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Gateway to pay government $9 million in settlement

The company agrees to shell out the money to resolve allegations that it overcharged the federal government by failing to give agreed-upon price reductions between 1994 and 1997.

Gateway has agreed to pay $9 million to settle allegations that it overcharged the federal government by failing to give agreed-upon price reductions between 1994 and 1997.

The settlement, announced Tuesday, arose from a contract between San Diego-based Gateway and the government's General Services Administration, which negotiates with federal contractors to provide products and services to government workers.

The government claimed that, under the terms of the contract, if Gateway reduced prices between the time the government ordered products and the time they were shipped, the lower price would apply. The government says that between 1994 and 1997, Gateway did not follow through on this agreement.

"Gateway had no system in place to ensure compliance with this contractual requirement," the Justice Department said in a statement. "Consequently, Gateway routinely failed to pass along to the government price reductions that had occurred between order and shipment."

According to Gateway, the company decided it would be cheaper to pay $9 million than battle the issue in court.

"We settled a dispute with the General Services Administration to avoid the expense and time of litigation," Gateway spokesman Tyson Heyn said in a statement. "We have admitted no wrongdoing, and the federal government continues to be one of our most valuable customers."

Earlier this month, consumers filed suit against Gateway for allegedly advertising free Internet access even though some customers were charged long-distance fees.