Dell Computer Corporation Agrees to Pay $800,000 Civil Penalty to Settle FTC Charges it Violated Mail Order Rule

Dell Computer Corporation, the country's largest direct seller of personal computers, has agreed to settle Federal Trade Commission charges that it violated the FTC's Mail Order Rule when it advertised and sold a "Dell Dimension" computer system bundled with a package of third-party software that was not ready to be shipped. The company, which is based in Round Rock, Texas, has agreed to pay an $800,000 civil penalty -- the largest penalty ever paid by a single defendant for a violation of the Rule.

"Hundreds of consumers order products and services through the mail and over the phone," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "The FTC enforces the Mail and Telephone Order Sales Rule vigorously to ensure that consumers have confidence in these transactions."

In late 1995, according to the FTC’s complaint, the "Dell Software Suite" was advertised as being an included component of the Dell Dimension systems. The FTC alleged that consumers who called and purchased a Dell Dimension system were not informed that the "Dell Software Suite" would not be included when their product was shipped. Instead, the company included a coupon for the software "when available." The FTC said, that in numerous instances, consumers who purchased a Dell Dimension system did not receive the software until well after their computers had arrived. The FTC also charged that Dell did not offer consumers the option of either consenting to the delay or canceling their orders and receiving a prompt refund, as required by the Rule.

The FTC's complaint detailing the allegations states that Dell violated the Mail Order Rule by:

• soliciting orders for merchandise, either by mail or phone, when it had no 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 was stated, within 30 days of receiving a properly completed order;

• failing to offer the buyer the option of either consenting to a delay in shipping or to cancel the order and receive a prompt refund; and

• failing to offer the buyer a prepaid means to exercise those options.

In addition, the complaint charged that Dell, having failed to offer customers the option to consent to a delay or to cancel the order and receive a prompt refund, and having failed to ship the merchandise within the applicable time, violated the rule by failing to deem the order canceled and issue a prompt refund.

The proposed settlement also contains a number of recordkeeping and reporting requirements designed to assist the FTC in monitoring compliance with its terms.

The complaint and proposed settlement were filed today by the Department of Justice (DOJ) on behalf of the FTC, in the U.S. District Court for the Western District of Texas, in Austin. The Commission vote to refer the complaint and proposed settlement to DOJ for filing was 4-0, with Commissioner Mary L. Azcuenaga not participating. The FTC's regional office in San Francisco conducted the investigation in this matter.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

Copies of the complaint and proposed consent decree are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(Civil Action No.: A-98-CA-0210)
(FTC File No. 962 3105)