Microsoft and Hewlett-Packard have settled a lawsuit with the US Federal Trade Commission (FTC) regarding a claim that the companies falsely advertised wireless capabilities of the Pocket PC handheld computer in a number of national print advertisements in the US.
The advertisements in question, paid for by HP and Microsoft, ran for several months beginning April 2000 in leading US newspapers including The New York Times and The Wall Street Journal.
The FTC argued that the advertisements misled consumers into thinking HP's handheld could access the Internet and e-mail "anytime" with no additional components. The PDAs (personal digital assistants) actually require a separate landline modem or wireless modem to access the Internet, which can cost between $US130 and $350.
The advertisements did contain a fine-print disclosure stating that a modem was required and sold separately, but the FTC argued that the disclosure, written in four-point and six-point type, was "unclear, inconspicuous and inadequate".
"The legal standard for disclosures is clear and conspicuous," Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, said in a statement. "Consumers shouldn't have to use a magnifying glass to read them."
Microsoft and HP settled the dispute without incurring monetary damages. The companies agreed to a consent order that prevents them from exaggerating the capabilities of products that access the Internet or e-mail, and to disclose clearly in advertisements the need for any additional products, such as a wireless modem or Internet access account.
"We're pleased to resolve this matter with the FTC," said Jim Desler, a spokesperson for Microsoft. "In terms of working through this with the FTC, we agree there is a need to educate consumers about the capabilities of the Pocket PC."
In addition to the FTC's consent order, Microsoft will voluntarily run a quarter-page ad in a number of major newspapers, which includes an "essay" regarding helpful hints for consumers when shopping for a PDA.
Meanwhile, HP has posted a link to a consumer information brochure on its Web site called "Helpful Facts About Personal Digital Assistants" and will refer to the link in subsequent advertisements.
"Consumers are faced with so many choices when they shop for handheld computers, and they often rely on advertising claims when they decide what PDA to buy," FTC's Bernstein said in a statement. "It is critical these ads stick to the facts and accurately reflect a PDA's capabilities."