Netpliance Settles Deceptive Ad Charges

Onetime Internet device manufacturer Netpliance agreed to settle charges by federal authorities that it ran misleading advertisements promoting its i-opener Web access product.

This week, the Federal Trade Commission voted to accept a settlement from the Austin, Texas-based firm, in which Netpliance agreed to pay a fine, but admitted no wrongdoing. The settlement, which stipulates that Netpliance pay a $100,000 civil penalty, stemmed from regulators’ concerns about the way the company’s advertising touted the i-opener as a less-expensive alternative to PC-based Internet access.

Specifically, the FTC objected to advertising copy that read: “Give Them the Internet! Imagine family or friends unwrapping the i-opener … Complete access to the World Wide Web … as low as $199!” and “With no computer hassles, software to load or boot-up delays, the Internet can now become a very convenient part of your life for as little as $199.”

The government agency maintained that the ads were deceptive because Netpliance failed to adequately disclose all of the extra costs associated with using the i-opener, such as monthly Internet service fees and long-distance telephone charges.

Advertisements for the i-opener also claimed that it provided access to all of the Internet’s entertainment and information and that it was equivalent to a PC with respect to its ability to access Internet content — allegations that Netpliance now admits were misleading.

For example, i-opener ads included statements such as “Complete access to the World Wide Web” and “Even the most expensive home computer system can’t bring you i-opener’s simplicity, compact size, and convenient features.” But according to the FTC, i-opener users are unable to access all of the Web, running into problems especially with rich media or downloaded content.

In addition, the FTC said the firm failed to disclose to consumers that they must use Netpliance’s Internet service to access the Internet — that is, consumers could not use the i-opener with another ISP.

Additionally, the FTC charged that Netpliance’s sales and billing practices violated federal laws. For one, Netpliance began charging some users when they received their i-openers, rather than when they actually started using the service — contrary to printed promises. According to the FTC, the company also back-billed these same consumers for months of Internet service by charging their credit cards without consent.

As part of the settlement, the company agreed to refund those consumers for the amounts charged to their accounts.

While it’s likely that the courts will approve the Netpliance proposal (or some form thereof), the settlement also serves as a bizarre reminder of the government’s speed in overseeing Internet-age business.

That is, Netpliance actually is no longer making or selling i-openers, having abandoned the business in November. At the time, the company announced it was getting into broadband content delivery, and since has handed over its i-opener subscriber base to Atlanta-based ISP Earthlink.

Nevertheless, even though the government complaint dealt specifically with the firm’s i-opener business, the FTC is taking no chances: as part of the settlement, Netpliance must “clearly and conspicuously” disclose terms and qualifications associated with any current or future Internet or online access product or service that the company runs.

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