BILL ANALYSIS
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|Hearing Date:April 19, 2004 |Bill No:SB |
| |1154 |
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SENATE COMMITTEE ON BUSINESS AND PROFESSIONS
Senator Liz Figueroa, Chair
Bill No: SB 1154Author:Figueroa
As Amended:April 12, 2004 Fiscal:No
SUBJECT: Consumer Rebates.
SUMMARY: 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.
Existing law:
There are no state or federal laws that specifically address
consumer rebates. However, the California Unfair Practices Act
As 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 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
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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.
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 Public Utilities
Commission.
FISCAL EFFECT: Unknown
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COMMENTS:
1.Purpose. According to the Author, 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.
SB 1154 sets reasonable timelines for consumers to submit rebate
requests and for companies to make good on their offers. SB
1154 will also standardize and simplify 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, SB 1154 contains the following provisions:
If a rebate is offered directly by the retailer, it
must be redeemable at the time of purchase.
The rebate offer must allow at least 60 days from
the date of purchase for the consumer to submit the
rebate form.
The check must be in the mail within 30 days of
receiving the rebate form.
The rebate offer must disclose a phone number to
check the status of the rebate.
The rebate form must be supplied with the product,
or at the time and place of purchase.
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.
1.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
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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 Federal Trade Commission expected to receive 1,700
complaints last year on rebates, which is up 70% from the
three previous years. Here in California, the Department
of Consumer Affairs reports that they have received 384
rebate-related complaints over the past three years
(2001-2003).
2.Arguments in Support. This bill is sponsored by Consumer
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% 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 SB 1154 attempt 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
system, including requiring that the rebate system be
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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.
3.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 won't 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
it would cause the termination of Cricket's rebate
program for cellular phone service. Cricket uses rebates
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as an incentive to stay with their service, and so
customers don't 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 that this bill 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 would present 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.
SUPPORT AND OPPOSITION:
Support:
Consumer Alliance for Consumer Protection
Consumer Federation of California
Consumers Union (sponsor)
The American Federation of State, County, and Municipal
Employees, AFL-CIO
Opposition:
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
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Consultant:Vincent D. Marchand