Antitrust Lawyer Blog Commentary on Current Developments

FTC Settles Two Complaints Charging Rebate-Fulfillment Violations

On April 27, the FTC settled charges against two companies for unfair and deceptive rebate practices. The FTC’s complaint against Soyo, Inc., a Nevada corporation, alleges that most of Soyo’s rebates were delivered late – in some cases, consumers had to wait a year or longer for their checks to arrive. The FTC’s complaint against the InPhonic, a Delaware corporation, alleges that, in connection with its advertised rebate offers, among other things, the company failed to provide promised documents needed to obtain rebates, to send out rebate checks in the time promised, and to disclose adequately certain material terms and conditions prior to purchase. The settlements bar the companies from similar violations in the future and require them to pay outstanding rebates to affected consumers.

Soyo, Inc. The FTC’s complaint alleges that Soyo made deceptive claims about its rebate program for computer motherboards and other consumer electronics products. After an investigation, the FTC found that thousands of consumers had submitted valid rebate requests since 2004 and had experienced delays, some for one year or more, in receiving rebate checks. Specifically, between October 2004 and March 2006, more than 95 percent of Soyo’s rebate checks were delivered to consumers later than 12 weeks after the date on which a valid request was postmarked. The average delivery time for the company’s rebates to consumers was about 24 weeks. The company was misrepresenting to consumers that the rebate checks would be mailed within a reasonable time, which was within 10-12 weeks after the postmark date of the program.

The FTC’s order prohibits Soyo from misrepresenting the time in which it will mail a rebate, as well as from failing to provide a rebate within the time specified, or if no time is specified, within 30 days. The order also prohibits Soyo from misrepresenting any material terms of a rebate grogram and contains a redress program that requires Soyo to pay out all the valid rebate requests is has that are past due.

InPhonic. Inc. The FTC charged InPhonic, an online retailer that offers substantial rebates on mobile phones bought in conjunction with wireless phone service, with making deceptive claims because the company did not inform the consumers that a rebate could not be requested until at least three to six months, and would then have to wait at least six to nine months after their purchase to get their rebate. According to the FTC, InPhonic also misrepresented that consumers could resubmit their rebate applications in the event that InPhonic deemed them incomplete. In addition, the company did not clearly state how many bills had to be submitted with the rebate application and allegedly failed to provide some consumers with the appropriate material to submit a rebate application.

The FTC’s order, settling the charges against InPhonic, prohibits the company from misrepresenting any material terms for rebates, requires InPhonic to disclose all terms related to rebates prominently on any rebate form. Further, the company must provide any rebate within the time specified, and if there is no time specified, within 30 days. Finally, the order calls for a redress program, under which all consumers who applied for a rebate and were denied due to InPhonic’s deceptive and unfair practices will be given their rebate.
The Commission vote to accept the complaints and consent agreements in each case was 5-0.

Camelia Mazard
(202) 589-1834
cmazard@dbmlawgroup.com