Value America, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF VALUE AMERICA, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATIONS OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3976; File No. 9923206 Complaint, September 5, 2000--Decision, September 5, 2000 This consent order addresses Value America’s advertising claims regarding the sale of various computer systems based upon a $400 rebate that required consumers to enter into a three-year contract for Internet service. The complaint alleges that Value America advertised computer systems citing a total cost amount that included undisclosed requirements. The complaint further alleges that the Respondent falsely claimed that a monitor would be included in some systems at no additional cost. Respondent also failed to ship some or all of the merchandise ordered in a timely manner and failed to offer buyers the option to consent to the delay in shipping or to cancel the order and receive a prompt refund. The order prohibits Value America from misrepresenting the price or cost to consumers of computers or computer related equipment without disclosing any condition clearly and conspicuously along with the price of the additional product or service that must be purchased. The order also requires the Respondent to disclose, clearly and conspicuously, and in close proximity to the after-rebate price or cost representation, the amounts of any rebates offered, and the total cost of the computer product or service, excluding any rebate amounts. Additionally, the order prohibits Respondent from making any representation about the cost of Internet access services without disclosing the following material facts: (1) if consumers have to pay additional fees, charges, rebate repayments, or other costs to cancel the Internet access service; (2) the amounts of such costs must be disclosed; (3) if consumers may have to pay long distance telephone charges, hourly surcharges, or other costs in excess of local telephone fees to access the Internet service; (4) the amount of time required for purchasers to receive any rebate. These disclosures can be made through hyperlinks if the hyperlink clearly indicated the nature and importance of the information included. Participants For the Commission: Beverly J. Thomas, Michael Dershowitz, Sydney Knight, Joel Winston, C. Lee Peeler, and BE. For the Respondents: Alfred J.T. Byrne, LeClair Ryan, PC. VOLUME 130 Complaint COMPLAINT The Federal Trade Commission, having reason to believe that Value America, 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:

1. Respondent Value America, Inc. is a Virginia corporation with its principal office or place of business at 2300 Commonwealth Drive, Charlottesville, Virginia 22901. 2. Respondent has advertised, offered for sale, sold, and distributed products to the public, including books, sporting goods, housewares, appliances, personal electronic devices, and personal computers. Value America sells these products through its Internet Web sites, <www.va.com> and <www.valueamerica.com> , and through toll-free telephone numbers.

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. The term AMail Order Rule@ means the Federal Trade Commission=s Trade Regulation Rule entitled AMail or Telephone Order Merchandise,@ 16 C.F.R. Part 435, and as it may hereafter be amended. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. S 57a(d)(3), a violation of the Mail Order Rule constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the Federal Trade Commission Act. 5. Respondent has disseminated or has caused to be disseminated advertisements for numerous computer systems, including but not limited to, a Toshiba Satellite 2100 CDS laptop, an HP Pavilion 4535 Multimedia PC, a Proteva computer, an IBM Aptiva E572 VALUE AMERICA, INC. 645 Complaint Micro Tower, and an emachines etower 366C. Advertisements for these computers appear in various media and include but are not necessarily limited to the attached Exhibits A through E. The advertisements contain the following statements: Exhibit A: Magazine ad Get Out of Here Hit the Road with Our Notebooks and Palm PCs [Depiction:Toshiba laptop] Let >Em Think You Paid Top Dollar The Toshiba Satellite 2100CDS looks and performs like a high-priced notebook, but actually costs a lot less. Built for speed, this Satellite boasts a 400 MHz AMD K67-2 processor with [component specifications for laptop].

Toshiba Satellite $1299, less optional Prodigy $400 Internet rebate!* Pay as little as $899 [A fine print disclosure, in approximately 5-point type, at the bottom of this magazine ad states:] *Prodigy Offer Terms & Conditions Offer limited to new Prodigy Internet members only and valid only in the United States. Mail-in rebate valid only on qualifying Toshiba notebook computers purchased from authorized Toshiba retailers or direct mail resellers between August 8, 1999, and December 31, 1999, and accompanied by enrollment in a fixed-term ARebate:Toshiba/ Prodigy Internet@ membership on Prodigy Internet between VOLUME 130 Complaint August 8, 1999, and January 31, 2000, using only the CD sent to you per this request. Enrollment in the Prodigy Internet service must be completed with an automatic payment plan on a valid major credit card. Payment of $19.95 per month is required for the length of your commitment. Mail-in rebate offer is subject to all Terms & Conditions on the reverse side of the mail-in rebate form which you will receive with your CD. Rebate checks will be processed within 8 weeks after Prodigy has received payment for your second monthly Prodigy membership fee, received your properly completed rebate form with a legible copy of your store receipt, and established your creditworthiness. If you cancel your membership prior to the end of your fixed term enrollment commitment, your credit card will be charged a cancellation fee equal to the amount of your Prodigy Internet mail-in rebate plus a $50 service fee as described in the Terms and Conditions on the mail-in rebate form. Rebate offered by Prodigy and not Toshiba. _______________________________ Exhibit B: Radio ad Announcer:

ValueAmerica.com - changing the way America buys. This week at ValueAmerica.com, we have the NEW Hewlett- Packard Pavilion 4535 Multi-media PC - with the Intel CELERON Processor - 400 megahertz . . . . It comes with a CD-ROM, Windows 98, and a 56K Modem. Imagine the quality of H-P at a price of less than $500 - in a package that also includes stereo speakers, a color monitor and a color printer. At Value America, this H-P Pavilion 4535 Multimedia PC, with the Intel CELERON processor, is ONLY 449! - after internet rebate. You heard right! 449 and if you call right now, we=ll throw in FREE DELIVERY! To take advantage of this week=s special, the H-P Pavilion 4535 for only 499 (sic), with FREE Shipping, call now at 888-XXX- XXXX. 888-XXX-XXXX or go online at ValueAmerica.com.

