Rebates May Come Back to Bite Retailers
By George Anderson
Ouch! Right in the bottom line, where it hurts.
A new consent order announced on March 11 by the Federal Trade Commission says retailers may be held responsible if manufacturers do not honor rebate programs.
The ruling came about after the FTC investigated complaints consumers were not receiving rebates for computer products sold through CompUSA. During 2001 and part of 2002, the computer retailer was advertising items for sale from a manufacturer in Irvine, Ca., QPS.
According to a report in the San Jose Mercury News, “QPS consistently failed to make payments and CompUSA did nothing, despite knowing about the problem, until shortly before QPS declared bankruptcy in August 2002.”
CompUSA has settled with the FTC by agreeing to pay all overdue QPS rebates while agreeing to “not make any representation . . . about the availability of any manufacturer rebate unless (CompUSA) has an established record with the manufacturer demonstrating that the manufacturer has consistently paid rebates in a timely manner.”
If the retailer does not have a track record with the manufacturer, CompuUSA also agrees to conduct “a reasonable financial analysis of the manufacturer and that financial analysis demonstrates the manufacturer’s ability to timely pay the rebates being offered.’
Lydia Parnes, action director of the FTC’s Bureau of Consumer Protection, said in a released statement, “The message to retailers is clear — the FTC is on the beat and will take action if you advertise manufacturers’ rebates when you know they aren’t honoring their promises.”
Moderator’s Comment: Should retailers be responsible for rebates if manufacturers fail to honor them? Will the FTC’s action reduce the amount of rebates
offered?
Scott Krugman, a spokesperson for the National Retail Federation told the Mercury News that retailers have received the FTC’s message.
“It’s a wake-up call to pick your partners wisely,’ he said. –
George Anderson – Moderator
This is really a kind of apples and oranges question. In this case the retailer knew the manufacturer’s rebates were no good and continued to represent that they were. It comes as no surprise they should be held culpable. As for the food industry, don’t we have a model in coupon chargebacks?
We all shop where we think we can save money. Rebate offers are enticing advertisement that push our money-saving buttons. Buying decisions are made based on the information given to the consumer by the retailer. Companies know the effect of the offers they run.
Two years ago, I purchased a TiVO from a reputable retailer. It had a $100 rebate attached. Still waiting for my rebate. No response to inquiries. Five years ago, I purchased a cell phone with a $50 rebate attached. You guessed it, still waiting for my rebate. No response to inquiries. I see a pattern here. There should be integrity in your business. If you pick unscrupulous partners, should your customers pay?
I doubt that this will have any effect on rebates offered by retailers in general. CompUSA was just caught using very poor judgment and it will hurt them, in my opinion, and should. This will cause major damage to their reputation and integrity with their customers. It looks like they will be joining Circuit City and others in watching their customers leave to go to Best Buy, Costco and Sam’s in addition to online. Mistakes like this will accelerate that migration.
After not getting a single rebate honored last year by H&R Block for purchasing Tax Cut Deluxe (federal, state, deduction pro software packages), which I bought at CompUSA, I decided to have my taxes prepared for me instead this year.
The reasons cited for not honoring the rebates were all different:
– Tax Cut Federal: Product bought outside of rebate period (which was not true, as the computer generated register receipt showed otherwise)
– Tax Cut State: Wrong product UPC mailed. (Again, not true. The proper barcode of the product was mailed.)
– Deduction Pro: Ineligible for rebate participation due to having already participated in the rebate for Tax Cut Deluxe (which they told me I wasn’t eligible for due to the purchase date issue).
Rather than dicker with H&R block over the $40 or so dollars I was entitled to, I let the matter go and decided instead to just never purchase their products again.
I don’t feel it’s proper to stick the retailer for footing the bill on mfg. rebates unless they falsely and knowingly advertise rebates that are non-applicable or already expired.
It does seem that the computer industry uses rebates to advertise lower prices and attract consumers rather than to collect the price discount and pass it along to consumers for the period of the ad. The FTC ruling could simply change the way that these promotions are structured to make it simpler for the consumer to get the advertised price.
