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Date="05/09/94"
Citation="59 FR 23864"
Group="commerce"
Type="NOTICE"
Department="FEDERAL TRADE COMMISSION"
Agency="FEDERAL TRADE COMMISSION"
Subject="Hayes Microcomputer Products, Inc.; Proposed consent agreement With Analysis to Aid Public Commentg"
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[File No. 922 3332]

Hayes Microcomputer Products, Inc.; Proposed consent agreement 
With Analysis to Aid Public Commentg

AGENCY: Trade Commission.

ACTION: Proposed Consent Agreement.
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[File No. 922 3332]

Hayes Microcomputer Products, Inc.; Proposed consent agreement 
With Analysis to Aid Public Commentg

AGENCY: Trade Commission.

ACTION: Proposed Consent Agreement.
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SUMMARY: In settlement of alleged violations of federal law 
prohibiting unfair acts and practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would prohibit, among other things, a Georgia 
manufacturer and distributor of computer communications products 
from making certain representations regarding any modem-related 
product, unless the respondent possesses and relies upon competent 
and reliable substantiating evidence.

DATES: Comments must be received on or before July 8, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the 
Secretary, room 159, 6th St. and Pa. Ave., NW., Washington, 
DC 20580.

FOR FURTHER INFORMATION CONTACT:

Linda Badger, FTC/San Francisco Regional Office, 901 Market 
St., Suite 570, San Francisco, CA. 94103. (415) 744-7920.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and sec 2.34 
of the Commission's Rules of Practice (16 CFR 2.34), notice 
is hereby given that the following consent agreement containing 
a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, 
has been placed on the public record for a period of sixty (60) 
days. Public comment is invited. Such comments or views will 
be considered by the Commission and will be available for inspection 
and copying at its principal office in accordance with sec 4.9(b)(6)(ii) 
of the Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

   In the Matter of: Hayes Microcomputer Products, Inc., a corporation.

   The Federal Trade Commission having initiated an investigation 
of certain acts and practices of Hayes Microcomputer Products, 
Inc., a corporation (``proposed respondent''), and it now appearing 
that the proposed respondent is willing to enter into an agreement 
containing an order to cease and desist from the use of the 
acts and practices being investigated,
   It is hereby agreed by and between Hayes Microcomputer Products, 
Inc., by its duly authorized officer, and its attorney, and 
counsel for the Federal Trade Commission that:
   1. Proposed respondent Hayes Microcomputer Products, Inc., 
is a corporation organized, existing and doing business under 
and by virtue of the laws of the State of Georgia, with its 
office and principal place of business located at 5835 Peachtree 
Corners East, in the City of Norcross, State of Georgia.
   2. Proposed respondent admits all the jurisdictional facts 
set forth in the draft of complaint here attached.
   3. Proposed respondent waives:
   a. Any further procedural steps;
   b. The requirement that the Commission's decision contain 
a statement of findings of fact and conclusions of law; and
   c. All rights to seek judicial review or otherwise to challenge 
or contest the validity of the order entered pursuant to this 
agreement.
   4. This agreement shall not become part of the public record 
of the proceeding unless and until it is accepted by the Commission. 
If this agreement is accepted by the Commission, it, together 
with the draft of complaint contemplated thereby, will be placed 
on the public record for a period of sixty (60) days and information 
in respect thereto publicly released. The Commission thereafter 
may either withdraw its acceptance of this agreement and so 
notify the proposed respondent, in which event it will take 
such action as it may consider appropriate, or issue and serve 
its complaint (in such form as the circumstances may require) 
and decision, in disposition of the proceeding.
   5. This agreement is for settlement purposes only and does 
not constitute an admission by the proposed respondent of facts, 
other than jurisdictional facts, or of violations of law as 
alleged in the draft of complaint here attached.
   6. This agreement contemplates that, if it is accepted by 
the Commission, and if such acceptance is not subsequently withdrawn 
by the Commission pursuant to the provisions of sec 2.34 of the 
Commission's Rules, the Commission may, without further notice 
to proposed respondent, (a) issue its complaint corresponding 
in form and substance with the draft of complaint here attached 
and its decision containing the following order to cease and 
desist in disposition of the proceeding and (b) make information 
public in respect thereto. When so entered, the order to cease 
and desist shall have the same force and effect and may be altered, 
modified or set aside in the same manner and within the same 
time provided by statute for other orders. The order shall become 
final upon service. Delivery by the U.S. Postal Service of the 
complaint and decision containing the agreed-to order to proposed 
respondent's address as stated in this agreement shall constitute 
service. The proposed respondent waives any right it may have 
to any other manner of service. The complaint may be used in 
construing the terms of the order, and no agreement, understanding, 
representation, or interpretation not contained in the order 
or the agreement may be used to vary or contradict the terms 
of the order.
   7. The proposed respondent has read the proposed complaint 
and order contemplated hereby. The proposed respondent understands 
that once the order has been issued, it will be required to 
file one or more compliance reports showing that it has fully 
complied with the order. The proposed respondent further understands 
that it may be liable for civil penalties in the amount provided 
by law for each violation of the order after it becomes final.

