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Gateway Settles FTC Charges Over Free Internet Service

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From Bloomberg News

Gateway Inc., the second-largest U.S. direct seller of personal computers, agreed to settle charges that it misled consumers with promises of free Internet service, the Federal Trade Commission said Tuesday.

The San Diego-based company agreed not to misrepresent the cost of any Internet service it provides in promoting personal computer sales, the FTC said. Gateway also agreed to refund long-distance telephone charges incurred by subscribers who registered for its Gateway.net service between January and August 1999.

Juno Online Services Inc. reached a similar agreement with the agency, settling charges it made a variety of deceptive advertising claims to lure subscribers to its Internet service. Juno also agreed to refund some long-distance charges incurred by those who didn’t receive sufficient warning they would have to make toll calls to connect to the World Wide Web, the FTC said.

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The FTC said Gateway failed to prominently disclose in advertisements that personal computer buyers could incur long-distance telephone charges of as much as $3.95 an hour if they took a “free” one-year subscription to Gateway.net. Gateway also was accused of failing to adequately warn consumers of the long-distance charges in ads promoting a $14.95-a-month Internet subscription.

The complaint against Juno accused the New York-based Internet service provider of incorrectly telling consumers they could cancel free trials of premium Internet service at any time without incurring extra charges.

Shares in Gateway closed off 6 cents at $17.69 on the New York Stock Exchange, while Juno closed up 5 cents at $1.48 on Nasdaq.

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