VALUE AMERICA, INC. 647 Complaint _______________________________ Exhibit C: Infomercial Audio Portion: Simultaneously Displayed on TV Screen:

The following is a paid program brought to you by Value America, the Internet and now television=s leading source for brand name products at unbeatable prices. [Lists computer system and bundled components] Stay tuned for the following products:

* * * * * * * * Stay tuned for Value America A$3000 [crossed out], $2000 Showcase. [crossed out] -- $1299 after rebates@ * * * * So how much do you think AValue America Discount you should pay for a system Price: $1799 minus like this? ... What would you -Microsoft Rebate: $400 (with do if I told you $1299 after MSN Activation) rebates? . . . [A]nd when you -Printer Rebate: $50 get hooked up with the -Scanner Rebate: $50 Microsoft Internet plan Total Rebates: $500" they=re going to give you a $400 rebate. We=re also going to give you a printer factory rebate of $50 and a scanner rebate of $50 for a total of $500 in rebates. . . .

[T]hat brings the total to VOLUME 130 Complaint $1299 for everything we=ve talked about.

VALUE AMERICA, INC. 649 Complaint And, if you call right A. . . . one-year Proteva warranty . . now, we=re going to .@ throw in free shipping A$1299 after rebates@ [in lower left and handling. . . . . corner of the screen; remains in lower left corner of the screen for * * * * much of the remaining minutes of the program.] We're talking about * * * * Proteva, let's hear a little Proteva, 10 year old computer bit about Proteva. manufacturer . . . . They're a huge company * * * * based in Wisconsin . . .

* * * * [The following is the full text of the terms and conditions associated with the $400 rebate offer. This text is scrolled vertically down the television screen, over a 4 to 5 second time period. There is no audio or visual indication that this[No audio] text applies to the rebate offer and, because it scrolls so quickly, it cannot be read or understood by viewers.] Terms and Conditions.

We know that you will like our service, and as an inducement to give MSN Plus Internet Access a full and fair trial, we are prepared to lend you the amount of the rebate selected above (up to $400) to help you get online. If you continue as a paying member of the MSN Plus service for the full period selected by you above, then you do not have to repay any part of the VOLUME 130 Complaint rebate amount. But if your MSN account is cancelled or terminated at any time before the end of the required period, you agree to pay back the full amount of the rebate. In either case you pay no interest.

(No audio) Within six to eight weeks of our acceptance of your application, which is subject to credit approval, the Microsoft Network, LLS, ("MSN") will advance to you the amount of (sic) designated above provided you have signed up for the MSN Plus Internet Access service. The rebate amount will either be credited to your credit card account as designated above or will be remitted by check to the address designated above. Accordingly to qualify for this program (1) you must pay for the MSN Plus Internet Access service each month in advance ($21.95); (2) you must purchase a Proteva PC no later than December 31, 1999; (3) this form must be completed fully mailed and postmarked within 30 (No audio) days of purchase date; (4) you must sign below to show that you agree to the items and conditions described in this application and the MSN member agreement which was presented to you online upon signup (and checked "I accepted") for line service; (5) you must attach this application, the original receipt, evidencing your purchase, with the purchase price circled, and (6) you must be at least 18 years old. You may receive only one rebate for each purchase. Accordingly you may receive only one rebate VALUE AMERICA, INC. 651 Complaint for each new MSN Internet access account. You are not obligated to continue as a MSN Plus Internet Access member for any particular length of time. HOWEVER, IF FOR ANY REASON WHATSOEVER YOU DO NOT CONTINUE FOR THE PERIOD OF TIME SPECIFIED ABOVE FOR THE REBATE YOU HAVE ELECTED TO RECEIVE, YOU AGREE THAT YOU WILL REPAY MSN THE AMOUNT [OF THE] REBATE ("Reimbursement amount") IMMEDIATELY UPON CANCELLATION OR TERMINATION OF YOUR MSN PLUS INTERNET ACCESS ACCOUNT. If you do not render payment in cash for the full reimbursement amount at the time that your MSN Plus Internet Access account is cancelled or terminated, and if your membership ends before the time designated for your rebate amount, you agree that MSN is authorized to change the reimbursement amount to your credit or debit card account. You acknowledge and agree that MSN may terminate your MSN Plus Internet Access account if you violate the MSN membership agreement. In such event you will be required to repay the reimbursement amount as described herein. You may designate your preferred credit card account above, but you understand and agree that MSN may charge any of your debit or [End of credit card accounts and you authorize the advertisement] issuer of any card account to which MSN charges the amount of the rebate to charge that amount to your account balance.

You agree that this agreement will be governed by the laws of the state of Washington and you consent to the exclusive VOLUME 130 Complaint jurisdiction and venue of the courts in King County Washington in all disputes arising out of or relating to this agreement.

You acknowledge and agree that your purchase is from the applicable retailer and not from MSN LLC, MSN or Microsoft Corporation.

This MSN rebate program is available only to residents of the 50 United States and the District of Columbia that purchase a Proteva PC.

