Comp-usa Settlement Requires Disclosure For Internet Sales

State Attorney General Spitzer today announced a settlement with CompUSA that requires the company to clearly disclose any and all costs for products and services sold via the Internet . The agreement stems from the advertising and sale of computer products by the defunct Cozone.com, an online computer retailer that was owned by CompUSA.

In the agreement, CompUSA has agreed to disclose fully and conspicuously in its Internet advertisements the cost of any goods or service that the company sells. CompUsa is also obligated to make clear disclosure of any conditions for rebate offers. In addition, the company has agreed to pay $50,000 to cover the costs of the investigation.

The Attorney General's investigation found that Cozone.com sold a variety of computer products on its web site and promoted them in connection with advertised rebates of up to $400 per purchase. What the ads failed to disclose up front, however, was that in order to purchase a computer for the price advertised, customers were required to sign up for three years of Internet service, at a cost of more than $20 per month. The ads also did not clearly disclose to consumers that early cancellation of the Internet service would result in substantial cancellation and repayment fees, depending upon when the customers terminated their service.

"My office aggressively monitors advertising both online and offline to help consumers make decisions based on accurate and complete information," said Attorney General Spitzer. "We are committed to protecting New York consumers by requiring companies to comply fully with New York's business laws. My office will continue to enforce ensure companies' obligations to make full and fair disclosure to customers, regardless of whether products and services are offered for sale via the Internet or through traditional media."

The agreement between the Attorney General's Office and CompUSA is one of the first instances in which a company has agreed to modify disclosure of offer-related conditions in its Internet advertising. The Attorney General's investigation found Cozone.com's disclosures insufficient because consumers were required to "click through" multiple web page links to locate the specific conditions of the rebate.

The agreement also underscores a subtle but important debate within the Internet commerce community regarding what standard should be used for online disclosure of material conditions and disclaimers. Some industry advocates, for instance, have promoted a standard that would deem certain online disclosures to be sufficient so long as they are simply "accessible or reviewable" by the consumer. Attorney General Spitzer found that such a standard is often insufficient because it may permit companies to place important disclosures or disclaimers behind multiple links, thereby making it difficult for online consumers to locate them. Spitzer pointed out that this agreement sets a more stringent standard, requiring that important disclosures appear adjacent to offers, or, in some cases, through a single, conspicuous, web site link.

This case was handled by Assistant Attorney General Kenneth Dreifach, who is Chief of Attorney General Spitzer's Internet Bureau.


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