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| BUY.COM Reaches Settlement with New York Attorney General Over False Advertising "Internet Superstore" BUY.COM has entered into an Assurance of Discontinuance with New York State Attorney General Eliot Spitzer, which requires the Company's future advertisements to clearly and conspicuously disclose any and all charges for computer or computer related products or services. Founded in June 1997 and based in Aliso Viejo, California, BUY.COM is a leading Internet Superstore that offers a broad range of products including computer hardware and peripherals, software, consumer electronics, books, videos, DVDs, games, music, golf, clearance equipment, and travel booking services. The Attorney General's inquiry focused on BUY.COM's advertisements that offered a computer for $269. Specifically, the Attorney General charged that the advertisements constituted false advertising in violation of Article 22-A, §§ 349 and 350 of the General Business Law, and were repeatedly fraudulent in violation of Article 5, § 63(12) of the Executive Law. The advertisements ran in August and September 1999, and appeared in print, on banners displayed on other Web sites, and on the BUY.COM Web site. The challenged print and banner advertisements offered a computer for $269 "after rebate" or "after mail-in rebate." As stated in the Assurance of Discontinuance, these advertisements failed to clearly and conspicuously disclose: • That in order to purchase the computer at the advertised price, it was necessary to enter into a three-year, $20 per month contract with an Internet service provider;The BUY.COM Web site advertisements later added the text "requires three year subscription to CompuServe internet service" or "$21.95 per month," but still failed to disclose possible hidden telephone charges, a cancellation fee and forfeiture of the rebate. Although BUY.COM maintained that the print advertisements referred customers to its Web site and that the Web site sufficiently expressed the cost information, it has agreed that all future advertisements distributed in New York for any computer or computer related product or service will disclose the existence and cost of a service agreement requirement, the fact that consumers will or may incur additional charges associated with such agreements, including telephone charges, or the existence and the amount of early termination penalties or forfeitures. In addition, BUY.COM has agreed to pay $65,000 to the State of New York. © 2000 Davis & Gilbert LLP |
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