_______________________________ Exhibit D: Web page advertisements Exhibit D.1 Hyperlink to ″Hyperlink to D.2 shopping cart [Depiction is a list hyperlink which, after two more hyperlinks, leads to Exhibit D.2.] (Exhibit D.1 is the initial Web page for the Home Computer section of Value America=s online store. Consumers can click on the shopping cart hyperlink to initiate the online purchase process, without viewing Exhibits D.2 or D.3.) VALUE AMERICA, INC. 653 Complaint Exhibit D.2 Your Price: $1,019.00 [Hyperlink to Price After Rebate: shopping cart $619.00 list] ASpecifications@ [List of twenty technical specifications about the advertised model, followed by:] $ Note: Monitor sold[AProduct separately.Rebates@ tab is a hyperlink to Exhibit D.3] (Exhibit D.2: ASpecifications@ Web page accessed through a minimum of two hyperlinks, whose labels do not refer or relate to the monitor. The quoted statement ANote: Monitor sold separately.@ appears at the bottom of the Web page after a lengthy list of technical product specifications. Consumers could purchase the advertised computer model from respondent online without viewing this page.) Exhibit D.3 AProduct Rebates@ A$400 Mail-In Offer ″[Undisclosed from Compuserve hyperlink behind 3 year Internet Service the phrase A$400 contract and major Mail-In Offer from VOLUME 130 Complaint credit card required. Compuserve,@ Valid with a purchase of which leads to the an IBM Aptiva PC and home page of a monitor from July 18, third party Web 1999 to January 31, site.] 2000. See rebate form for complete details.@ (Exhibit D.3: AProduct Rebates@ Web page accessed from Exhibit D.1 through a minimum of two hyperlinks, the first of which is not labeled as referring or relating to information about the advertised rebate offer. This Web page discloses that the advertised rebate offer is from Compuserve and requires a three year Internet service contract. Consumers could purchase the Aptiva E572 Micro Tower, with its associated rebate offer, from respondent online without viewing Exhibit D.3. No Arebate form@ or additional details about the Compuserve rebate offer are available at or from Value America=s Web site. An undisclosed hyperlink behind the phrase A$400 Mail-In Offer from Compuserve@ links to the home page of a third party Web site, which home page does not contain any information about the advertised rebate or any hyperlinks that refer or relate to the advertised rebate offer. Although information about other material terms and conditions of the Compuserve rebate offer is available on interior pages of the third party Web site, Value America=s Web pages do not hyperlink to these pages or otherwise provide access to this information.) _______________________________ Exhibit E: Web banner ad emachines Cyrix MII FREE PC! etower 366PR 366C Monitor not included VALUE AMERICA, INC. 655 Complaint 6. Through the means described in Paragraph 5, including but not necessarily limited to Exhibits A through E, respondent has represented, expressly or by implication, that the total cost of the advertised computer systems is $899 for the Toshiba Satellite 2100CDS laptop, $449 for the Hewlett-Packard Pavilion 4535 Multi-media PC, $1299 for the Proteva PC and bundled video camera, printer, scanner and software, $619 for the Aptiva E572 Micro Tower computer and FREE for the emachines etower 366C computer.

7. In truth and in fact, the total cost of the computers and bundled components described in Paragraph 6 was not as advertised. In order to obtain the advertised computer systems and bundled components at the prices advertised, consumers were required to subscribe to Compuserve 2000 Premier Internet Service, Prodigy Internet, or Microsoft MSN Plus Internet Access for 36 months at an additional cost of $19.95 to $21.95 per month or, in the case of Compuserve Internet Service, optional full prepayment of $790.20. Therefore, the representations set forth in Paragraph 6 were, and are, false or misleading. 8. In its advertisements, including but not limited to Exhibits A through E, for the computers and bundled components described in Paragraph 6, respondent has represented that the total cost of the advertised computer systems, respectively, is $899, $449, $1299, $619, and FREE. In these advertisements, respondent has failed to disclose or failed to disclose adequately: (a) that in order to obtain the advertised computers and bundled components for the advertised prices, consumers are required to subscribe to Compuserve 2000 Internet Service, Prodigy Internet, or Microsoft MSN Plus Internet Access for 36 months at an additional cost of $19.95 to $21.95 per month or in the case of Compuserve Internet Service, optional full pre-payment of $790.20; VOLUME 130 Complaint (b) with respect to Exhibits B and E, the amounts of the rebates - $400 for the Internet service rebate - and the total price of the computer system, with bundled components where applicable, before rebates;

(c) that consumers who terminate their Internet service contracts within three years must repay all or a prorated portion of the $400 rebate and, in the case of the Compuserve and Prodigy rebate offers, also pay a cancellation fee of up to $50;

(d) that it can take up to eight weeks after payment has been received for the consumer=s second monthly Internet service membership fee, or a total of 12 to 17 weeks, to receive the $400 Prodigy Internet rebate; and (e) that Compuserve 2000 Premier Internet, Prodigy Internet, and Microsoft MSN Plus Internet Access do not provide local access telephone numbers for their respective Internet services in all areas, and therefore that many consumers must either pay long distance telephone charges or surcharges of up to $6.00 per hour to access their Internet services.

These facts would be material to consumers in their purchase or use of the products. The failure to disclose these facts, in light of the representations made, was, and is, a deceptive practice. 9. Through the means described in Paragraph 5, including but not necessarily limited to Exhibit D, respondent has represented, expressly or by implication that the IBM Aptiva E572 Micro Tower computer includes a monitor at the advertised after-rebate price of $619 or the total price of $1,019. The IBM Aptiva E572 Micro Tower is depicted in Exhibit D with a monitor, with the IBM Aptiva logo written across the monitor, on both the initial product offering Web page and on subsequent Web pages advertising and offering this model for sale. VALUE AMERICA, INC. 657 Complaint 10. In truth and in fact, the depicted IBM Aptiva E572 Micro Tower does not include a monitor at the advertised after-rebate price of $619 or the total price of $1,019. Consumers must purchase a monitor separately. Although there is a statement on one page of the Internet ad indicating that a monitor is not included, the hyperlinks leading to the disclosure page are not labeled as referring or relating to the monitor, and the statement can be viewed only by scrolling to the bottom of the page, past a list of more than twenty technical product specifications. Furthermore, this disclosure is avoidable entirely before purchase by those consumers who view the depiction and proceed directly to the online ordering and payment process. Therefore, the representation set forth in Paragraph 9 was, and is, false or misleading.

