Syncronys Softcorp; Rainer Poertner; Daniel G. Taylor; Wendell Brown; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 962-3002]

Syncronys Softcorp; Rainer Poertner; Daniel G. Taylor; Wendell

Brown; 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would prohibit, among other things, the Culver

City, California-based computer software manufacturer and three of its

officers from making performance claims about their SoftRAM and

SoftRAM\95\ software programs or about any substantially similar

product unless the claims were true and substantiated. The respondents

are also prohibited from making any claims that a product intended to

improve computer performance had been licensed, endorsed, authorized,

or certified by any person or organization unless those claims were

true. The consent agreement settles allegations that the respondents

misrepresented and/or failed to substantiate the performance of these

two products, which were advertised and promoted for their purported

ability to improve the performance of personal computers using

Microsoft, Inc.'s Windows and Windows 95 programs.

DATES: Comments must be received on or before September 23, 1996.

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

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Michael Bloom, Federal Trade Commission, New York Regional Office, 150

William Street, Suite 1300, New York, NY 10038. (212) 264-1201.

Robin Eichen, Federal Trade Commission, New York Regional Office, 150

William Street, Suite 1300, New York, NY 10038. (212) 264-1250.

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

comments 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

The Federal Trade Commission has conducted an investigation of

certain acts and practices of Syncronys Softcorp, a corporation, Rainer

Poertner, Daniel G. Taylor, and Wendell Brown, individually and as

officers of the corporation (``proposed respondents''). Proposed

respondents, having been represented by counsel, are willing to enter

into an agreement containing a consent order resolving the allegations

contained in the draft complaint. Therefore,

It is hereby agreed by and between Syncronys Softcorp, by its duly

authorized officers, and Rainer Poertner, Daniel G. Taylor, and Wendell

Brown, individually and as officers of the corporation, and counsel for

the Federal Trade Commission that:

1.a. Proposed respondent Syncronys Softcorp is a Nevada corporation

with its principal office or place of business at 3958 Ince Boulevard,

Culver City, California 90232.

1.b. Proposed respondent Rainer Poertner is an officer of the

corporate respondent. Individually or in concert with others, he

formulates, directs, or controls the policies, acts, or practices of

the corporation, including the acts or practices alleged in the draft

complaint. His principal office or place of business is the same as

that of Syncronys Softcorp.

1.c. Proposed respondent Daniel G. Taylor is an officer of the

corporate respondent. Individually or in concert with others, he

formulates, directs, or controls the policies, acts, or practices of

the corporation, including the acts or practices alleged in the draft

complaint. His principal office or place of business is the same as

that of Syncronys Softcorp.

[[Page 38748]]

1.d. Proposed respondent Wendell Brown is an officer of the

corporate respondent. Individually or in concert with others, he

formulates, directs, or controls the policies, acts, or practices of

the corporation, including the acts or practices alleged in the draft

complaint. His principal office or place of business is the same as

that of Syncronys Softcorp.

2. Proposed respondents admit all the jurisdictional facts set

forth in the draft complaint.

3. Proposed respondents waive:

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

complaint, will be placed on the public record for a period of sixty

(60) days and information about it publicly released. The Commission

thereafter may either withdraw its acceptance of this agreement and so

notify proposed respondents, 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 respondents that the law has been

violated as alleged in the draft complaint, or that the facts as

alleged in the draft complaint, other than the jurisdictional facts,

are true.

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 respondents, (1) issue its complaint corresponding in form and

substance with the draft complaint and its decision containing the

following order in disposition of the proceeding, and (2) make

information about it public. When so entered, the order 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 of the

complaint and the decision and order to proposed respondents by any

means specified in Section 4.4 of the Commission's Rules shall

constitute service. Proposed respondents waive any right they may have

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

the terms of the order. No agreement, understanding, representation, or

interpretation not contained in the order or in the agreement may be

used to vary or contradict the terms of the order.

