BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1154|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: SB 1154
Author: Figueroa (D)
Amended: 4/12/04
Vote: 21
SENATE BUSINESS & PROFESSIONS COMMITTEE : 5-0, 4/19/04
AYES: Aanestad, Cedillo, Machado, Murray, Figueroa
NO VOTE RECORDED: Brulte, Vincent
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Consumer rebates
SOURCE : Consumers Union
DIGEST : This bill enacts provisions of law regulating
consumer rebates, including requiring companies to allow
consumers a minimum of 60 days to submit a rebate request,
requiring companies to send a rebate check 30 days after
receiving the rebate request, and requiring rebates offered
directly by the retailer (rather than the manufacturer) to
be redeemed at the time of purchase.
ANALYSIS : There are no state or federal laws that
specifically address consumer rebates. However, the
California Unfair Practices Act prohibits unfair
competition, which is defined in part as any unlawful,
unfair or fraudulent business act or practice and unfair,
deceptive, untrue or misleading advertising.
The Federal Trade Commission Act has been used by the
CONTINUED
SB 1154
Page
2
Federal Trade Commission (FTC) to take action against the
mail-in rebate industry. Title 15, United States Code,
Section 45, prohibits unfair methods of competition and
unfair or deceptive acts or practices in or affecting
commerce, and the FTC has used this law in the past, for
example, to take action against companies who failed to
deliver rebates within the time specified by the rebate
offer.
This bill:
1. Requires a copy of a receipt to be sufficient proof of
purchase for a rebate request, unless the company
offering the rebate has an agreement with its retailers
to provide consumers with a duplicate original receipt,
in which case the company is permitted to require an
original receipt.
2. Permits a company to reject a rebate request based upon
a copy of a receipt only when the company has a
reasonable belief that the consumer submitting the
rebate request is attempting to commit fraud or has
already received the offered rebate.
3. Requires a rebate offer to conspicuously disclose a
telephone number on the rebate form that a consumer may
call to check the status of his or her rebate request.
4. Requires a rebate offered directly by a retailer on a
product the retailer sells to be redeemed at the time of
the product's purchase.
5. Permits a company to require the consumer to write the
model number or other identifying number on the rebate
form only if the receipt does not reveal the product
name, type, model, or other identifying number.
6. Requires a company that offers a rebate to allow at
least 60 days from the time of purchase for the rebate
request to be submitted by the consumer.
7. Requires a company to mail the rebate check no later
than 30 days from the date the company receives a valid
rebate request.
SB 1154
Page
3
8. Prohibits a company offering a rebate from requiring
personal information other than the consumer's name,
address, and home phone number.
9. Requires a company offering a rebate to provide a rebate
redemption form with the product, or at the time and
place the consumer purchases the product.
10.Exempts from the provisions of the bill rebates and
rebate programs that are offered by gas or electric
corporations through their energy efficiency programs
under the jurisdiction of the State Public Utilities
Commission.
Comments
Purpose of the bill . According to the author's office, the
use of rebates as a marketing tool has exploded over the
past few years, and with it, the number of complaints from
consumers regarding rebates has increased. Problems with
rebates range from very short deadlines to submit the
rebate form (as little as two weeks is a common deadline)
to a maze of specific instructions buried in the fine print
on the exact way to submit a rebate request. Even if you
follow the exact instructions and get the rebate form in
the mail before the deadline, it often takes several months
to receive a check.
This bill sets reasonable timelines for consumers to submit
rebate requests and for companies to make good on their
offers. This bill also standardizes and simplifies the
process by limiting the information that a company can
require on a rebate form and requiring rebates offered
directly by the retailer to be redeemable immediately at
the time of purchase. Specifically, this bill contains the
following provisions:
1. If a rebate is offered directly by the retailer, it must
be redeemable at the time of purchase.
2. The rebate offer must allow at least 60 days from the
date of purchase for the consumer to submit the rebate
form.
SB 1154
Page
4
3. The check must be in the mail within 30 days of
receiving the rebate form.
4. The rebate offer must disclose a phone number to check
the status of the rebate.
5. The rebate form must be supplied with the product, or at
the time and place of purchase.
6. The rebate form cannot require personal information
beyond name, address, and home phone.
Additionally, copies of the receipt would be permitted
(instead of only the original), and the consumer would only
have to write down the model number on the rebate form if
the receipt doesn't include the name of the product.
Background . Mail-in rebates have grown increasingly
common, especially for consumer electronics. Manufacturers
use rebates to lower prices temporarily, to increase market
share, and sometimes to gain demographic information about
customers. Sellers frequently outsource their programs,
thereby shifting their rebate responsibility to a third
party. Although redemption rates vary widely depending on
the value of the rebate, according to the Aberdeen Group, a
Boston-based market research firm, only about 40 percent of
qualifying buyers actually redeem a rebate check. Another
40 percent of rebate offers are never even submitted, and
the remaining 20 percent are disqualified.
