal Trade Commission Act; and The respondent, its attorney, and counsel for Federal Trade Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of 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 has violated the said Act, and that 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 thirty (30) days, now in further conformity with the procedure prescribed in ' 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order: 1. Respondent Memtek Products, Inc. is a California corporation with its principal office or place of business at 10100 Pioneer Boulevard, Santa Fe Springs, CA 90670.

VOLUME 129 Decision and Order 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 interest.

ORDER DEFINITIONS For purposes of this Order, the following definitions shall apply:

1. "Rebate" shall mean cash, credit towards future purchases, merchandise, services, or any other consideration offered by respondent to consumers who purchase products or services from respondent, which is provided subsequent to the purchase. 2. Unless otherwise specified, "respondent" shall mean Memtek Products, Inc., a corporation, its successors and assigns and its officers, agents, representatives, and employees. 3. "Mail Order Rule" shall mean the Federal Trade Commission's Trade Regulation Rule Concerning Mail or Telephone Order Merchandise, 16 C.F.R. Part 435, or as the Rule may hereafter be amended.

4. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. ' 44.

I.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with respondent's manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product or service in or affecting commerce, shall not: MEMTEK PRODUCTS, INC. 705 Decision and Order A. misrepresent, in any manner, expressly or by implication, the time in which any rebate in the form of cash or credit towards future purchases will be mailed, or otherwise provided to purchasers;

B. fail to provide any rebate in the form of cash within the time specified, or, if no time is specified, within thirty days;

C. fail to provide any rebate in the form of credit towards future purchases within the time specified, or, if no time is specified, within thirty days;

D. in connection with any rebate in the form of merchandise, violate any provision of the Mail Order Rule, including failing to provide the rebate within the time specified, or, if no time is specified, within thirty days, unless respondent offers to the purchaser the option of either: 1. consenting to the delay; or 2. canceling the rebate request and promptly receiving reasonable cash compensation instead of the rebate originally offered; or E. fail to provide any rebate in the form of services or any other consideration (other than cash, credit towards future purchases, or merchandise) within the time specified, or, if no time is specified, within thirty days, unless respondent offers to the purchaser the option of either: 1. consenting to the delay; or 2. canceling the rebate request and promptly receiving reasonable cash compensation instead of the rebate originally offered.

VOLUME 129 Decision and Order II.

IT IS FURTHER ORDERED that respondent Memtek Products, Inc., and its successors and assigns shall for five (5) years after the last date of dissemination of any representation covered by this order maintain and upon request make available to the Federal Trade Commission for inspection and copying: A. All respondent's advertisements and promotional materials containing such representation;

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

IT IS FURTHER ORDERED that respondent Memtek Products, Inc., and its successors and assigns shall deliver a copy of this order to all current and future principals, officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with respect to the subject matter of this order. Respondent shall deliver this order to current personnel within thirty (30) days after the date of service of this order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities. MEMTEK PRODUCTS, INC. 707 Decision and Order IV.

IT IS FURTHER ORDERED that respondent Memtek Products, Inc., 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 obtaining 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, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. V.

IT IS FURTHER ORDERED that respondent Memtek Products, Inc., and its successors and assigns shall, within sixty (60) days after 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 they have complied with this order. VI.

This order will terminate on February 17, 2020, 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 VOLUME 129 Analysis to Aid Public Comment violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of: A. Any Part in this order that terminates in less than twenty (20) years;

B. This order's application to any respondent that is not named as a defendant in such complaint; and C. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided, further, that if such complaint is 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 and the date such dismissal or ruling is upheld on appeal. By the Commission.

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 respondent Memtek Products, Inc. (AMemtek@). The proposed consent order has been placed on the public record for thirty (30) days for reception 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 MEMTEK PRODUCTS, INC. 709 Analysis to Aid Public Comment decide whether it should withdraw from the agreement or make final the agreement=s proposed order.

Memtek repackages, advertises, labels and sells, among other products, AMemorex@ brand computer diskettes, and blank audiotapes and videotapes. This matter concerns allegedly deceptive rebate advertising claims made in conjunction with the sale of these products. The Commission=s proposed complaint alleges that Memtek falsely represented that purchasers of its package of 100 computer diskettes would receive a $29.99 cash rebate within 12 weeks of Memtek=s receipt of purchasers= rebate requests. The complaint alleges that in many instances purchasers received their rebates one to two months late. The complaint also alleges that Memtek falsely represented that purchasers of its blank audiotapes and videotapes would receive a $10 Best Buy Gift Check within 8 weeks of Memtek=s receipt of purchasers= gift check requests. The $10 Gift Check could then be used at any Best Buy retail store to obtain $10 off the purchase of any prerecorded videotape or music CD. The complaint alleges that in many instances purchasers received their $10 Gift Checks one to three months late.

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

Part I of the proposed order prohibits respondent from misrepresenting the time in which any cash rebate, or rebate in the form of credit towards future purchases, will be mailed to consumers. It also prohibits respondent from failing to provide such rebates within the time specified, or if no time is specified, within thirty days.

Part I of the proposed order also prohibits respondent from violating any provision of the FTC=s Mail Order Rule in connection with rebates in the form of merchandise. Among other VOLUME 129 Analysis to Aid Public Comment things, the Mail Order Rule prohibits marketers from failing to provide rebates in the form of merchandise within the time they specify for delivery, or if no time is specified, within thirty days, unless they offer consumers the option of consenting to a delay or canceling the rebate request and promptly receiving reasonable cash compensation instead of the merchandise originally offered. Finally, Part I of the proposed order similarly prohibits respondent from failing to provide rebates in the form of services or any other consideration (other than cash, credit towards future purchases, or merchandise) within the time it specifies for delivery, or if no time is specified, within thirty days, unless it offers consumers the option of consenting to a delay or canceling the rebate request and promptly receiving reasonable cash compensation instead of the rebate originally offered.

Part II of the proposed order requires respondent to maintain copies of all materials relied upon in making any representation covered by this order.

Part III of the proposed order requires respondent to distribute copies of the order to various officers, agents and employees of respondent.

Part IV of the proposed order requires respondent to notify the Commission of any changes in corporate structure that might affect compliance with the order.

Part V of the proposed order requires respondent to file with the Commission one or more reports detailing compliance with the order.

Part VI of the proposed order is a Asunset@ provision, dictating that the order will terminate twenty years from the date it is issued or twenty years after a complaint is filed in federal court, by either the United States or the FTC, alleging any violation of the order. MEMTEK PRODUCTS, INC. 711 Analysis to Aid Public Comment The purpose 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.

VOLUME 129 Complaint