Orchid Technology; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 942 3029]

Orchid Technology; Proposed Consent Agreement With Analysis To

Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

prohibit, among other things, a California-based company from falsely

representing that any of its computer peripheral products had been

rated, reviewed or endorsed by any person or publication, and from

misrepresenting the results of any test, study or evaluation in

connection with marketing its computer peripheral equipment. The

consent agreement also would require the respondent to possess

competent and reliable evidence to substantiate performance claims.

DATES: Comments must be received on or before April 14, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th Street and Pennsylvania Avenue NW., Washington, D.C.

20580.

FOR FURTHER INFORMATION CONTACT:

Matthew Gold or Jeffrey Klurfeld, San Francisco Regional Office,

Federal Trade Commission, 901 Market St., Suite 570, San Francisco, CA

94103. (415) 744-7920.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. Public comment is invited. Such

comment or views will be considered by the Commission and will be

available for inspection and copying at its principal office in

accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

The Federal Trade Commission having initiated an investigation of

certain acts and practices of Orchid Technology, a corporation,

(``proposed respondent''), and it now appearing that the proposed

respondent is willing to enter into an agreement containing an order to

cease and desist from the use of the acts and practices being

investigated,

It is hereby agreed by and between Orchid Technology, a

corporation, by its duly authorized officer, and its attorney, and

counsel for the Federal Trade Commission that:

1. Proposed respondent Orchid Technology is a corporation

organized, existing and doing business under and by virtue of the laws

of the State of California, with its office and principal place of

business located at 45365 Northport Loop West, Fremont, California

94538.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed respondent waives:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law; and

c. All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement.

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission, it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the proposed respondent, in which event

it will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

5. This agreement is for settlement purposes only and does not

constitute an admission by proposed respondent of facts, other than

jurisdictional facts, or of violations of law as alleged in the draft

of complaint.

6. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Section 2.34 of the

Commission's Rules, the Commission may, without further notice to

proposed respondent, (a) issue its complaint corresponding in form and

substance with the draft of complaint and its decision containing the

following order to cease and desist in disposition of the proceeding

and (b) make information public in respect thereto. When so entered,

the order to cease and desist shall have the same force and effect and

may be altered, modified or set aside in the same manner and within the

same time provided by statute for other orders. The order shall become

final upon service. Delivery by the U.S. Postal Service of the

complaint and decision containing the agreed-to order to proposed

respondent's address as stated in this agreement shall constitute

service. The proposed respondent [[Page 8238]] waives any right it may

have to any other manner of service. The complaint may be used in

construing the terms of the order, and no agreement, understanding,

representation, or interpretation not contained in the order or the

agreement may be used to vary or contradict the terms of the order.

7. The proposed respondent has read the proposed complaint and

order contemplated hereby. The proposed respondent understands that

once the order has been issued, it will be required to file one or more

compliance reports showing that it has fully complied with the order.

The proposed respondent further understands that it may be liable for

civil penalties in the amount provided by law for each violation of the

order after it becomes final.

Order

Definition

For purposes of this Order, the term ``computer peripheral

equipment'' shall mean graphics cards, sound cards, adaptor cards,

memory expansion cards, or other hardware products that enhance the

capability and performance of personal computers.

I

It is ordered that respondent Orchid Technology, a corporation, its

successors and assigns, and its officers, agents, representatives and

employees, directly or through any corporation, subsidiary, division or

other device, in connection with the manufacturing, labelling,

advertising, promotion, offering for sale, sale or distribution of the

Celsius Windows Accelerator, or other computer peripheral equipment, in

or affecting commerce, as ``commerce'' is defined in the Federal Trade

Commission Act, do forthwith cease and desist from representing, in any

manner, directly or by implication, that such product has been rated,

endorsed, recommended, reviewed or evaluated by any person or

publication, unless such is the case.

II

It is further ordered that respondent Orchid Technology, a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labelling, advertising promotion, offering for sale,

sale, or distribution of the Celsius Windows Accelerator, or other

computer peripheral equipment, in or affecting commerce, as

``commerce'' is defined in the Federal Trade Commission Act, do

forthwith cease and desist from misrepresenting, in any manner,

directly or by implication, the existence, contents, validity, results,

conclusions, interpretations or purpose of any test or study.