I hope that the ruling does distinguish between retailers that are advertising the rebate to drive traffic and retailers that simply attempt to assist consumers with getting the rebate offered on the package.
Yes, retailers should be responsible. Reputable retailers will give you the rebate at the cash register rather than making the customer fumble through receipts, proof of purchase codes, and send it off to some PO Box in El Paso. If a retailer does not give the rebate in the store – run – don’t ever shop there. The retailer should offer the rebate to the customer at the store. Then the retailer should be responsible for recovering the rebates from the manufacturer. The manufacturer would benefit by only having to process rebates from a few thousand stores rather than hundreds of thousands of customers. It would be more efficient for the customer and the manufacturer. Just like when you buy a car or when you use your loyalty card at the supermarket. It’s the retailers job to deal with rebates.
I’m glad that this long-standing scam has finally come to the FTC’s attention. But presuming the manufacturer is still in business, retailers can just deduct off invoice. With an added fee. Right?
The comments above demonstrate why we’re doing more coupon promotions than ever before for companies that used rebates heavily in the past. Rebate promotions that depend on consumers forgetting to claim them or being denied at an appalling rate are not an ideal way to move product. They can tout high dollar amounts to attract buyers only because of the “breakage” in the process, and leave what should be happy customers angry at both the manufacturer and the retailer. They are expensive to process as well. Coupons (or “instant rebates” if you will) can generate the same number of units moved at lower face values and lower processing costs.
I do believe retailers should bear some responsibility for only promoting rebates from manufacturers they believe will honor them. There should be some duty to do due diligence; after all, they are profiting from the sale as well.
As in any contractual agreement, it is critical to validate the supplier that a retailer buys from, and set up specific guidelines on the rebate program. Given a long lag time from consumer purchase to the processing of the rebate by the consumer, large rebate amounts should be monitored through the redemption house, or a set a side reserve agreement.
The food industry doesn’t encounter these rebate issues given the low dollar level, and retailers knowing their suppliers’ history.
Someone has to be held responsible for honesty in manufacturer rebates and retailers are the most accessible and have the most to lose through noncompliance. They also have the most control and the highest stake in customer satisfaction.
Often, smart retailers will cave in and provide a manufacturer rebate to a respected (or vocal) customer. This worked for me regarding a $90 mail-in rebate on a Motorola mobile phone purchased through AT&T Wireless. After three fruitless attempts to even secure a rebate form from Motorola, I asked AT&T Wireless for help. They immediately offered to deduct the $90 from my bill. Wow!
Consumer groups have recently taken the following approach to drawing retailer attention to their dissatisfaction with manufacturer mail-in rebates: 30-40 shoppers enter a store offering a substantial mfg. rebate on a high-ticket item. They remove every unit of the item from the shelf and line up at the checkout counter. One by one their orders are processed, and one by one they ask why the rebate hasn’t been reflected in their purchase price. After a lengthy explanation to each customer, then the reversal of their purchase, the next shopper steps forward to force the store to repeat the same process all over again. It’s getting their attention.
The only rebate that should be legal is an instant rebate at the register. Manufacturers are only being deceptive when they offer mail in rebates. They know that by placing a time fuse on the offer that a certain % of consumers will disqualify themselves. What these idiots don’t take into consideration is the fact that consumers have memories. There are several manufacturers that I will never consider doing business with again due to rebate problems I have experienced.
I guess the marketing genius that came up with fused rebates spent his/her formative years working for one of the major airlines in their marketing department. I know of nowhere else where marketing practices this shoddy could have been learned.
The retailers use the rebates as a marketing tool to bring the customers into their stores and buy their products. Of course they should be responsible for honoring those rebates.
Having dealt with the cumbersome rebate process as a consumer (Apple requires you to cut the bar code off of the box the computer came in – the box is huge and made of heavy-stock cardboard; the bar code is on the bottom left corner, and there is no hope of ever using that box again), I would never purchase something where the rebate doesn’t happen at the source of purchase.