GSC Electronics, Inc

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IN THE MATTER OF GCS ELECTRONICS, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3202. Complaint, Oct. 30, 1986-Decision, Oct. 3D, 1986 This consent order prohibits, among other things, a Costa Mesa, Calif. electronics company from making unsubstantiated claims about the capabilities of its portable Mark II Executive Phone.

Appearances For the Commission: Steven A. Shaffer and Joel Winston. For the respondents: Pro se.

COMPLAINT The Federal Trade Commission, having reason to believe that GCS Electronics, Inc., a corporation, and Gene Comfort, individually and as an offcer of said corporation, hereinafter sometimes referred to as respondents, have violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, alleges: PARAGRAPH 1. GCS is a California corporation, with its offces and principal place of business at 3200 Park Center Drive, 7th Floor, Costa Mesa, California.

Respondent Gene Comfort is an offcer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices alleged in this complaint. His offce and principal place of business is the same as that of the corporation.

Respondents cooperate and act together in carrying out the acts and practices alleged in this complaint.

PAR. 2. Respondents manufacture, advertise, offer for sale, and sell mobile radiotelephones and mobile radiotelephone equipment, including the GCS Executive Phone Mark II ("Mark II" PAR. 3. The acts and practices of respondents alleged in this complaint have been in or affecting commerce. PAR. 4. Typical of respondents' advertisements for the Mark II , but not necessarily all-inclusive thereof, are attached hereto as Attach- 158 Complaint ments A and B. The aforesaid a9vertis ments contain the followingstatements: (a) up to 50 mile (80 kilometer) range.

(b) 50 MILE RANGE- With your new Mark II, you enjoy an incredible up to 50-mile receiving range - 80 kilometers - an unheard of over 1200 square mile coverage in each city! This range, which varies somewhat plus or minus depending upon local conditions is measured on a diameter usually from the center of your town or almost any city or town you happen to be visiting.

(c) You merely answer and talk direct as you would on any other telephone, a veryeasy(d) It is not a CB. It'soperation.not a walkie-talkie. PAR. 5. Through the use ofthe statements referred to in Paragraph Four (a)-(b) and others in advertisements not specifically set forth herein, respondents have represented, directly or by implication that:

(a) An appreciable number of users of the Mark II wil achieve a range of 50 miles or close to 50 miles, measured between the user and the center of almost any city or town in the Vnited States, under circumstances reasonably foreseen by consumers. (b) Every user of the Mark II wil achieve a range reasonably close to 50 miles.

(c) Every user of the Mark II wil achieve a coverage of at least 1200 square miles in each city.

(d) The Mark II allows the user to transmit and receive messages simultaneously.

PAR. 6. In truth and in fact (a) few, if any, consumers using the Mark II wil achieve a range of 50 miles or close to 50 miles under reasonably foreseen circumstances. (b) Not every user of the Mark II wil achieve a range reasonably close to 50 miles.

(c) Not every user of the Mark II wil achieve a coverage of at least 1200 square miles in each city.

(d) The Mark II does not allow the user to transmit and receive messages simultaneously.

Therefore, respondents' representations as set forth in Paragraph Five were and are false and misleading.

PAR. 7. Through the use of the statements and representations set forth in Paragraphs Four and Five and others not specifically set forth herein, respondents have represented, directly or by implication, that they possessed and relied upon a reasonable basis for such representations at the time they made the representations. Complaint - lO8F.

PAR. 8. In truth and in fact, at the time respondents made these representations, respondents did not possess and rely upon a reasonable basis for such representations. Therefore, respondents' representations as set forth in Paragraph Seven were and are false and misleading.

PAR. 9. The acts and practices of respondents as alleged in this complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

GCS "L"CTRONICS, INC., ET AL. 101 158 Complaint ATIACHMENT A Z\T:'ACH:IE:!':' .

162 FED"RAL TRADE C()MMISSION DECISIONS Complaint 108 F.

ATTACHMENT B The Portable Executive Communicator MARltIJ c:,::!::7 "

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Complaint 108 F.

Up to 50 Mile Range Worldwide H".L"

158 Decision and Order DECISIO D qRD The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Federal Trade Commission Act; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent GCS Electronics, Inc., is a corporation organized existing and doing business under and by virtue of the laws of the State of California, with its offce and principal place of business located at 3200 Park Center Drive, 7th Floor, in the City of Costa Mesa, State of California.

Respondent Gene Comfort is an offcer of said corporation. He formulates, directs and controls the policies, acts and practices of said corporation, and his principal offce and place of business is located at the above stated address.

2. The Federal Trade Commission has jurisdiction of the subject matter ofthis proceeding and of the respondents, and the proceeding is in the public interest.

166 FEDERAL TRAD" COMMISSION D"CISIONS Decisio; and ' der 108 F:. ORDER Definition Range-related claim means any general or specific, oral or written representation that, directly or by implication, describes or refers to the distance over which a radiotelephone communications device wil receive and transmit signals that are of commercially useable quality. It is ordered That respondents GCS Electronics, Inc., a corporation its successors and assigns, and its offcers, and Gene Comfort, individually and as an offcer of said corporation, and respondents representatives, agents and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of any mobile telephone or other radiotelephone communications device in or affecting commerce, as !Icommerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: A. Representing in any manner, directly or by implication, any performance characteristic of any such device unless at the time of such representation, respondents possess and rely upon a reasonable basis for such representation, consisting of competent and reliable evidence which substantiates such representation. B. Making any range-related claim about any such device which uses the phrase ttup to" or words of similar import unless the maximum level of performance can be achieved by an appreciable number of consumers; and further, in any instances where consumers could not reasonably foresee the major factors or conditions affecting the maximum level of performance, cease and desist from failing to disclose clearly and prominently the class of consumers who can achieve the maximum level of performance.

C. Misrepresenting in any manner, directly or by implication, the range or coverage of any such device.

D. Misrepresenting in any manner, directly or by implication, the ability of any such device to transmit and receive messages simultaneously.

II.

It is further ordered That for three years from the date that the representations to which they pertain are last disseminated, respond- 158 Decision and Order ents shall maintain and upon rgquest make available to the Federal Trade Commission for inspection and copying: A. All materials relied upon to substantiate any claim or representation covered by this order; and B. All test reports, studies, surveys or other materials in their possession or control that contradict, qualify or call into question such representation or the basis upon which respondents relied for such representation.

III.

It is further ordered That respondents shall notify the Commission at least thirty (30) days prior to any proposed change in the corporation such as a 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 under this order.

IV.

It is further ordered That the individual respondent named herein promptly notify the Commission of the discontinuance of his present business or employment and of his affiiation with a new business or employment. In addition, for a period of five (5) years from the date of service of this order, the respondent shall promptly notify the Commission of each affliation with a new business or employment. Each such notice shall include the respondent' s new business address and a statement ofthe nature of the business or employment in which the respondent is newly engaged as well as a description of respondent' s duties and responsibilties in connection with the business or employment. The expiration of the notice provision of this paragraph shall not affect any obligation arising under this order. It is further ordered That respondents shall, within sixty (60) days after service of this order upon them, fie with the Commission a written report setting forth in detail the manner and form in which they have complied with this order.

168 FEDERAL TRADE COMMISSION D"CISIONS Modifying Order 108 F.