Order


Definitions

   For the purposes of this Order, the following definitions 
shall apply:
   A. The term Improved Escape Sequence with Guard TIme means 
the escape method technology described, among other things, 
in United States Patent Number 4,549,302, titled as ``Modem 
With Improved Escape Sequence With Guard Time Mechanism.''
   B. The term Time Independent Escape Sequence, or Ties, means 
an escape sequence consisting of three escape characters (eg., 
``+++'') followed by a valid AT command, which can be followed 
by additional at commands, and ended with another character, 
typically a carriage return.
   C. The term modem-related product means any modem, any component 
of any modem, or any hardware or software used in the operation 
of any modem.

I

   It is ordered that respondent, Hayes Microcomputer Products, 
Inc., a corporation, its successors and assigns, and its officers, 
and respondent's agents, representatives and employees, directly 
or through any corporation, subsidiary, division or other device, 
in connection with the manufacturing, labelling, advertising, 
promotion, offering for sale, sale, or distribution of products 
containing the Improved Escape Sequence with Guard Time, in 
or affecting commerce, as ``commerce'' is defined in the Federal 
Trade Commission Act, do forthwith cease and desist from representing, 
in any manner, directly or by implication, that:
   A. Because a modem does not incorporate the Improved Escape 
Sequence with Guard Time, the use of that modem creates a substantial 
risk of data destruction;
   B. When incorporated in modems, the ``Time Independent Escape 
Sequence'' (``TIES'') creates a substantial risk of data transmission 
failure;
   C. The Improved Escape Sequence with Guard Time is the only 
escape method that does not create a substantial risk of data 
transmission failure; or
   D. The use of any modem that does not incorporate the Improved 
Escape Sequence with Guard Time entails a data transmission 
problem that can be solved only by replacing it with a modem 
that incorporates the Improved Escape Sequence with Guard Time;

unless such representation is true, and at the time of making 
such representation, respondent possesses and relies upon competent 
and reliable evidence, which when appropriate must be competent 
and reliable scientific evidence, that substantiates such representation. 
For purposes of this Order, ``competent and reliable scientific 
evidence'' shall mean tests, analyses, research, studies or 
other evidence based on the expertise of professionals in the 
relevant area, that has been conducted and evaluated in an objective 
manner by persons qualified to do so, using procedures generally 
accepted in the profession to yield accurate and reliable results.

II

   It is further ordered that respondent, Hayes Microcomputer 
Products, Inc., a corporation, its successors and assigns, and 
its officers, and respondent's agents, representatives and employees, 
directly or through any corporation, subsidiary, division or 
other device, in connection with the manufacturing, labelling, 
advertising, promotion, offering for sale, sale, or distribution 
of any modem-related product in or affecting commerce, as ``commerce'' 
is defined in the Federal Trade Commission Act, do forthwith 
cease and desist from representing, in any manner, directly 
or by implication, the risk of experiencing data destruction, 
data loss or data transmission problems due to any escape method, 
unless, at the time of making such representation, respondent 
possesses and relies upon competent and reliable evidence, which 
when appropriate must be competent and reliable scientific evidence, 
that substantiates such representation.

III

   It is further ordered that for five (5) years after the last 
date of dissemination of any representation covered by this 
Order, respondent, or its successors and assigns, shall maintain 
and upon request make available to the Federal Trade Commission 
for inspection and copying:
   A. All materials that were relied upon in disseminating such 
representation; and
   B. All tests, reports, studies, surveys, demonstrations or 
other evidence in its possession or control that contradict, 
qualify, or call into question such representation, or the basis 
relied upon for such representation including complaints from 
consumers.

IV

   It is further ordered that respondent shall notify the Commission 
at least thirty (30) days prior to the effective date of any 
proposed change in the respondent that may effect compliance 
obligations under this Order such as dissolution, assignment, 
or sale resulting in the emergence of successor corporation(s), 
the creation or dissolution of subsidiaries, or any other change 
in the corporation(s).

