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CompUSA fingered by feds over rebates

Firm ordered to pay up
Mon Mar 14 2005, 06:39
EVER WONDER about those Big Box rebate offers on computer kit being too good to be true? Still waiting for your rebate cheque to arrive? The US government is starting to move against companies that aren't paying up on time. On Friday, March 11, the United States Federal Trade Commission ( here) settled charges against CompUSA and the offices of peripherals manufacturer QPS. Inc for "allegedly failing to pay, in a timely manner, thousands of rebates for products sold under the CompUSA and QPS brands."

Under terms of the settlement, CompUSA will pay consumers who purchased QPS products at CompUSA their due or past-due rebates, typically ranging from $15 to $100 each. It's the first time the FTC has charged a retailer over its rebate advertising practices. The administrative agreement settles all federal charges against CompUSA and two QPS principals.

In the CompUSA complaint, the FTC alleged that CompUSA engaged in "deceptive and unfair practices relating to rebate offers made for both its own branded products, as well as QPS products that it marketed and sold." CompUSA was involved with the creation of the rebate program with QPS, but CompUSA said QPS-funded rebates would be mailed to buyers of QPS products within six to eight weeks.

Instead, between September and December of 2001, many consumers experienced delays between one to six months before getting a rebate check - some didn't get checks at all.

The practice continued between January and July 2002 with "thousands" never receiving rebates from QPS. The FTC contends that CompUSA knew about the problems with the rebate scheme, but continued to advertise them up until QPS filed for bankruptcy in August 2002.

If that wasn't bad enough, the FTC also alleged that CompUSA promised it would deliver rebates from $3 to $100 within six to eight weeks, but failed to do so between September 2001 and June 2002. Instead, many people experienced delays between a week to more than three months before getting their money back. Finally, CompUSA also "unfairly unilaterally extended the time period in which it would deliver the rebates" even after receiving legit rebate requests.

For its sins, CompUSA has a lot more bookkeeping to contend with. First, CompUSA can't represent the time it will mail any cash rebate it will fund, unless it thinks it can fund it. The company is also prohibited from misrepresenting any "material terms" of any CompUSA rebate program and it can't advertise any manufacture's rebates until it has an established record of the manufacturer consistently paying the rebates in a timely matter.

If that doesn't exist, CompUSA has to conduct a financial analyst of the manufacturer's rebate plan to make sure they can pay up. Finally, CompUSA has to cover QPS rebates of items bought at CompUSA and which are past due. CompUSA will also have to provide a copy of the FTC order to manufacturers currently offering exclusive rebates at the chain and to anyone with an exclusive in the future.

Analysts are speculating that this ruling may prove to make the whole rebate scheme slim down in the future, since it puts Big Box retail chains on the hook for paying the rebates of their suppliers if the supplier can't pay up. Estimates are that about 30 per cent of consumers actually redeem their rebates, with the lower the dollar amount making it less likely that someone will bother to fill out the paperwork. Rebates above $65 can have a 66 per cent redemption rate. µ


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