clock menu more-arrow no yes

Filed under:

NEW OR USED? LABELING OF COMPUTERS DRAWS FIRE

You may know the difference between a hard drive and a disk drive, but when is a personal computer new and when is it used?

Is it new only when it comes perfectly sandwiched in styrofoam from a box with unbroken packing tape? What if it was returned barely used by a customer, upgraded with a faster chip by the manufacturer and shipped out again?The questions were hardly pressing in the PC industry until Compaq Computer Corp. filed a suit this past week that accused Packard Bell Electronics Inc. of false advertising for putting parts from returned PCs in new ones.

Packard Bell denied the charge and accused Compaq of pulling a PR stunt at a time when the two are dueling in retail outlets and Packard Bell is getting ready to challenge Compaq in its core market, corporations.

Some competitors and analysts were left shaking their heads.

"It seems the sort of issue the state attorney general or the federal government would bring," said Dick Shaffer, principal of Technologic Partners, a New York technology consulting firm. "I'm puzzled that a competitor would. Besides, if Packard Bell stands behind the product and provides a new warranty on it, what difference does it make?"

Compaq declined to say whether it had looked into the manufacturing habits of other rivals or answer other questions about the lawsuit, filed in a federal court in Delaware.

(The company later in the week announced that a Taiwan company would design and make some Compaq-labeled home PCs later this year, prompting another metaphysical question: When is a Compaq PC really a Compaq PC?)

A 1960s federal law enforced by the Federal Trade Commission governs what manufacturers may or may not resell as new. But it is broadly written and specific guidelines have only been created for the auto industry.

"There is an underlying statute, which prohibits unfair and deceptive practices," said Bonnie Jansen, spokeswoman for the Federal Trade Commission. "For instance, you cannot misrepresent a material feature of a product."

The commission has brought misrepresentation cases against companies in the auto, hearing aid and furniture industries but never the computer business. Jansen said the FTC does not comment on investigations it may have conducted into specific manufacturers.

Some interviews with PC makers made it clear there's not an established convention. One reason is that some PC parts, like solid-state circuit boards or chips, don't really deteriorate in performance.

Another is that PC returns vary greatly. Some come back days after being purchased. These are generally retested and, if they're undamaged, sold as new. Others, particularly from corporations, may come back after a few months with little use, be upgraded with new chips or bigger hard drives and sold as refurbished.

Literature accompanying Dell Computer Corp.'s machines, for example, declares they are made with parts that are "new or equivalent to new in accordance with industry practice."

But practices vary, and Cythia Upson, spokeswoman for the Electronics Industries Association, said there aren't any industry guidelines.

At IBM, every returned computer gets an "R" marked by its serial number, spokeswoman Tara Sexton said. But if it's in good shape, it may be resold just like new. New models that contain returned parts get a sticker that says "This PC contains used parts," according to Sexton.

Gateway 2000 Inc. refurbishes returned models. They are then sold through factory outlets or used internally.