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FTC slams free PC offer; e-tailers change tune

Value America, and Office Depot agree to comply with Federal Trade Commission consent orders to revamp advertising that the agency said was misleading.

Two Internet retailers and a retail chain store today agreed to comply with Federal Trade Commission consent orders to revamp advertising that the agency said was misleading.

According to the FTC,

Gartner analyst George Reilly says government regulators fear that the same vehicles that enable e-markets to increase market efficiency could also facilitate anti-competitive practices such as price-fixing.

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the promotions advertised by e-tailers Value America and and retail chain Office Depot included rebates that hinged on the purchase of three years of Internet service. The FTC said the advertising failed to disclose the true costs and important restrictions on the offers.

The retailers have agreed to disclose this information prominently in future advertising to enable consumers to determine the real, out-of-pocket costs of such deals.

"You shouldn't need a Ph.D. to figure out the cost of a PC," Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, said in a statement.

Value America, the first major online retailer to suffer from the now nearly ubiquitous e-commerce slump, said it has negotiated a consent order with the FTC to improve the quality of the information it provides shoppers.

The company's stock has traded as high as $74.25 but has plummeted since its high-flying debut. The stock closed yesterday at a new 52-week low of $1.13., an Internet superstore, has also slipped in recent months, trading around $5 after hitting a 52-week high of more than $35. The stock got a boost today, surging more than 18 percent this morning, after announced a deal with Palm that will allow shoppers to make purchases at the site using wireless Palm devices.

Earlier this spring, Value America, which sells computers and consumer electronics, said the FTC was looking at the company's advertisements of free or low-cost computer systems and rebates for Internet access services.

"In the last six months, we have significantly improved our customer service, including shipment times and resolution of customer issues," Glenda Dorchak, Value America's chief executive, said in a statement. "We are satisfied that our efforts with the FTC will ensure that our product descriptions, including information on rebates and shipping, are the most accurate and content-rich."