7. Proposed respondents have read the draft complaint and consent

order. They understand that they may be liable for civil penalties in

the amount provided by law and other appropriate relief for each

violation of the order after it becomes final.

Order

Definitions

For purposes of this order, the following definitions shall apply:

1. ``Random access memory (RAM)'' is the primary working memory in

a computer. The instructions provided by a computer program and the

data being worked on are stored in RAM while the program is running.

Additional RAM, measured in megabytes (``MBs''), can be purchased in

the form of microchips that are physically inserted into a computer.

2. ``Compression technology'' is a process which allows more

information to reside in RAM. Compression technology eliminates

redundant data by utilizing various recipes for analyzing and

transforming it.

3. ``Windows 95'' refers to the Windows 95 software operating

system manufactured by Microsoft, Inc.

4. ``Substantially similar product'' shall mean any software

product that uses or purports to use compression technology and that is

intended or purports to increase the amount of RAM in a computer or to

accomplish any effect similar to one that would be caused by increasing

the amount of RAM in a computer. These effects include, but are not

limited to, increase in speed of computer operations, increase in size

or number of applications that can be run simultaneously, and expansion

of systems resources or reduction or elimination of ``insufficient

memory'' errors or messages.

5. ``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.

6. Unless otherwise specified, ``respondents'' shall mean Syncronys

Softcorp, a corporation, its successors and assigns and its officers;

Rainer Poertner, Daniel G. Taylor, and Wendell Brown, individually and

as officers of the corporation and each of the above's agents,

representatives, and employees.

7. ``In or affecting commerce'' shall mean as defined in Section 4

of the Federal Trade Commission Act, 15 U.S.C. 44.

I

It is ordered that respondents, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of SoftRAM95 or any substantially similar

product in or affecting commerce, shall not misrepresent, in any

manner, expressly or by implication, that:

A. Such product increases RAM in a computer using Windows 95 to a

greater extent than other software products;

B. Such product uses compression technology to increase the RAM

available to a computer using Windows 95 or achieves RAM compression

ratios of up to five times or higher in a computer using Windows 95;

C. Such product produces the effect of increasing the RAM available

to a computer using Windows 95;

D. Use of such product in a computer will speed up Windows 95;

E. Use of such product will permit a Windows 95 user to run larger

applications on a computer or to open more applications simultaneously;

F. Use of such product with Windows 95 will result in expanded

systems resources on a computer and will substantially reduce or

eliminate the occurrence of computer screen messages that indicate that

the computer has insufficient memory to run the user's application(s);

or

G. Microsoft, Inc. has licensed, endorsed, or otherwise approved

such product for use with Windows 95.

II

It is further ordered that respondents, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of SoftRAM, SoftRAM95, or any substantially

similar product in or affecting commerce, shall not make any

representation, in any manner, expressly or by implication, about the

[[Page 38749]]

relative or absolute performance, attributes, benefits, or

effectiveness of 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 the

representation.

III

It is further ordered that respondents, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product intended to improve the

performance of any computer in or affecting commerce, shall not make

any representation, in any manner, expressly or by implication, that

such product has been authorized, certified, licensed, endorsed, or

otherwise approved by any person or organization, unless such

representation is true.

IV

It is further ordered that respondents, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product intended to improve the

performance of any computer in or affecting commerce, shall not make

any representation, in any manner, expressly or by implication, about

the relative or absolute performance, attributes, benefits, or

effectiveness of such product, unless, at the time it is made,

respondents possess and rely upon competent and reliable evidence,

which when appropriate must be competent and reliable scientific

evidence, that substantiates the representation.

V

It is further ordered that respondents shall, for five (5) years

after the last date of dissemination of any representation covered by

this order, maintain and, within ten (10) business days of their

receipt of a written request, make available to the Federal Trade

Commission for inspection and copying:

A. All advertisements and promotional materials containing the

representation;

B. All materials that were relied upon in disseminating the

representation; and

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

evidence in their possession or control that contradict, qualify, or

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

representation, including complaints and other communications with

consumers or with governmental or consumer protection organizations.

