Rebate Scams

The McMillan Law Firm has brought a number of lawsuits against manufacturers and retailers for a failure to pay rebates. Some of the suits that we have prosecuted have resulted in restitution of the unpaid rebate amount to all consumers who were improperly denied their rebates. Additionally, we have obtained promises from the defendant companies to refrain from denying payment on a rebate to consumers who were otherwise eligible for payment by the terms of the advertised offer.

In order to successfully prove a "rebate case" it is imperative that the consumer keept copies of the rebate submission documents, and the advertisement where the rebate offer appeared. Although a failure to pay a rebate may only affect each consumer by a small amount of money, national advertisers and manufacturers have often sold tens of thousands units as a result of the rebate offer. Indeed, a dishonest advertiser may rely on the fact that the injury to a single individual does not justify the trouble of a lawsuit.

Consumer protection attorneys and the FTC are increasingly recognizing and challenging the fraudulent schemes used by some retailers and manufacturers through unsubstantiated promises to pay rebates. What began in 2000 with simple warnings to manufacturers that did not fulfill rebates escalated to holding retailers accountable for those manufacturers' failures. Now, the retailers that published the offers for rebates that were later unfulfilled are being held accountable for the injury suffered by consumers. We predict that the next trend in advertising litigation will be to hold those publishers of false advertising, who are aware of the deceptive character of the advertising, accountable for the injuries suffered by consumers. The following illustrates the increasing amount of attention given unfulfilled rebates by the Federal Trade Commmission:

 

FTC Settles Two Complaints Charging Rebate-Fulfillment Violations

Soyo, Inc. The Commission's complaint against Soyo charged it with making deceptive claims in connection with its rebate program for computer motherboards and other consumer electronics products. According to the FTC, thousands of consumers who submitted valid rebate requests since 2004 experienced significant delays in getting their rebate checks, including delays of one year or more. Specifically, between October 2004 and March 2006, more than 95 percent of Soyo's rebate checks were delivered to consumers later than 12 weeks after the date on which a valid request was postmarked. The average delivery time for the company's rebates to consumers was about 24 weeks, although Soyo's rebate forms expressly state that they would mail rebate checks "in 10-12 weeks after the postmark date of the program." The complaint also charged the company with misrepresenting to consumers that the rebate checks would be mailed in a reasonable amount of time.

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InPhonic. Inc. The Commission charged InPhonic, an online retailer that offers substantial rebates on mobile phones bought in conjunction with wireless phone service, with making deceptive claims and engaging in unfair practices in connection with its rebate offers. According to the FTC, in advertising its rebates InPhonic failed to disclose adequately prior to purchase that, among other things, consumers would have to wait at least three to six months to submit their rebate requests and would have to wait at least six to nine months after their purchase to get their rebate.

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The Rebate Debate: Why Were They Late? FTC Settles Charges Against CompUSA

Action Is First Challenging a Retailer's Promises for Third-Party Rebates

Under the terms of two separate consent agreements announced March 11, 2005, the Federal Trade Commission has settled charges against nationwide computer superstore CompUSA Inc. and the officers of computer peripherals manufacturer Q.P.S. Inc., whose products were marketed and sold by CompUSA, for allegedly failing to pay, in a timely manner, thousands of rebates for products sold under the CompUSA and QPS brands.

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FTC Obtains Permanent Bar Against Rebate Scheme Defendants

New York Defendants Failed to Fulfill Promise to Refund Total Purchase Price to Consumers

On August 24, 2004, the Federal Trade Commission announced a court order against two New York-based individuals, Joel Granik and Joseph Lichter, settling allegations that they ran a company, Cyberrebate.com, now in bankruptcy, that unfairly took in millions of dollars by promising rebates to consumers that were never paid. Granik and Lichter advertised products with a 100 percent rebate on products marked up to 10 times the retail value of the products, but failed to pay the "100 percent" rebate they promised to purchasers.

To induce customers to purchase these high-priced products, in many cases, the defendants told consumers that the products would be "free" after they sent in and received a rebate for the purchase price. For example, the defendants sold a 13-inch RCA television, which retailed for several hundred dollars, for $1,099.99 and promised to provide consumers with a $1,099.99 rebate within 10 to 14 weeks after it was submitted. They then simply failed to pay the promised rebates--either within the time promised or at all.

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Q-Bate and Switch: Court Order Closes Case on N.Y. Web Retailer That Kept Consumers Waiting for Cash Back

Defendants to Pay $600,000 for Allegedly Failing to Deliver Rebates as Promised

On June 26, 2003, the Federal Trade Commission announced it settled an action against a New York-based Internet retailer that allegedly left over a thousand consumers in the lurch after failing to provide hundreds-of-thousands of dollars worth of promised cash rebates. According to the FTC, UrbanQ and its principals told consumers who bought items from their Web site that they would receive the rebates -- which they called "Q-bates" -- within 12 weeks of their purchase. However, many of the Q-bates, which often ranged from 70 to 100 percent of the original purchase price, failed to arrive within the time promised, and many never showed up at all.

UrbanQ, which began doing business in early 2000, is a Nevada limited liability company, with its principal place of business in Cedarhurst, New York. According to the FTC, in September 2000, it began selling consumer products -- typically apparel -- through its UrbanQWeb site. On the site, the company offered consumers generous rebates, known as "Q-bates," for up to 100 percent of the purchase price of the product. Buyers had 60 days to submit their Q-bates, with the company promising to pay these rebates within 12 week of their receipt. The manufacturer did not provide the rebates -- instead, UrbanQ would pay all rebates, which were offered on approximately 70 percent of all items sold on the Web Site.

After the FTC obtained a settlement with the company, which prohibited the company and the individual defendants from engaging in similar behavior and will pay $600,000 in consumer refunds. Howard Beale, Director of the FTC's Bureau of Consumer Protection, said: "A rebate is part of the deal with the consumer. It's not just bait, You can't lure consumers with promises of cash back and then not keep your word."

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FTC Agreements Protect Consumers from Misleading Coupon and Rebate Offers Settlements Reached

Memtek Products, Inc. and UMAX Technologies, Inc.

On January 10, 2000, the FTC reached a settlement agreement with Memtek Products, Inc., and UMAX Technologies requiring the companies to pay their rebates in a timely manner. Memtek Products, Inc. repackages, advertises, labels and sells printing supplies, PC accessories, optical storage media, and audio and video equipment and accessories, including the well-known Memorex brand of computer diskettes and blank videotapes and audiotapes. According to the Commission's complaint, Memtek represented to purchasers of its package of 100 computer diskettes that they would receive a $29.99 cash rebate within 12 weeks of the company's receipt of the rebate request. In many instances, however, purchasers received their rebates one-to-two months late. In addition, according to the complaint, Memtek represented that purchasers of the company's blank audiotapes and videotapes would receive a $10 gift check within eight weeks of the company's receipt of gift check requests, good at the electronics retailer Best Buy for $10 off of any pre-recorded videotape or compact disc. The complaint alleges that in many instances these checks were sent to purchasers one-to-three months late.

UMAX Technologies, Inc. is a wholesale distributor of computer scanners, digital cameras and personal computers. According to the Commission's complaint, UMAX deceptively advertised rebate offers made in connection with its sale of computer scanners. Specifically, the FTC alleged that UMAX represented that purchasers of its Astra 1220P scanner, for example, would receive a cash rebate of $30 - and that purchasers of its Astra 1220S scanner would receive a cash rebate of $50 - within 12 weeks of the company's receipt of the rebate request. The complaint alleged, however, that in many instances purchasers received their rebates one-to-five months late.

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