Dell fined $800,000 (£475,000) for '95 sales of vaporware

The Federal Trade Commission (FTC) levied its biggest ever fine for a mail-order firm against Dell yesterday.

The FTC hit Dell with an $800,000 (£475,000) fine to settle charges from 1995, saying the direct PC seller sold software it didn't have. "When you advertise a product, there has to be a reasonable expectation that you can ship it to the customer," said Linda Badger, a staff attorney at the FTC office in San Francisco. Badger said it was the largest fine ever sought against a single company for violating the Mail Order Rule.

The FTC wanted to make an example of Dell because of the importance of the mail-order computer industry.

The FTC charged the company with violation of the Mail Order Rule in late 1995, when Dell advertised a Dimension computer system bundled with software that it couldn't deliver.

According to the complaint, in October of 1995, Dell announced its "Dell Software Suite" as a bundled component of its Dimension computer system. Instead, customers who purchased the systems received a coupon for the software suite "when available." In some cases, the customers didn't receive the CD-ROM until well after their computers arrived.

"There was a whole series of things that conspired to delay the software getting to the customer," said a Dell spokesman. Who added problems with licensing, production, testing, and distribution for delaying the CD-ROM.

The FTC also charged Dell with not offering the affected customers the choice of consenting to the delay or cancelling their orders and receiving a refund. "That would never happen today," the spokesman said. "I think we are larger and wiser. Period."

The spokesman said the 1995 give-away was the first time Dell had tried its hand at bundling software. In 1996, the company ventured into the same waters with much more success.

The action was passed by the FTC Commissioners by a 4-0 vote with one abstention.

In a separate case against Dell in 1996, the FTC reached a consent agreement with the firm regarding charges that it restricted competition in the PC industry. The settlement prevented Dell from taking legal action against companies that used a computer technology called the VL-bus, to which Dell claimed it had patents.