11. In numerous instances, after having solicited telephone orders for merchandise, including but not limited to orders submitted over the Internet at its Web site, and having received Aproperly completed orders,@ as that term is defined in Section 435.2(d) of the Mail Order Rule, 16 C.F.R. ' 435.2(d), respondent has been unable to ship some or all of the ordered merchandise to the buyer within the time stated in the solicitation, or if no time was stated, within 30 days, as required by Section 435.1(a)(1) of the Mail Order Rule, 16 C.F.R. ' 435.1(a)(1).

12. In numerous instances in which respondent was not able to ship ordered merchandise as set forth in Paragraph 11, respondent solicited such orders when it had no reasonable basis to expect that it would be able to ship some or all of such merchandise within the time stated in the solicitation, or if no time was stated clearly and conspicuously in the solicitation, within thirty (30) days after receipt of a properly completed order, thereby violating 16 C.F.R. ' 435.1(a)(1).

13. In numerous instances in which respondent was not able to ship ordered merchandise as set forth in Paragraph 11, respondent VOLUME 130 Complaint failed to offer to the buyer, clearly and conspicuously and without prior demand, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, thereby violating 16 C.F.R. ' 435.1(b)(1).

14. In numerous instances in which respondent was not able to ship ordered merchandise as set forth in Paragraph 11, having failed to offer the affected buyers an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, as required by 16 C.F.R. ' 435,1(b)(1), respondent failed to deem the order cancelled and to make a prompt refund to the buyer involved, thereby violating 16 C.F.R. ' 435.1(c)(5). 15. 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, 15 U.S.C. ' 45(a). THEREFORE, the Federal Trade Commission this fifth day of September, 2000, has issued this complaint against respondent. By the Commission.

VALUE AMERICA, INC.

Complaint Exhibits Complaint Exhibits Out of Here — Hit the Road with Our Notebooks and Palm PCs. Let ‘Em Think You Paid Top Dollar The Toshiba Satellite 2100CDS looks and performs like a high-priced notebook, but actually costs a lot less. Built for speed, this Satellite boasts a 400MHz AMD K6®-2 processor with 3D Now! technology, 4.3GB hard drive, 32MB of memoty, a built-in 56K V.90 modem, and a CD-ROM drive.

Toshiba Satellite $1299, less optional Prodigy $400 Internet rebate!”

Pay as little as $899 Symantec Norton Antivirus 2000 v6.0 $34.95, less $20.00 méfr’s mail-in upgrade ee $1495 The Most Popular Palm PC The Palm V handheld organizer offers a slick, anodized aluminum frame and peerless data control. But it’s got more than just good looks. The Palm V also has scads of memory— there's room to store about 6,000 addresses, five years of appointments, to-do lists, and other great applications. Style and substance come together in this organizer, a member of the famous ‘Palm’ family from 3Com. It comes with HotSync cradle, stylus pen, and rechargeable battery.

Big, Fast, and Versatile ‘Toshiba’s Satellite notebook computer features a huge 14.1" TFT activematrix display for a great look. View movies using the DVD-ROM drive. It has a 400MHz Intel® Celeron™ processor, 64MB of memory, a 6.4GB hard drive, and an integrated 56K V.90 modem. You'll get a $400 mail-in rebate when you sign up for Internet service with Prodigy.

‘Toshiba Satellite 4090XDVD $2099, less optional Prodigy $400 Internet rebate!” Pay as ™*$1699 The Coolest Gift of the Year Apple packs power and personality into what's sure to be this holiday season’s bestseller. The iBook is a yummy, translucent dream of a notebook with a pull-out handle, a Powered G3 processor, a CD-ROM drive, a modem and built-in ethernet, and the option to go totally wireless, even when connected to the Net.

It's tough, too—designed to survive transport in a student's backpack! Order your iBook now, and we'll give you a Umax Astra 2000U USB Color Flatbed Scanner.

Apple iBook with Umax Scanner $1639 , less $40 mail-in rebate.

The Value No Interest, No Payments for 90 Days!* America Offer Details: +5199 minimum purchase required. With credit . for made on the Value America Credit Card. As of Credit Card — september 31, 1999, APR: Best Rate 22.26%; Ste. Rate 24.26% (rates . may vary). Min. Fin. Chg. $50. See Revolving Credit Agreement for details. Offer is for individuals, not businesses. Offer expires Decexber 31, 1999, s Finance Finance Changes accrue from the date of = and all accrued Finance Charges will be added to your Soo ‘Account for the entire deferred period if qualifying purchases are not paid in full by the end of the deferred payment period or if you fail to make any required payment on your Account when due. eee I a St, Agi 99 ane ees, nal arocnploued Sy ensclisnns ta & fed tea “Rebate Toahdea/ rocigyisisoer” eben ax Procigy tnearet Serres August Sain abate forex Rabat offered by Prodigy seed not Toshiba ‘ flit MERICK0t or 85) 88 Exhibit A VOLUME 130 Complaint Exhibits VALUE AMERICA, INC. 661 Complaint Exhibits OFFICIAL TRANSCRIPT PROCEEDING FEDERAL TRADE COMMISSION MATTER NO. 9923206 TITLE VALUE AMERICA, INC.

DATE RECORDED: OCTOBER 12, 1999 TRANSCRIBED: JANUARY 12, 2000 PAGES 1 THROUGH 47 VIDEOTAPE - PROTEVA COMPUTER SYSTEM FOR THE RECORD, INC.

