Microsoft and Hewlett Packard have escaped serious penalty in their settlement with the Federal Trade Comission regarding claims of false and deceptive advertisements relating to the Pocket PC handheld computers.

The complaint against the two companies involved a series of ads that touted the Pocket PC as being able to access the web and email "anythime." The FTC cited these ads as misleading consumers into believing that internet and email connectivity was included with the device. The reality is that a separate modem is required. A wireless version of these modems can cost more than $350.

The HP ad in question had a small disclaimer "Modem Required: Sold Separately" at the bottom of the ad in the very small 4-point type. Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, says that "It is critical these ads stick to the facts and accurately reflect a PDA's capabilities...Consumers shouldn't have to use a magnifying glass to read them."

Under the terms of the settlement both companies are barred from making these claims in the future, and they will also be required to lauch a consumer education campaign informing consumers on the exact features their PDAs offer. In addition, Microsoft will run a quarter page ad in several major metropolitan dailies discussing the capabilities and limitations of PDAs.