V

   It is further ordered that respondent shall, within ten (10) 
days from the date of service of this Order upon it, distribute 
a copy of this Order to each of its officers, agents, representatives, 
independent contractors, and employees involved in the preparation 
and placement of advertisements or promotional materials, to 
all company executives, and to all marketing and sales managers; 
and for a period of three (3) years, from the date of issuance 
of this Order, distribute a copy of this Order to all of respondent's 
future such officers, agents, representatives, independent contractors, 
and employees.

VI

   It is further ordered that respondent shall, within sixty 
(60) days from the date of service of this Order upon it, and 
at such other times as the Commission may require, file with 
the Commission a report, in writing, setting forth in detail 
the manner and form in which it has complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

   The Federal Trade Commission has accepted an agreement, subject 
to final approval, to a proposed consent order from respondent 
Hayes Microcomputer Products, Inc., (``Hayes'') a Georgia corporation.
   The proposed consent order has been placed on the public 
record for sixty (60) days for reception of comments by interested 
persons. Comments received during this period will become part 
of the public record. After sixty (60) days, the Commission 
will again review the agreement and the comments received and 
will decide whether it should withdraw from the agreement and 
take other appropriate action or make final the agreement's 
proposed order.
   Hayes manufactures and distributes products for computer 
communications, including modems, local area networks, and software. 
This matter concerns a patented ``escape sequence'' which Hayes 
developed for use in its modems, and licenses to other companies. 
An escape sequence is a mechanism by which modems end a data 
transmission. The name of the Hayes escape sequence at issue 
is the ``Improved Escape Sequence with Guard Time.'' The Commission's 
complaint charges that respondent's advertising contained false 
representations that the use of other escape methods creates 
a substantial risk of experiencing data transmission problems. 
For example, the complaint charges that Hayes made false representations 
regarding the Time Independent Escape Sequence (``TIES''), an 
escape method developed by several of Hayes' competitors. Specifically, 
the complaint alleges that the respondent falsely represented 
that:
   (1) Because a modem does not incorporate the Improved Escape 
Sequence with Guard Time, the use of that modem creates a substantial 
risk of data destruction;
   (2) When incorporated in modems, the ``Time Independent Escape 
Sequence'' (``TIES'') creates a substantial risk of data transmission 
failure;
   (3) The Improved Escape Sequence with Guard Time is the only 
escape method that does not create a substantial risk of data 
transmission failure; and
   (4) The use of any modem that does not incorporate the Improved 
Escape Sequence with Guard Time entails a data transmission 
problem that can be solved only by replacing it with a modem 
that incorporates the Improved Escape Sequence with Guard Time.
   The proposed consent order contains provisions designed to 
remedy the violations charged and to prevent the respondent 
from engaging in similar acts and practices in the future. Part 
I of the proposed order would prohibit the company from making 
any of the false claims delineated above, unless they are true, 
and at the time of making them, the respondent possesses and 
relies upon competent and reliable evidence, which when appropriate 
must be competent and reliable scientific evidence.
   Part II of the proposed order includes fencing-in relief, 
prohibiting the company from making representations relating 
to any modem-related product, regarding the risk of experiencing 
data loss, data destruction, or data transmission problems due 
to any escape method, unless, at the time of making such representations, 
the company possesses and relies upon a reasonable basis, which 
when appropriate, must include competent and reliable scientific 
evidence. It is to be noted that this fencing-in provision relates 
to any method used to switch a modem to the command mode-this 
would include out-of-band escape sequences as well as in-band 
escape sequences such as TIES or Hayes' Improved Escape Sequence 
with Guard Time.
   The proposed order also requires the respondent to maintain 
materials relied upon to substantiate claims covered by the 
order; to provide a copy of the consent agreement to all employees 
or representatives involved in the preparation and placement 
of the company's advertisements, as well as to all company executives 
and marketing and sales managers; to notify the Commission of 
any changes in corporate structure that might affect compliance 
with the order; and to file one or more reports detailing compliance 
with the order.
   The proposed of this analysis is to facilitate public comment 
on the proposed order. It is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify 
in any way their terms.

Donald S. Clark,
Secretary.

[FR Doc. 94-11108 Filed 5-6-94; 8:45 am]
BILLING CODE 6750-01-M


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The Contents entry for this article reads as follows:

Prohibited trade practices:
  Hayes Microcomputer Products, Inc., 23864
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