VI

It is further ordered that respondent Syncronys Softcorp and its

successors and assigns shall deliver a copy of this order to all

current and future principals, officers, directors, and managers, and

to all current and future employees, agents, and representatives having

responsibilities with respect to the subject matter of this order, and

shall secure from each such person a signed and dated statement

acknowledging receipt of the order. Respondent Syncronys Softcorp and

its successors and assigns shall deliver this order to current

personnel within thirty (30) days after the date of service of this

order, and to future personnel within thirty (30) days after the person

assumes such position or responsibilities.

VII

It is further ordered that respondent Syncronys Softcorp and its

successors and assigns shall notify the Commission at least thirty (30)

days prior to any change in the corporation that may affect compliance

obligations arising under this order, including but not limited to a

dissolution, assignment, sale, merger, or other action that would

result in the emergence of a successor corporation; the creation or

dissolution of a subsidiary, parent, or affiliate that engages in any

acts or practices subject to this order; the proposed filing of a

bankruptcy petition; or a change in the corporate name or address.

Provided, however, that, with respect to any proposed change in the

corporation about which respondents learn less than thirty (30) days

prior to the date such action is to take place, respondents shall

notify the Commission as soon as is practicable after obtaining such

knowledge. All notices required by this Part shall be sent by certified

mail to the Associate Director, Division of Enforcement, Bureau of

Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.

VIII

It is further ordered that respondents Rainer Poertner, Daniel G.

Taylor, and Wendell Brown, for a period of five (5) years after the

date of issuance of this order, shall each notify the Commission of the

discontinuance of his current business or employment, or of his

affiliation with any company engaged in the manufacturing, labeling,

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

product intended to improve the performance of any computer in or

affecting commerce. The notice shall include respondent's new business

address and telephone number and a description of the nature of the

business or employment and his duties and responsibilities. All notices

required by this Part shall be sent by certified mail to the Associate

Director, Division of Enforcement, Bureau of Consumer Protection,

Federal Trade Commission, Washington, D.C. 20580.

IX

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

days after the date of service of this order, and at such other times

as the Federal Trade Commission may require, file with the Commission a

report, in writing, setting forth in detail the manner and form in

which they have complied with this order.

X

This order will terminate twenty (20) years from the date of its

issuance, or twenty (20) years from the most recent date that the

United States or the Federal Trade Commission files a complaint (with

or without an accompanying consent decree) in federal court alleging

any violation of the order, whichever comes later; provided, however,

that the filing of such a complaint will not affect the duration of:

A. Any Part in this order that terminates in less than twenty (20)

years;

B. This order's application to any respondent that is not named as

a defendant in such complaint; and

C. This order if such complaint is filed after the order has

terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal

court rules that the respondent did not violate any provision of the

order, and the dismissal or ruling is either not appealed or upheld on

appeal, then the order will terminate according to this Part as though

the complaint had never been filed, except that the order will not

terminate between the date such complaint is filed and the later of the

deadline for appealing such dismissal or ruling and the date such

dismissal or ruling is upheld on appeal.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Syncronys Softcorp, Rainer Poertner, Daniel

G. Taylor, and Wendell Brown. The proposed respondents are marketers of

computer

[[Page 38750]]

software products, including SoftRAM and SoftRAM95.

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.

The Commission's complaint charges that the proposed respondents

made the following unsubstantiated representations about SoftRAM: (1)

SoftRAM uses compression technology to double the random access memory

(``RAM'') available to a computer using any of Microsoft, Inc.'s

Windows 3.0, 3.1, or 3.11 operating systems (collectively ``Windows

3.x''); (2) SoftRAM produces the effect of doubling RAM in a computer

using Windows 3.x; (3) use of SoftRAM will permit a Windows 3.x user to

open more applications simultaneously on a computer; and (4) use of

SoftRAM in a computer using Windows 3.x will substantially reduce or

eliminate the occurrence of computer screen messages that indicate

insufficient memory.

