Over the past few years, various states have passed new laws regulating rebates and, as a result, offers that were lawful a few years ago now violate laws in some states. But because these laws have received little press, many marketers aren’t aware of the new requirements. Marketers who simply recycle offers without adjusting to new laws may find themselves at risk of being challenged by regulators.
Many rebate laws dictate what marketers can, cannot and must say in ads. For example, laws in New York and Oklahoma prohibit advertisers from mentioning an item’s post-rebate price (the price after the rebate is deducted) unless the pre-rebate price (the price consumers pay at the register) is clearly disclosed. Even in states where such a disclosure is not specifically mandated by rebate laws, this information is arguably necessary to comply with disclosure requirements under general advertising laws.
Other states have more stringent requirements. Connecticut and Rhode Island both prohibit companies from advertising a post-rebate price unless the rebate is given to consumers at the time of purchase. Under these statutes, it would be unlawful to disclose, for example, that a product costs $5 at retail, but will cost $4 after a mail-in rebate. You can, however, advertise that the product costs $5 and that a $1 mail-in rebate is available (as long as you don’t mention the final price).
In addition to price disclosures, regulators have been focusing on how rebates are fulfilled. On the federal level, the Mail Order Rule requires companies to mail rebates within the time promised or, if no time was promised, within 30 days. States have been adding additional requirements. For example, laws in New York and North Carolina state that certain rebates must be fulfilled within 60 days. And Texas enacted a law similar to the Mail Order Rule but also adds a requirement that companies must give consumers the opportunity to correct deficient rebate requests.
In recent years, a number of companies have been challenged for failure to disclose terms and fulfill rebates on time. For example, last year, the Federal Trade Commission challenged Soyo and InPhonic over their rebate practices. The FTC alleged that most of Soyo’s rebates were delivered late — in some cases, consumers had to wait over a year for checks to arrive. And the complaint against InPhonic alleged that the company failed to disclose material terms, provide necessary rebate forms, and mail rebates on time.
Consumers are also paying attention to how companies market rebates. Last year, consumers filed a class action lawsuit against AT&T over the company’s $100 rebate offer. Although consumers received the promised rebates, instead of getting rebate checks, they received Visa Rewards cards that were subject to numerous restrictions and expired in four months. The plaintiffs claim that these material terms were not adequately disclosed prior to purchase.
Companies that offer rebates need to ensure that their ads clearly disclose all material terms and comply with laws regarding post-rebate prices. And it is important to ensure rebates are fulfilled in a timely manner. But it isn’t enough to set up a rebate system that complies with current laws and forget about it. As states continue to pass new laws in this area, companies need to pay attention and be able to react quickly to changes in the legal landscape.
Gonzalo E. Mon is an attorney in Kelley Drye & Warren’s Advertising and Marketing Law practice. You can reach him at [email protected] or 202.342.8576.
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