BILL ANALYSIS
SB 1154
Page 1
Date of Hearing: June 22, 2004
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Lou Correa, Chair
SB 1154 (Figueroa) - As Amended: June 16, 2004
(As proposed to be amended)
SENATE VOTE : 24-13
SUBJECT : Consumer rebates.
SUMMARY : Regulates the offering and fulfillment of rebates for
consumer products, including requirements that consumers have a
minimum of 30 days to submit a rebate request and companies have
a maximum of 60 days to deliver the rebate, as well as
restrictions on what evidence and personal information a company
may require the consumer to provide. Specifically, this bill :
1)Requires a company offering rebates to allow a minimum of 30
days from the eligibility date for the consumer to submit the
rebate request.
2)Requires a company to mail the rebate check or otherwise
fulfill the terms of the offer no later than the same number
of days provided to consumers to submit their rebate request,
and no later than 60 days in any event, after either of the
following:
a) Upon receipt of a valid request; or,
b) Upon completion by the customer of the required minimum
service period and the receipt of a valid request.
3)Prohibits a company from requiring a consumer to provide more
than all of the following as a proof of purchase for a
consumer rebate: a receipt, any universal product code or
other packaging element, and the consumer's name, address,
telephone number, membership number, and signature.
4)Prohibits a company offering a rebate from requiring any
personal information other than the consumer's name, address,
telephone number, membership number, and signature. A company
would be permitted to require an email address rather than a
telephone number if the product was purchased over the
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Internet.
5)Requires a company to provide the rebate redemption form
directly with the product, and at the same time and location
as the purchase. Companies providing rebates must provide
retailers with sufficient quantities of rebate forms or a
means to create them. In the case of Internet sales, a
generally accessible Web page may be used to provide the form.
In the case of telephone sales, a generally accessible Web
page may be used to comply, as can a form sent, upon request,
via regular mail, electronic mail, or telecopy.
6)Requires a company to accept a copy of a receipt as sufficient
unless the consumer is provided with a duplicate original
receipt.
7)Permits a company to require a consumer to write the model
number or other identifying information on the rebate form
only if the receipt does not provide that information.
8)Requires a rebate offer to conspicuously disclose a telephone
number on the rebate form so that a consumer can check on the
status of his or her rebate request.
9)Permits companies to use a Web site or other electronic means
to provide consumers with a means to check the status of his
or her rebate if the product was purchased over a Web site
operated by the company.
10)Exempts from the provisions of this bill certain rebates
offered by gas or electric corporations, or local
publicly-owned electric utilities.
11)Declares that this bill shall become operative on July 1,
2005.
12)Declares that this bill shall not impose any obligation to
recall any product or service shipped prior to the operative
date. Any rebate offer in effect prior to the operative date
shall be deemed in compliance.
13)Defines the term "consumer rebate."
EXISTING LAW : There are no state or federal laws that
specifically address consumer rebates. However, the California
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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 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
that failed to deliver rebates within the time specified by the
rebate offer.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . This bill is intended to regulate the use
of rebates for consumer products so that consumers can send
rebate requests and receive their checks within a reasonable
amount time and without unnecessary requirements for
documentation or personal information. This bill is sponsored
by Consumers Union.
In general, this bill would enact a number of protections for
consumers requesting a product rebate, including: a minimum of
30 days for a consumer to request a rebate and an equal amount
of time (not to exceed 60 days) for the company to send it;
restrictions on the evidence and personal information a company
can require a consumer to submit; a requirement for the
disclosure of a contact point (telephone or electronic) to check
the status of a rebate; and a requirement that rebate forms be
provided with the product at the time of purchase. In order to
make these new requirements practicable for the companies,
rebate offers and products shipped before the operative date of
July 1, 2005 are exempted.
Rebate programs and consumer complaints . 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
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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.
"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 notes that "[t]here are various reasons for
denial including consumers not following the directions exactly
or not providing all of the specified information. It is
unfortunate that while promising good value, rebates often
result in significant consumer frustration." Furthermore, the
FTC expected to receive 1,700 complaints last year on rebates,
which is up 70% from the three previous years. In California,
the Department of Consumer Affairs reports that they have
received 384 rebate-related complaints over the past three years
(2001-2003).
Arguments in support . According to the author, "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."
Consumers Union argues that "[w]hen 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. SB 1154 attempts to ensure that these
consumer expectations are met."
Arguments in opposition . Because of recent and proposed
amendments, the current status of most opponents is unknown.
However, opponents have previously offered a number of arguments
against the bill, some of which are described below.
The California Manufacturers and Technology Association (CMTA)
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has argued against this bill on multiple grounds. First, they
view it as unnecessary because of existing contract laws and
federal and state consumer protection laws. Second, they
believe that this bill unnecessarily restricts "the ability of
companies to contract with consumers when making rebate offers.
The proposed limitation on collection of personal information
would restrict companies from using rebate offers as
compensation for market research." Third, they fear this bill
would unduly burden nationwide rebate programs, noting that
state-specific legislation could cause conflicts for companies
among the various states and leading to the exclusion of
California from rebate offers, "again harming competition and
consumers in California." CMTA also expressed concerns about
increased fraud, degraded customer service, and the difficulty
of enforcement.
Young America Corporation, a rebate fulfillment and promotions
service provider, opposes this bill for three reasons: First,
they argue that substantial consumer protections for consumer
rebates already exist, noting that California's Unfair
Competition Law and the Federal Trade Commission have been used
in the past to redress consumer complaints about rebates.
Second, they argue that this bill would increase their risk of
fraud, in part because the short turnaround time required by
this bill would make verification of claims much more difficult.
Finally, Young America opposes this bill because of the
additional complexity and cost it would impose on national
retailers who must comply with a California-only law. They
argue that the likely result of this would be a reduction in the
number of rebates offered to California consumers.
Dell Computers, which has a "neutral" position on this bill, has
suggested one substantial change related to enforcement. Dell
recommends that this bill be amended to allow a company to
assert as a complete and affirmative defense in a civil lawsuit
(particularly an Unfair Competition claim) that the violation
was unintentional and that the company had adequate training and
procedures in place to ensure compliance with the provisions of
this bill. This would "ensure that in those RARE instances
where an unintentional mistake has been made due to human error,
mail error delivery, etc. a company would not have to deal with
frivolous law suits."
Recent and proposed amendments . This bill was recently amended
as a result of lengthy discussions between the author, sponsor,
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and opponents. The sponsor notes that "SB 1154 has been
significantly amended at the request of many businesses. These
amendments address the legitimate workability concerns voiced by
businesses without compromising the integrity of the
legislation." Because of these amendments, the current
opponents of this bill could not be fully confirmed. In order
to further respond to concerns about this bill, three additional
amendments are proposed, which are reflected in this analysis.
Confirmed neutrality . The following groups have confirmed their
neutrality on this bill, as of June 18, 2004: California
Retailers Association, Grocery Manufacturers of America, Bayer
HealthCare LLC, Dell, Nextel, Apple, Sprint, Cellular
Telecommunications and Internet Association, SBC, RiteAid, AT&T
Wireless, and T-Mobile.
REGISTERED SUPPORT / OPPOSITION :
Support
Consumers Union (sponsor)
Consumer Federation of California
California Alliance for Consumer Protection
American Federation of State, County, and Municipal Employees
Opposition
(See "Recent and proposed amendments" in above Comments)
American Electronics Association (verified 6/18/04)
California Manufacturers and Technology Association
Cricket Communications
Global Fulfillment Services
Promotional Marketing Association
Young America Corporation
Analysis Prepared by : Hank Dempsey / B. & P. / (916) 319-3301