603 POST OFFICE ROAD, SUITE 309 - WALDORF, MARYLAND 20602 (301)870-8025 Exhibit C (Transcript not reproduced here; relevant portions are quoted in complaint) VOLUME 130 Complaint Exhibits VALUE AMERICA, INC. 663 Complaint Exhibits Home Computers https/www. valueamerica.com 80/products.asp?»=0.0.0.0.0.66.0.0.0&1=1.8a=0.0,0.0.0 Click for; ' More Your | Shopping } Product Description Info; price | ante Aptiva E572 Micro Tower Computer w/ 17" Monitor, Canon Printer, UMAX Flatbed Scanner Price reflects $580.00 Mail-in Rebate v | $919.00] 494 t AMD® Athlon™ SOOMHz Processor / ust 96MB / 17GB / 56Kbps Modem / DVD-ROM / Win98 (2nd Edition) Aptiva E595 Micro Tower w/ 17"

Aptiva Monitor, Canon Printer, and UMAX Scanner Price reflects $580.00 Mail-in Rebate AMD® Athlon™ 600MHz Processor / 128MB / 20.4GB / S6K Modem / DVD-ROM / CD-RW / Win98 (2nd Edition) : ° $1,479.00 Aptiva E805 Micro Tower w/15"

Monitor, Canon Printer & UMAX Scanner Price reflects $480.00 Mail-in Rebate AMD®-K6-2 SOOMHz Processor / 64MB / 10GB / CD-ROM / 56K Modem / Win Product Status Legend (For more info, hold your cursor over any icon.) X Sold Out # Shipping Included . ~ Back To Top Search | Shopping List | Sign In | Account Info | Checkout | Help You Have Our Word | Security & Privacy | Contact Us Order Status © Copyright 1999 Vaiue America, Inc. All Rights Reserved. 20f2 01/10/2000 1:20 PM VOLUME 130 Complaint Exhibits VALUE AMERICA, INC. 665 Complaint Exhibits View P: { http://www. valueamerica. com: 80/product.a...39665.195067.66.45.0.0&b=1.887=0, 1.2.6.0 Aptiva E572 Micro Tower := ES AMD® Athlon™ SOOMHz Processor / 96MB / 17GB / 56Kbps Modem Ss * Se 7 / DVD-ROM / Win98, (2nd Edition) Your Price: $1,019.00 Price After Rebate: $619.00 Unit Shipping: $35.00 Cleo eat Sy hetenaton EEN Search | Shopping Lst | Sign In | Account Info | Checkout | Help You Have Our Word | Security & Privacy | Contact Us Order Status © Copyright 1999 Value America, Inc. All Rights Reserved. Exhibit D.3 lofi 01/10/2000 1:22 PM VOLUME 130 Complaint Exhibits VALUE AMERICA, INC. 667 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 the 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, and having duly considered the comments received, 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 Value America, Inc., is a Virginia corporation with its principal office or place of business at 2300 Commonwealth Drive, Charlottesville, Virginia 22901. VOLUME 130 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, instant savings, instant credit, credit towards future purchases, merchandise, services, or any other consideration offered to consumers who purchase products or services from respondent, which is provided at the time of purchase, or subsequent to the purchase. 2. Unless otherwise specified, "respondent" shall mean Value America, Inc., a corporation, its successors and assigns and its officers, agents, representatives, and employees. 3. "Clearly and conspicuously" shall mean as follows: A. In an advertisement communicated through an electronic medium (such as television, video, radio, and interactive media such as the Internet, online services, and software), the disclosure shall be presented simultaneously in both the audio and visual portions of the advertisement. Provided, however, that in any advertisement presented predominantly through audio or visual means, the disclosure may be made through the same means in which the ad is predominantly presented. The audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. The visual disclosure shall be of a size and shade, and shall appear on the screen for a duration, sufficient for an ordinary consumer to read and comprehend it. VALUE AMERICA, INC. 669 Decision and Order B. In a print advertisement, promotional material, or instructional manual, the disclosure shall be in a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears. The disclosure shall be in understandable language and syntax. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement or on any label. 4. In the case of advertisements disseminated by means of an interactive electronic medium, such as software, the Internet, or online services:

(i) Ain close proximity@ shall mean on the same Web page, online service page, or other electronic page, and proximate to the triggering representation, and shall not include disclosures accessed or displayed through hyperlinks, pop-ups, interstitials or other means;

(ii) a disclosure made Athrough the use of a hyperlink@ shall mean a hyperlink that is itself clear and conspicuous, is clearly identified as a hyperlink, is labeled to convey the nature and relevance of the information it leads to, is on the same Web page, online service page, or other electronic page and proximate to the triggering representation, and takes the consumer directly to the disclosure on the click-through electronic page or other display window or panel. 5. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. ' 44.

6. The term AMail or Telephone Order Merchandise Rule@ means the Federal Trade Commission=s Trade Regulation Rule VOLUME 130 Decision and Order entitled AMail or Telephone Order Merchandise,@ 16 C.F.R. Part 435, and as it may hereafter be amended. 7. AEligible purchaser@ shall mean any person, firm or other entity that ordered and paid for any product from respondent prior to the date of service of this order, whose product has not been shipped by respondent, and who has not previously received a refund and who has not previously consented to a delay in shipping; and more than ten (10) days have passed after the date stated by respondent in the solicitation for shipment or the delay notice (or if no time was stated, thirty (30) days after receipt of the properly competed order or issuance of the delay notice). I.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution of any computer, computer-related product or Internet access service, in or affecting commerce, shall not misrepresent, in any manner, expressly or by implication, the price or cost to consumers of such product or service or what is included in the price of any such product or service. II.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution of any computer, computer-related product or Internet access service, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the price or cost to consumers of any such computer, computer-related product or Internet access service when that price, cost, or any rebate is conditioned upon the purchase of any other product or service, unless it discloses clearly and conspicuously, and in close proximity to the representation, that consumers must purchase the other product or service in order to obtain the represented price or rebate and the VALUE AMERICA, INC. 671 Decision and Order cost of the other product or service, including if a service, the length of time that consumers are required to purchase the service. Provided, that for purposes of this Part, use of the term Arebate@ or Adiscount,@ without any description or characterization of either term, shall not, in and of itself, be deemed a representation about the price or cost to consumers of a product or service. III.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution of any computer, computer-related product or Internet access service, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the after-rebate cost of such product or service, unless it discloses, clearly and conspicuously, and in close proximity to the representation, the amounts of any and all rebates offered and the total price or cost to consumers of the product or service, excluding any and all rebate amounts (i.e., the beforerebate price).

