Rebaters face more laws, enforcement

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Gonzalo Mon
Gonzalo Mon

As consumers become more cautious with their spending, some companies are trying to lure them back into stores with rebate offers. These offers have recently come under increased scrutiny as states pass new rebate laws and regulators challenge companies who fail to comply.

Laws in various states dictate how rebates can be advertised. For example, some states prohibit advertising a post-rebate price unless the price paid at the register is clearly disclosed. Even in states where such a disclosure isn't specifically mandated, the disclosure is arguably necessary to comply with advertising laws. Thus, it's always a good idea to highlight the pre-rebate price. Other states have more stringent advertising requirements, so check with your legal counsel before advertising a rebate.

Regulators have also become more active in challenging rebate offers. This year alone, the Federal Trade Commission entered into settlements with two companies for failing to mail rebates within the amount of time promised. And, the New York Attorney General alleged that AT&T's rebate advertisements highlighted the post-rebate price, but hid the pre-rebate price in fine print. The AG also argued that AT&T didn't adequately disclose that rebates would be fulfilled using debit cards that were subject to various restrictions. To settle the investigation, AT&T agreed to pay more than $2.63 million to consumers.

Another area where we're likely to see more enforcement is escheat. Under escheat statutes in various states, if a consumer does not cash a rebate check within a specific time, the check may be presumed "abandoned" and the issuer may be required to turn the funds over to the state. As states face budget shortfalls, many are looking for alternate sources of revenue, including escheat. There is currently a lawsuit pending in Iowa regarding escheatment of uncashed rebate checks. Rebate issuers should pay close attention as the case develops.

These developments indicate that rebates will continue to be subject to increased scrutiny. As states pass new laws and challenge rebate issuers, companies need to pay attention and be able to react quickly to changes in the legal landscape.

gmon@kelleydrye.com  

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