FTC Says Heeding Employee Concerns Could Have Saved Office Depot $25M
The Boca Raton-based office supply retailer was accused of running software on shoppers' computers that falsely indicated the presence of malware.
March 28, 2019 at 03:57 PM
4 minute read
The original version of this story was published on Corporate Counsel
The Federal Trade Commission has a message for general counsel and their companies after reaching a settlement with Office Depot Inc.: Don't ignore employee concerns about questionable business practices.
The Boca Raton-based office supply retailer agreed to pay $25 million to settle allegations that the company tricked customers into spending millions of dollars on repairs by deceptively claiming it found malware symptoms or infections on their computers.
Support.com, which is owned by Office Depot, agreed to pay another $10 million for its role in the alleged scheme, which, according to the FTC, was first flagged by store employees.
Office Depot executive vice president, chief legal and administrative officer and corporate secretary David Bleisch, who joined the company in 2017, was not available for comment by deadline. A Support.com representative did not respond to an emailed request for comment.
In an emailed statement, an Office Depot representative said the settlement resolves an investigation into a computer diagnostic system that was offered to Office Depot and OfficeMax customers before December 2016. The company said the $25 million would “provide equitable relief for affected customers.”
“While Office Depot does not admit to any wrongdoing regarding the FTC's allegations, the company believes that the settlement is in its best interest in order to avoid protracted litigation,” according to the statement.
Under the terms of the agreement, Office Depot is required to provide regular compliance reports, create and retain certain records, and submit to compliance monitoring.
William MacLeod of Kelley Drye & Warren, along with Katrina Lindsey, senior vice president and deputy GC at Office Depot, represented the company in the case.
Claire Wack, Sung Kim, Colleen Robbins and Thomas Biesty represented the FTC, the legal department of which is overseen by GC Alden Abbott.
Since at least 2009, Support.com provided Office Depot with software called PC Health Check that offered free PC checkups via advertising in Office Depot stores, on the radio and in print publications, the complaint said.
When consumers were in stores, employees allegedly installed the software program in their presence. The defendants, however, configured the PC Health Check program to report the scan found malware symptoms, even in the absence of them, on a pop-up box that asked the consumer to identify if the computer had any of four generic symptoms, the FTC said.
Store employees complained about the program beginning in 2012, but Office Depot allegedly told them to continue advertising the service and running the program on shoppers' computers, The FTC said. Store managers and employees were paid extra commissions for meeting their weekly goals for performing for PC Health Check runs and tech service sales, and the company reproached those who did not.
The program was suspended after a Seattle television station aired a 2016 segment reporting Office Depot stores were falsely claiming to detect malware on brand-new computers, the FTC said.
In providing lessons from the case, the agency quipped, “Clarity begins at home.”
“When employees express concern about a questionable business practice, savvy executives pay attention,” the agency said. “Heeding in-house early warnings and responding appropriately may be able to prevent a more serious predicament.”
Other tips from the agency include a reminder that service promises, not just product claims, are subject to the FTC act, and it's “unwise” for companies to exploit consumer fears about computer security for their own economic benefit.
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