Provided, however, if (1) the offer involves only one rebate and no other reductions in the total price of such product or service, and (2) respondent discloses the amount of that rebate as prescribed above, then respondent need not disclose the beforerebate price or cost of such product or service. IV.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution of any Internet access service, or any computer or computer-related product for which the price, cost or VOLUME 130 Decision and Order any rebate is conditioned upon the purchase of Internet access service, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the price or cost to consumers of such Internet access service, unless it discloses, clearly and conspicuously: A. the dollar amounts of any and all fees, charges, rebate repayments, and other costs consumers are required to pay to cancel the Internet access service;

B. (1) that consumers may have to pay long distance telephone charges, hourly surcharges, or other costs in excess of local telephone service charges to access the Internet service, if that is the case; and (2) a means for each consumer to ascertain whether he or she would incur such costs or charges to access the Internet service and the amount of any such costs or charges. Provided that respondent may comply with Part IV.B (2), above, by disclosing a means by which consumers may obtain information from the Internet service provider about available access phone numbers and the amount of any hourly surcharges or other costs to access the Internet service, and by advising consumers to contact their local telephone company to determine whether using the access telephone number closest to them will incur charges in excess of local service charges; and C. the amount of time required for purchasers to receive any rebate.

Provided that in the case of advertisements disseminated through an interactive electronic medium, such as software, the Internet or other online services, respondent may make the disclosures required by this Part through the use of a hyperlink. In addition, 1. for Part IV.A, above, any such hyperlink must be labeled: AEarly Cancellation of the Internet Service May Result in Substantial Penalties. Click Here.@; VALUE AMERICA, INC. 673 Decision and Order 2. for Part IV.B, above, any such hyperlink must be labeled: AYou May Have to Pay Significant Telephone Charges to Use the Internet Service. Click Here.@; 3. for Part IV.C , above, any such hyperlink must be labeled: ATime to Receive Rebate. Click Here.@ V.

IT IS FURTHER ORDERED that respondent Value America, Inc., directly or through any corporation, subsidiary, division or other device shall not violate any provision of the Mail or Telephone Order Merchandise Rule, including but not limited to:

A. Soliciting orders for the sale of telephone order merchandise unless it has a reasonable basis to expect that it will be able to ship some or all of such merchandise within the time stated in the solicitation or, if no time is stated clearly and conspicuously in the solicitation, within thirty (30) days after receipt of a properly completed order, as required by 16 C.F.R. ' 435.1(a)(1); B. Where respondent is unable to ship within the applicable time set forth in 16 C.F.R. ' 435.1(a)(1), failing to offer to the buyer, clearly and conspicuously and without prior demand, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, as required by 16 C.F.R. ' 435.1(b)(1); and C. Having failed to offer the option to consent to a delay or to cancel the order and receive a prompt refund, as required by 16 C.F.R. ' 435.1(b)(1), and also having failed to ship the merchandise within the applicable time, failing to VOLUME 130 Decision and Order deem the order canceled and to make a prompt refund, as required by 16 C.F.R. ' 435.1(c)(5).

Provided that, in the event the Mail or Telephone Order Merchandise Rule is hereafter amended or modified, respondent=s compliance with the Mail or Telephone Order Merchandise Rule as so amended or modified shall not be deemed a violation of this order.

VI.

IT IS FURTHER ORDERED that respondent Value America, Inc., and its successors and assigns, shall, for a period of five (5) years from the date of issue of this Order, maintain and make available to the Federal Trade Commission, within thirty days (30) days of the date of receipt of a written request, business records demonstrating compliance with the terms and provisions of Part V.

VII.

IT IS FURTHER ORDERED that respondent shall provide refunds to eligible purchasers in accordance with the provisions of this Part.

A. Within twenty (20) days from the date of service of this order, respondent shall compile a list containing: (1) the name, last known mailing address, phone number and electronic mail address of each eligible purchaser; and (2) the total price paid by each such eligible purchaser for all products ordered but not received, including all charges for applicable taxes and for shipping and handling, if any. Respondent shall retain a National Change of Address System (ANCOA@) licensee to update the mailing addresses on this list by processing the name and mailing address portion of this list through the NCOA database, provided that respondent=s obligation to retain such an VALUE AMERICA, INC. 675 Decision and Order NCOA licensee shall expire at such time as respondent completes its compilation of the above-referenced list. B. Within thirty (30) days after the date of service of this order, respondent shall cancel the order of each eligible purchaser contained on the list required by Part VII.A, and shall send to each such person, via first-class mail, a Refund Notice in the form set forth in Appendix A, accompanied by a check for the amount stated on the list. The phrase: ANOTICE: REFUND CHECK ENCLOSED@ shall appear on the front of the envelope transmitting the Refund Notice in typeface equal or larger in size to 14 point. The words AForward and Address Correction Requested@ shall appear in the upper, left-hand corner one-quarter of an inch beneath the return address. Provided that, in lieu of mailing a refund check to any eligible purchaser, respondent may credit each such eligible purchaser=s credit card or debit card account for the amount stated on the list required by Part VII.A, and shall send the Refund Notice via electronic mail. The subject line of the electronic mail shall state ARefund Credit.@ The Refund Notice shall include the amount of the refund credit and the date such action was taken. The Refund Notice shall not include any information other than that contained in Appendix A, nor shall any other material be transmitted with the notice, except for a refund check, if applicable.

