First FTC Action Against Rebate Foot-Draggers

First FTC Action Against Rebate Foot-Draggers

The Federal Trade Commission has settled two cases against companies that failed to live up to rebate promises made to consumers of computer peripheral products. It's the first time the FTC has challenged such conduct as both deceptive and unfair in violation of the FTC Act.

The cases were against Philips Electronics North America Corp. and Tim Wofford, president and sole shareholder of the recently bankrupt OKie, Inc., a company that did business as "Prime Peripherals."

"Rebates that begin as a big draw for consumers often end up as a big drag," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "Some companies are quick to offer attractive rebates, but are slow to send them out, and often make them so difficult to redeem that consumers simply give up."

Further, he stated that, "In both of the cases announced today, the Commission alleged that the sellers changed the rules of the game while it was being played. The FTC will use all of its powers - including its power to allege unfair business practices - to challenge such conduct."

According to the FTC, both Philips and Wofford misrepresented the time in which they would deliver rebates, in addition to unilaterally modifying the terms of their rebate programs after they had already begun.

Under the consent orders reached with the Commission, Philips and Wofford would be required to comply with the FTC Act and the Commission's Mail or Telephone Order Rule (Mail Order Rule) in the future. Philips also would be required to provide redress to consumers whose pending rebate requests are either due or past due.

The FTC's complaint against Philips states that, between January 2001 and January 2002, its division, Philips Consumer Electronics North America, promised a rebate delivery time of eight weeks, and, in many instances, extended this delivery time without seeking agreement from consumers. Over 50,000 consumers waited up to six months or more beyond the promised eight weeks before receiving their rebates.

The complaint against Wofford alleges a similar failure to live up to rebate delivery promises made for OKie, Inc.'s "Prime Peripherals" brand products - noting that in many instances, Wofford's customers either experienced delays ranging from one to six months, or never even received their rebates. The Wofford complaint also alleges facts indicating that the respondent made it difficult for consumers to redeem their rebates by modifying or failing to disclose material terms and conditions of rebate offers. Specifically, Wofford rejected rebate coupons that did not include a phone number, fax number, or email address on the rebate coupon - without informing customers that they would be required to have and disclose all of this information to be eligible to receive a rebate.