With respect to SoftRAM95, the complaint charges that the

proposed respondents made the following unsubstantiated

representations: (1) SoftRAM95 increases RAM in a computer using

Microsoft, Inc.'s Windows 95 operating system (``Windows 95'') to a

greater extent than other software products; (2) SoftRAM95 uses

compression technology to at least double the RAM available to a

computer using Windows 3.x or Windows 95, and achieves RAM compression

ratios of up to five times and higher in such a computer; (3)

SoftRAM95 produces the effect of at least doubling RAM in a

computer using Windows 3.x or Windows 95; (4) use of SoftRAM95 in

a computer will speed up Windows 3.x or Windows 95; (5) use of

SoftRAM95 will permit a Windows 3.x or Windows 95 user to run

larger applications on a computer, and to open more applications

simultaneously; and (6) use of SoftRAM95 with Windows 3.x or

Windows 95 will result in expanded systems resources on a computer and

will substantially reduce or eliminate the occurrence of computer

screen messages that indicate insufficient memory. The complaint also

charges that claims (1) through (6) are false to the extent that they

apply to use of SoftRAM95 with Windows 95. Further, the complaint

charges that the proposed respondents have falsely represented that

Microsoft, Inc. has licensed, endorsed, or otherwise approved

SoftRAM95 for use with Windows 95.

The proposed consent order contains provisions designed to remedy

the violations charged and to prevent proposed respondents from

engaging in similar acts in the future.

Part I of the proposed order, in connection with SoftRAM95 or

any substantially similar product, prohibits the proposed respondents

from misrepresenting that: (1) such product increases RAM in a computer

using Windows 95 to a greater extent than other software products; (2)

such product uses compression technology to increase the RAM available

to a computer using Windows 95 or achieves RAM compression ratios of up

to five times or higher in a computer using Windows 95; (3) such

product produces the effect of increasing the RAM available to a

computer using Windows 95; (4) use of such product in a computer will

speed up Windows 95; (5) use of such product will permit a Windows 95

user to run larger applications on a computer or to open more

applications simultaneously; (6) use of such product with Windows 95

will result in expanded systems resources on a computer and will

substantially reduce or eliminate the occurrence of computer screen

messages that indicate that the computer has insufficient memory to run

the user's application(s); or (7) Microsoft, Inc. has licensed,

endorsed, or otherwise approved such product for use with Windows 95.

Part II of the proposed order prohibits any representation which

relates to the relative or absolute performance, attributes, benefits,

or effectiveness of SoftRAM, SoftRAM95, or any substantially

similar product, unless such representation is true and proposed

respondents possess and rely upon competent and reliable evidence that

substantiates the representation. Part III of the proposed order

prohibits the proposed respondents from representing that any product

intended to improve the performance of any computer has been

authorized, certified, licensed, endorsed, or otherwise approved by any

person or organization, unless such representation is true. In

addition, Part IV prohibits any representation which relates to the

relative or absolute performance, attributes, benefits, or

effectiveness of any product intended to improve the performance of any

computer, unless proposed respondents possess and rely upon competent

and reliable evidence that substantiates the representation.

The proposed order (Part V) contains recordkeeping requirements for

materials that substantiate, qualify, or contradict covered claims and

requires the proposed respondents to keep and maintain all

advertisements and promotional materials containing any representation

covered by the proposed order. In addition, the proposed order (Part

VI) requires distribution of a copy of the consent decree to current

and future officers and agents. Further, Part VII provides for

Commission notification upon a change in the corporate respondent and

Commission notification when each of the individual respondents changes

his present business or employment (Part VIII). The proposed order also

requires the filing of compliance report(s) (Part IX).

Finally, Part X provides for the termination of the order after

twenty years under certain circumstances.

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

proposed order, and 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. 96-18856 Filed 7-24-96; 8:45 am]

BILLING CODE 6750-01-U