C. Within sixty (60) days after the date of service of this order, respondent shall furnish to Federal Trade Commission staff:

1. a copy of the list required by Part VII.A, VOLUME 130 Decision and Order 2. for each eligible purchaser, (a) the amount, check number and mailing date of the refund check mailed to such purchaser, or (b) the amount credited to such person=s credit card or debit card account, and the date on which it was credited.

VALUE AMERICA, INC. 677 Decision and Order VIII.

IT IS FURTHER ORDERED that respondent Value America, 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 advertisements and promotional materials containing the representation;

Provided however, that in the case of advertisements and promotional materials disseminated by means of an interactive electronic medium, respondent and its successors and assigns may comply with this provision by maintaining and making available all advertisements and promotional materials for computer or computer-related products or services for which the price, cost or any rebate is conditioned upon the purchase of Internet access service; but, multiple versions of advertisements and promotional materials need not be maintained or submitted, if they differ only in terms of the prices of the products or services being offered;

B. All materials that were relied upon in complying with this order; 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. IX.

VOLUME 130 Decision and Order IT IS FURTHER ORDERED that respondent Value America, Inc., and its successors and assigns, shall deliver a copy of this order and the Mail or Telephone Order Merchandise Rule 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. X.

IT IS FURTHER ORDERED that respondent Value America, 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. XI.

IT IS FURTHER ORDERED that respondent Value America, 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 VALUE AMERICA, INC. 679 Decision and Order a report, in writing, setting forth in detail the manner and form in which they have complied with this order. XII.

This order will terminate on September 5, 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 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.

VOLUME 130 Decision and Order APPENDIX A REFUND NOTICE [To be printed on Value America, Inc. letterhead] [Date] [Name and address of recipient] Dear [recipient=s name]:

Our records show that you have an outstanding order of merchandise from Value America. Pursuant to the terms of an agreement with the Federal Trade Commission concerning our merchandise delivery practices, we have agreed to provide full refunds to any customer whose shipment has not been made within ten days of the date we promised. Because your merchandise has not been shipped, you are entitled to a refund. We have [enclosed a refund check] [credited your charge or debit card on [date]] for [amount of redress]. This amount includes the purchase price(s) for the merchandise you ordered, plus any taxes and shipping and handling charges. If you still wish to purchase the merchandise, you may reorder it from Value America.

Please call toll-free 1-800-XXX-XXXX or see our website at www.va.com if you have any questions.

Sincerely, [Name and title of Value America, Inc. official] VALUE AMERICA, INC. 681 Analysis to Aid Public Comment 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 Value America, Inc. (Arespondent@).

The proposed consent order has been placed on the public record for thirty (30) days for receipt 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 decide whether it should withdraw from the agreement or make final the agreement=s proposed order.

Respondent advertises, sells, and distributes personal electronic devices, computer software, personal computers, and other products through its Internet Web site (reached by <www.va.com> or <www.valueamerica.com>), and through tollfree telephone numbers. This matter concerns allegedly false and deceptive advertising claims regarding the sale of various computer systems based upon a $400 rebate that required consumers to enter into a three year contract for Internet service. This matter also concerns alleged violations of the Mail or Telephone Order Merchandise Rule.

The Commission=s proposed complaint alleges that respondent falsely claimed that the total cost of a Toshiba Satellite 2100CDS laptop was $899; that the total cost of a Hewlett- Packard Pavilion 4535 Multimedia PC was $449; that the total cost of a Proteva computer system was $1299; that the total cost of an IBM Aptiva E572 Micro Tower computer was $619; and that an emachines etower 366C computer was Afree.@ In fact, in order to obtain these computers at the advertised prices, consumers were required to subscribe to Compuserve 2000 Premier Internet Service, Prodigy Internet, or Microsoft MSN Plus Internet Access for three years at an additional cost of $19.95 VOLUME 130 Analysis to Aid Public Comment to $21.95 per month or, in the case of Compuserve Internet Service, an optional full pre-payment of $790.20. The complaint also alleges that when respondent represented that the total cost of the computers was, respectively, $899, $449, $1299, $619, or Afree,@ respondent failed to disclose or failed to disclose adequately: (a) that consumers were required to subscribe to Compuserve 2000 Premier Internet Service, Prodigy Internet, or Microsoft MSN Plus Internet Access for three years at an additional cost of $19.95 to $21.95 per month or, in the case of Compuserve Internet Service, an optional full pre-payment of $790.20; (b) the amounts of the rebates, and the total price of the computer systems before rebates with respect to the Hewlett- Packard Pavilion 4535 Multimedia PC, and the emachines etower 366C computer; (c) that consumers who cancel the Internet service within three years must repay all or portion of the $400 rebate and, in the case of the Compuserve and Prodigy rebate offers, also pay a cancellation fee of up to $50; (d) that, in the case of the Prodigy rebate, it can take a total of 12 to 17 weeks to receive the $400 rebate; and (e) that Compuserve, Prodigy, and Microsoft do not provide local access telephone numbers for their respective Internet services in all areas, and therefore, that many consumers must either pay long distance telephone charges or, in the case of Compuserve 2000 or Prodigy Internet, $6.00 per hour to access their Internet service. The complaint alleges that the failure to disclose these material facts is a deceptive practice. In addition, the complaint alleges that respondent falsely claimed that the IBM Aptiva E572 Micro Tower computer included a monitor at no additional cost. In fact, consumers must purchase a monitor separately. The complaint also alleges that in numerous instances, respondent failed to ship some or all of the ordered merchandise to the buyer within the time stated in the solicitation, or if no time was stated, within 30 days after receipt of a properly completed order, as required by the Mail Order Rule. The complaint also alleges that when respondent was not able to ship some or all of the ordered merchandise to the buyer, respondent failed to offer to the buyer an option either to consent to a delay in shipping or to cancel the order and receive a prompt VALUE AMERICA, INC. 683 Analysis to Aid Public Comment refund, as required by the Mail Order Rule. The complaint also alleges that when respondent was not able to ship ordered merchandise to the buyer, and having failed to offer the affected buyer an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, as required by the rule, respondent failed to deem the order canceled and to make a prompt refund to the buyer, as required by the Mail Order Rule. 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 making any misrepresentations as to the price or cost to consumers of any computer, computer-related product, or Internet access service or what is included in the price of any such product or service. Part II of the proposed order prohibits respondent from making any representation about the price or cost to consumers of any computer, computer-related product, or Internet access service, when that price or cost, or any rebate, is conditioned upon the purchase of another product or service, unless respondent discloses clearly and conspicuously, and in close proximity to the price, cost or rebate representation that consumers must purchase the additional product or service in order to obtain the advertised price or rebate. In addition, Part II requires respondent to disclose the cost of the other product or service that must be purchased, along with the length of time consumers are required to purchase such other service. Part II also contains a proviso that permits respondent to use the terms Arebate@ or Adiscount@ without making the additional cost disclosures, as long as respondent does not describe or characterize the rebate or discount in any way. Part III of the proposed order prohibits the respondent from making a claim about the after-rebate price or cost of any computer, computer-related product, or Internet access service, unless it discloses, clearly and conspicuously, and in close VOLUME 130 Analysis to Aid Public Comment proximity to the after-rebate price or cost representation, the amounts of any rebates offered, and the total cost of the computer product or service, excluding any rebate amounts (i.e., the beforerebate price). Part III also contains a proviso that states that if there is only one rebate involved in the offer, and no other reductions in the total price of the product or service, respondent need only disclose the amount of that one rebate, and need not also disclose the before-rebate price.