Consumers Union, which is sponsoring this bill, states that
the FTC expected to receive 1,700 complaints last year on
rebates, which is up 70 percent from the three previous
years. Here in California, the State Department of
Consumer Affairs reports that they have received 384
rebate-related complaints over the past three years
(2001-2003).
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/27/04)
SB 1154
Page
5
Consumers Union (source)
American Federation of State, County and Municipal
Employees, AFL-CIO
Consumer Alliance for Consumer Protection
Consumer Federation of California
OPPOSITION : (Verified 4/27/04)
AT&T Wireless
California Manufacturers & Technology Association
California Retailers Association
Cellular Telecommunications & Internet Association
Cricket Communications
Global Fulfillment Services
Grocery Manufacturers of America
Promotional Marketing Association
SBC
ARGUMENTS IN SUPPORT : This bill is sponsored by
Consumers Union (CU), and indicates that a market research
firm estimated that more than two-thirds of all personal
computer offers at retail included a rebate in 2002, up
from 53.5 percent in 2001. CU states that rebate offers in
2002 amounted to $10 billion. Such growth in the offerings
of rebates demonstrates that retailers are profiting from
them and consumers are responding to the offers. CU argues
it is unfortunate that while promising good value, rebates
often result in significant consumer frustration. CU
states that it has received unsolicited complaints from
consumers whose rebate requests were rejected based on
providing the wrong label from the box, or who simply never
received the rebate at all for no apparent reason. CU
states that when a consumer purchases a product that
includes a rebate offer, the consumer expects to receive
the rebate in a timely manner without an unreasonable
amount of hassle, and this bill attempts to ensure that
these consumer expectations are met.
The California Alliance for Consumer Protection (CACP) also
supports this bill, stating that consumers are having
problems redeeming officially announced and recognized
rebates, especially those offered by electronics and
computer companies. CACP, however, argues that this bill
should be amended to completely restructure the rebate
SB 1154
Page
6
system, including requiring that the rebate system be
handled by a neutral third party, or a "rebate bank," and
requiring companies to post a bond to ensure there is
enough money to cover the total amount of the rebate offer.
ARGUMENTS IN OPPOSITION : The following group of
associations and companies jointly signed a letter in
opposition: the California Retailers Association, the
Cellular Telecommunications & Internet Association, the
Grocery Manufacturers of America, the Promotional Marketing
Association, AT&T Wireless, and Global Fulfillment
Services. The opponents state that while they support the
goal that customers receive the rebates they are entitled
to, the practical effect of this bill will be to deny
customers the financial benefits that the rebates provide.
The opponents state that should this bill become law, many
businesses may determine that the new requirements are so
problematic they will not make rebate offers in California.
For example, the opponents state that the requirement that
a company accept a copy of a receipt as proof of purchase
is a step backward for companies trying to combat the real
problem of fraudulent rebate redemption, which involves
high quality copies of an original receipt. The opponents
offered a number of suggested amendments to this bill,
including removing the requirement that retailer rebates be
redeemed at the time of purchase, and extending the time
for a company to mail a rebate check to 90 days (rather
than 30 days).
This bill is also opposed by SBC, which states that it has
two concerns with this bill: (1) the need for legitimate
information from the customer in order to process the
rebate and prevent fraud, and (2) maintaining the ability
to impose additional promotional requirements when offering
rebates. With regard to the first concern, SBC states that
obtaining serial numbers from the product is essential
because they can be tracked uniquely and prevent fraud.
As for maintaining the ability to impose additional
promotional requirements, SBC states that companies should
have the ability to use promotional rebates, such as
requiring customers to turn in their old cell phone in
order to receive a rebate for a new phone.
Similarly, Cricket Communications opposes this bill because
SB 1154
Page
7
it will cause the termination of Cricket's rebate program
for cellular phone service. Cricket uses rebates as an
incentive to stay with their service, and so customers do
not qualify for their rebates until they have stayed on
service for a minimum of 90 days. Cricket urges amendments
to allow for this type of rebate offers.
The California Manufacturers & Technology Association
(CMTA) states in opposition to this bill that it is
unnecessary because existing federal and state consumer
protection laws already require companies to comply with
reasonable terms and conditions outlined in the rebate
offers. CMTA states that this bill would greatly increase
a company's exposure to fraud, by limiting proof of
purchase to a copy of a receipt. CMTA additionally states
that this bill limits the ability of companies using rebate
offers as compensation for market research by prohibiting
the collection of personal information. Finally, CMTA
argues that vague terms in this bill presents numerous
enforcement problems, such as a lack of a definition of a
rebate, and that this bill presents interstate issues,
since companies most often make nation-wide rebate
programs.
CP:mel 4/27/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****