It is the first time that the US consumer watchdog has charged a nationwide retailer over its rebate advertising practices, including its advertising of manufacturer mail-in rebates.
The practice of using rebates or cashbacks to encourage consumer purchase is a common one, and allows firms to offer products at what seems like a low price, while still collecting the full price at the till. The payment of the rebate is then dependent on the purchaser claiming it, and human nature being what it is, purchasers quite often do not get round to putting forward their claims.
According to the FTC, CompUSA engaged in deceptive and unfair practices relating to rebate offers made for both its own branded products, as well as QPS products that it marketed and sold.
The complaint alleges that in marketing QPS's rebates, CompUSA falsely represented that QPS-funded rebate checks, ranging between $15 and $100, would be mailed to buyers of QPS products within six to eight weeks, or within a reasonable period of time.
However, Between September and December 2001, many consumers experienced delays of between one and six months before receiving their rebates, and some never received the promised rebates at all, according to the FTC.
The regulator also claims that, between January and July 2002, many consumers experienced delays and thousands never received their rebates from QPS. Despite knowing about these problems, the FTC contends, CompUSA continually advertised QPS's rebates until shortly before the company filed for bankruptcy in August 2002.
With regard to marketing CompUSA's own-branded products, the FTC's complaint alleges that CompUSA promised that it would deliver its rebates, ranging from $3 to $100 in value, within six to eight weeks, or within a reasonable period of time. Between September 2001 and June 2002, however, many consumers experienced delays ranging from a week to more than three months before getting their money.
Finally, the complaint alleges that in many cases, after receiving valid rebate requests for CompUSA-branded products, the company unfairly unilaterally extended the time period in which it would deliver the rebates, without consumers agreeing to the time extension.
In a separate complaint against QPS principals Priti and Rajeev Sharma, the FTC also challenges their rebate-related conduct as deceptive and unfair. The company is now in bankruptcy and is not currently operating.
On Friday the Commission announced that it had approved two separate consent orders, addressing the complaints.
CompUSA
According to the Commission, CompUSA can no longer represent the time in which it will mail any cash rebate that it will fund, unless it has substantiation for that claim, and is prohibited from misrepresenting any material terms of any CompUSA rebate program.
It is also prohibited from failing to provide any such rebate within the time specified to consumers, or, if no time is specified, within 30 days.
Further, the order addresses CompUSA's role as a retailer in advertising manufacturers' rebates – that is, those to be funded by the manufacturers. Under the terms of the order, CompUSA is prohibited from advertising the availability of a manufacturer's rebate unless: it has an established record with the manufacturer demonstrating that the manufacturer has consistently paid rebates in a timely manner; or it has conducted a reasonable financial analysis of the manufacturer that demonstrates the manufacturer's ability to pay the offered rebate.
Finally, the order requires CompUSA to pay all valid QPS rebate requests that were received from consumers who bought QPS products at CompUSA, and which are due or past due.
CompUSA also is required to send a rebate to any eligible consumer who contacts CompUSA or the FTC within 75 days after the order is served on the company.
Priti and Rajeev Sharma of QPS
According to the Commission, the order with QPS's principals prohibits them from engaging in practices similar to those alleged in the Commission's complaint, specifically those related to any rebate program involving any product or service.