In connection with the promotion or sale of any Internet access service, or any computer or computer-related product whose price is conditioned upon the purchase of Internet access service, Part IV of the proposed order prohibits respondent from making any representation about the price or cost to consumers of any Internet access service, unless it discloses certain material facts. If consumers have to pay additional fees, charges, rebate repayments, or other costs to cancel the Internet access service, the amounts of such costs must be disclosed. If consumers may have to pay long distance telephone charges, hourly surcharges, or other costs in excess of local telephone fees to access the Internet service, this fact must be disclosed, along with a means for consumers to ascertain whether or not they would have to incur such costs and the amounts of any such costs. In addition, respondent must disclose the amount of time required for purchasers to receive any rebate. These disclosures must be clear and conspicuous.

Part IV of the proposed order also contains a proviso, that together with the definition of Athrough the use of a hyperlink,@ provides a way in which the disclosures required by Part IV can be made on the Internet with hyperlinks. These disclosures may be made through the use of hyperlinks, as long as each hyperlink label contains sufficient information about the nature and importance of the required disclosure, is itself clear and conspicuous, is on the same Web page and proximate to the Internet service price or cost representation, and leads directly to the full disclosure. According to the proviso, if a hyperlink is used to disclose information about Internet cancellation terms, it VALUE AMERICA, INC. 685 Analysis to Aid Public Comment must be labeled as follows: AEarly Cancellation of the Internet Service May Result in Substantial Penalties. Click Here.@ Similarly, if a hyperlink is used to disclose information about Internet access costs, it must be labeled: AYou May Have to Pay Significant Telephone Charges to Use the Internet Service. Click Here.@ Finally, if a hyperlink is used to disclose information about the time it takes to receive a rebate, it must be labeled: ATime to Receive Rebate. Click Here.@ Part V of the proposed order prohibits respondent from violating any provision of the Mail or Telephone Order Merchandise Rule, including the soliciting of orders for merchandise, either by mail or phone, without a reasonable basis to expect to be able to ship some or all of the merchandise within the time stated in the solicitation, or if no time is stated, within 30 days of receiving a properly completed order. Respondent must offer the buyer the option of either consenting to a delay in shipping or canceling the order and receiving a prompt refund when respondent is unable to ship within the applicable time period. Respondent must also deem the order canceled and make a prompt refund in instances where respondent failed to ship on time and failed to offer the buyer the option of either consenting to the delay or canceling the order and receiving a prompt refund. Part VI of the proposed order requires respondent to maintain and make available to the Commission for five years, business records demonstrating compliance with the terms and conditions of Part V. Part VII of the proposed order requires respondent to compile a list of purchasers who ordered products from respondent and paid for them prior to the service date of the order, and who had not previously received a refund or consented to a delay, but did not receive ordered products more than ten days after the date respondent stated they would be shipped, or the date of the delay notice. Respondent must then cancel each such order and send a refund to each purchaser on the list for the total amount paid, including all taxes and shipping and handling VOLUME 130 Analysis to Aid Public Comment charges, if any. Respondent must furnish the list of purchasers to the Commission, indicating for each the amount and date the refund was paid.

Part VIII of the proposed order contains a document retention requirement, the purpose of which is to ensure compliance with the proposed order. It requires that respondent maintain copies of ads and promotional material that contain representations covered by the proposed order, and materials that were relied upon by respondent in complying with the proposed order. Part IX of the proposed order requires respondent to distribute copies of the order to various officers, agents and employees of respondent.

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

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

Part XII of the proposed order is a Asunset@ provision, dictating that the order will terminate twenty years after 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.

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.

BUY.COM, INC. 687 Complaint