FTC Settles Deceptive Ad Case with Gateway and Juno

16 May 2001

The Federal Trade Commission has reached a settlement with internet access provider Juno and PC marketer Gateway over accusations that both had conducted deceptive ad campaigns for purportedly free access to the web.

The duo acknowledged that their ads for ‘free’ web access services failed to mention the possibility of certain charges.

Juno’s ads failed to disclose that the 150 free hours of premium internet service on offer had to be used within a month, or that some rural customers would have to pay a toll charge. The company was also accused of making it hard to cancel a free online access trial, leading to subscribers being billed for a service they no longer wanted.

Gateway, however, did reveal that rural subscribers and customers spending over 150 hours online per month would have to pay more – but only in the small print. The campaign was handled by McCann-Erickson Worldwide, though the company has since shifted its account in-house.

Under the terms of the agreement with the FTC, both companies are barred from further misrepresentations regarding the price, cancellation and length of ‘free’ trials. Juno agreed to abandon the offending ads, refund long-distance charges made to customers and vow not to start a trial or billing period until the subscriber can access the service.

Meanwhile, Gateway consented to compensate subscribers for access charges made between January and April 1999, before the company provided consumers with suitable warnings about the fees.

News sources: Financial Times; Advertising Age - Daily Deadline