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Apple speaks on ads settlement

Apple signs a consent agreement with the Federal Trade Commission to give rebates to some Mac buyers.

    Apple Computer (AAPL) has agreed to hand out rebates to some Macintosh users as part of a settlement with the Federal Trade Commission over charges of false advertising.

    "While we do not agree with the allegations, it is important to us that customers are satisfied with the products they purchased. We negotiated this settlement in that spirit," said an Apple spokesperson.

    As a part of a consent agreement, Apple will offer upgrades to the more powerful PowerPC processor for $599, less than half the original list price of the upgrade. Apple will also refund $776 of the original upgrade price to consumers who have already purchased the kits. Today's consent agreement does not constitute an admission of guilt by the company.

    The FTC was representing consumers who bought Performa 550, 560, or Macintosh LC 550 computers, all introduced in 1993 and 1994 and used a chip from Motorola that has now been replaced by the PowerPC. The FTC complaint alleged that Apple made false claims that an upgrade to a PowerPC processor would be available within a reasonable amount of time.

    In fact, the upgrade was not offered for at least a year, and once offered, was almost as expensive to buy as a whole new system. The FTC also alleged that Apple failed to let consumers know that they would have to purchase not only an upgrade card but a new motherboard as well.

    "Apple's offer to compensate thousands of consumers will help assure the public that advertising must be truthful," said Jodie Bernstein, Director of the FTCs Bureau of Consumer Protection, in a prepared statement. "This is particularly important in the fast moving world of computers, where consumers must be able to rely upon claims made by companies that the product they are buying is, and will be, capable of remaining up-to-date," she said.

    In future advertisements, Apple is prohibited from claiming that a hardware product is upgradeable unless the upgrade is currently available in reasonable quantities based on anticipated demand. Also, if an upgrade should require a new motherboard, the company will be required to "prominently" state that requirement.

    As a part of the consent agreement, Apple will include all of the necessary hardware required for the upgrade, as well as 4MB RAM, two essential pieces of software, and a coupon for free installation of the upgrade hardware which can be redeemed at any authorized Apple service location.

    Apple could not be reached for comment at press time.