Apple Computer, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 952-3275]

Apple Computer, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

-----------------------------------------------------------------------

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

[[Page 11200]]

final Commission approval, would require, among other things, the

Cupertino, California-based computer hardware and software manufacturer

to offer Power PC Upgrade Kits, at less than half the original price,

to each consumer who purchased one of three of the company's entry-

level ``Performa'' model personal computers. Apple has already agreed

to rebate $776 of the original price to consumers who have already

purchased the upgrade. The complaint accompanying the consent agreement

alleges that Apple misrepresented that the upgrade was available to

consumers at the time that they purchased a Performa or within a

reasonable period of time thereafter.

DATES: Comments must be received on or before May 12, 1997.

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:

Matthew Gold, San Francisco Regional Office, Federal Trade Commission,

901 Market Street, Suite 570, San Francisco, CA 94103. (415) 356-5276.

Linda Badger, San Francisco Regional Office, Federal Trade

Commission, 901 Market Street, Suite 570, San Francisco, CA 94103.

(415) 356-5275.

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

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

commission's rules of practice (16 CFR 2.34), notice is hereby given

that the above-captioned 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. The following Analysis to Aid Public

Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home Page (for March 3, 1997), on

the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A paper

copy can be obtained from the FTC Public Reference Room, Room H-130,

Sixth Street and Pennsylvania Avenue, NW., Washington, DC 20580, either

in person or by calling (202) 326-3627. 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 Sec. 4.9(b)(6)(ii) of the Commission's rules of

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

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 Apple Computer, Inc.

(hereinafter ``Apple'' or ``respondent''). Apple is a major manufacture

and marketer of personal computer hardware and software products.

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

sixty (60) days for the 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 any 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 has focused on Apple's advertisements for the

``Performa 550,'' ``Macintosh LC 550,'' and ``Performa 560'' personal

computers. The Performa 550, Macintosh LC 550, and Performa 560 models

are based on the Motorola 680030 microprocessor. While continuing to

promote the sale of these computers, respondent introduced a new series

of computers based on the faster, more powerful ``PowerPC''

microprocessor.

Beginning on or about April 1, 1994, subsequent to the introduction

of the PowerPC microprocessor, respondent advertised Performa 550,

Macintosh LC 550, and Performa 560 computers as upgradeable to PowerPC

performance. A PowerPC upgrade, however, was not offered for at least

one year after Apple began representing that these computers were

upgradeable. Further, by the time Apple made the upgrade available, its

price approached the cost of an entirely new computer with a PowerPC

microprocessor.

The proposed complaint alleges that Apple made false claims that:

(1) A PowerPC upgrade was available to consumers at the time that they

purchased a Performa 550 or Performa 560 computer; and (2) a PowerPC

upgrade would be available within a reasonable period of time after the

purchase of a Performa 550, Macintosh LC 550, or Performa 560 computer.

The proposed complaint further alleges that Apple deceptively

failed to disclose that the PowerPC upgrade package for the Performa

550, Macintosh LC 550, or Performa 560 computers would include not only

a PowerPC upgrade card, but also a new logic board. As a result, the

complaint alleges, consumers were not aware that they would have to

incur the cost and inconvenience associated with the replacement of the

logic board.

Part I of the proposed order prohibits Apple from misrepresenting

the availability of any microprocessor upgrade product. Part II of the

proposed order prohibits Apple from representing that any computer

hardware product is currently upgradeable, unless at the time such

representation is made, the upgrade is then available, in reasonable

quantities to the public, given good-faith projections of anticipated

demand.

Parts III and IV of the proposed order address Apple's failure to

disclose that the upgrade product for the Performa 550, Macintosh LC

550, or Performa 560 computers would include a new logic board in

addition to an upgrade card. Part III provides that Apple, when

marketing any microprocessor upgrade product that incorporates a new

logic board, may not represent that such product is an ``upgrade''

unless it clearly and prominently discloses that a new logic board is a

component of the upgrade product.

Part IV of the proposed order prescribes a redress program under

which Apple is required to offer a PowerPC Upgrade Kit for the reduced

price of $599 to consumers who purchased a Performa 550, or Macintosh

LC 550 computer after Apple began advertising them as upgradeable.

Under Part IV, the kit will include all of the hardware necessary for

the upgrade, as well as four megabytes of RAM, two essential pieces of

PowerPC software, and a coupon for free installation of the upgrade

redeemable at any authorized Apple service location.

Under Part IV, Apple has the option of providing eligible consumers

with a new PowerPC system in lieu of the upgrade kit. This provision is

designed to protect consumers if Apple runs out of the hardware

necessary to build the upgrade kits. Any consumer who receives a new

system will have to return the old computer to an authorized Apple

dealer. Apple will then be responsible for arranging for the dealer to

transfer all the consumer's data and peripherals to the new PowerPC,

and for testing the new system to make certain that it is functional.

To compensate the consumers who have already purchased an upgrade

for one of the relevant computers, Part IV of the proposed order

requires Apple to rebate $776.00 of the original purchase price of

$1,375.00.

The proposed order also requires the respondent to maintain

materials relied upon to substantiate claims covered by the order; to

provide a copy of the consent agreement to all employees or

[[Page 11201]]

representatives with duties affecting compliance with the terms of the

order; to notify the Commission of any changes in 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, 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. 97-6056 Filed 3-10-97; 8:45 am]

BILLING CODE 6750-01-M