III

It is further ordered that respondent Orchid Technology, a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labelling, advertising, promotion, offering for sale,

sale, or distribution of the Celsius Windows Accelerator, or other

computer peripheral equipment, in or affecting commerce, as

``commerce'' is defined in the Federal Trade Commission Act, do

forthwith cease and desist from making any representation, in any

manner, directly or by implication, about the performance or attributes

of any such product, unless such representation is true and, at the

time of making such representation, respondents possess and rely upon

competent and reliable evidence, which when appropriate must be

competent and reliable scientific evidence, that substantiates such

representation. For purposes of this provision, ``competent and

reliable scientific evidence'' shall mean tests, analyses, research,

studies or other evidence based on the expertise of professionals in

the relevant area, that has been conducted and evaluated in an

objective manner by persons qualified to do so, using procedures

generally accepted in the profession to yield accurate and reliable

results.

IV

It is further ordered that for five (5) years after the last date

of dissemination of any representation covered by this Order,

respondent, or its successors and assigns, shall maintain and upon

request make available to the Federal Trade Commission for inspection

and copying:

A. All materials that were relied upon in disseminating such

representation; and

B. All tests, reports, studies, surveys, demonstrations or other

evidence in its possession or control that contradict, qualify, or call

into question such representation, or the basis relied upon for such

representation, including complaints from consumers.

V

It is further ordered that respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in the

respondent such as dissolution, assignment, or sale resulting in the

emergence of a successor corporation, the creation or dissolution of

subsidiaries, or any other change in the corporation which may affect

compliance obligations arising under this Order.

VI

It is further ordered that respondent shall, within ten (10) days

from the date of service of this Order upon it, distribute a copy of

this Order to each of its officers, agents, licensees, representatives,

independent contractors, and employees involved in the preparation and

placement of advertisements or promotional materials, or who is in

communication with customers or prospective customers, or who has any

responsibilities with respect to the subject matter of this Order.

VII

It is further ordered that respondent shall, within sixty (60) days

from the date of service of this Order upon them, and at such other

times as the Commission may require, file with the Commission a report,

in writing, setting forth in detail the manner and form in which it has

complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement, subject to

final approval, to a proposed consent order from respondent Orchid

Technology, a California corporation.

The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement and take other appropriate action or make

final the agreement's proposed order.

This matter concerns the advertising of the ``Celsius/VLB Windows

Accelerator,'' a circuit board that both increases the speed at which a

personal computer displays complex graphical images, and improves the

quality of the graphical images. The Commission's complaint charges

that respondent's advertising represented that excerpts from computer

periodical reviews referred to the Celsius, when, in fact, they

referred to products manufactured by Orchid's

competitors. [[Page 8239]]

The proposed consent order contains provisions designed to remedy

the violations charged and to prevent the respondent from engaging in

similar acts and practices in the future.

Part I of the proposed order prohibits respondent from falsely

representing that any computer peripheral equipment, as defined in the

order, has been rated, endorsed, recommended, reviewed or evaluated by

any person or publication.

As fencing-in relief, Part II of the proposed order prohibits

respondent, when advertising computer peripheral equipment, from

misrepresenting the existence, contents, validity, results,

conclusions, interpretations or purpose of any test or study. Part III

provides that, if respondent makes any representation about the

performance or attributes of any computer peripheral equipment, the

representation must be true and respondent must possess competent and

reliable evidence, which when appropriate must be competent and

reliable scientific evidence, to substantiate the representation.

The proposed order also requires respondent to maintain materials

relied upon to substantiate claims covered by the order; to provide a

copy of the consent agreement to its employees involved in the

preparation and placement of respondent's advertisements, or in

communication with respondent's customers or prospective customers; to

notify the Commission of any change in the corporate structure that

might affect compliance with the order; and to file one or more reports

detailing compliance with the order.

The purpose of this analysis is to facilitate public comment on the

proposed order. It is not intended to constitute an official

interpretation of the agreement and proposed order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 95-3542 Filed 2-10-95; 8:45 am]

BILLING CODE 6750-01-M