BILL ANALYSIS
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|Hearing Date:April 17, 2006 |Bill No:SB |
| |1737 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Liz Figueroa, Chair
Bill No: SB 1737Author:Figueroa
As Introduced: February 24, 2006Fiscal: No
SUBJECT: Consumer rebates.
SUMMARY: This bill regulates the offering and fulfillment of
consumer rebates, including requiring that consumers have a
minimum of 30 days to submit a rebate request and companies have
a maximum of 60 days to mail the rebate after receipt of the
request, and also limits what companies can require the consumer
to provide in order to complete a rebate request form.
Existing law:
There is no state or federal laws that specifically address
consumer rebates. However, the California 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
who failed to deliver rebates within the time specified by the
rebate offer.
This bill:
1)Defines "consumer rebate," for purposes of this bill, as
an offer to provide cash, credit, or credit towards
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future purchases, that is offered to consumers who
acquire or purchase a specified product or service and
that is conditioned upon the consumer submitting a
request for redemption after satisfying the terms and
conditions of the offer.
2)Exempts from the definition of "consumer rebate" any
discount from the purchase price that is taken at the
time of purchase, any discount, cash, credit, or credit
towards a future purchase that is automatically provided
to a consumer without the need to submit a request for
redemption, or any refund that may be given to a consumer
in accordance with a company's return, guarantee,
adjustment, or warranty policies, or any company's
frequent shopper customer reward program.
3)Defines "company," for purposes of this bill, as the
company or entity that is funding the consumer rebate.
4)Requires a company that offers a consumer rebate to allow
a minimum of 30 days from the date the consumer purchases
the product, or becomes eligible for the rebate, for the
consumer to submit the rebate request.
5)Requires a company to mail the rebate check or transmit
the rebate funds to the consumer or fulfill the terms of
the rebate offer within the same number of days provided
to the consumer to submit the rebate request, but in no
event later than 60 days from either of the following
events as applicable:
a) Upon receipt of a consumer rebate request meeting
the terms and conditions of the rebate offer, to the
extent permitted by this bill and as disclosed at the
time of purchase; or,
b) If the consumer rebate offer is conditioned upon a
consumer staying with a service for a minimum length
of time, then upon completion of this term of the
rebate offer and receipt of a rebate request meeting
the terms and conditions for the rebate to the extent
permitted by this bill and as disclosed at the time of
purchase.
6)Prohibits a company from requiring a consumer to provide
more than the following as proof of purchase for purposes
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of redeeming a consumer rebate:
a) A receipt for the purchase of the product or
services;
b) A universal product code, packing slip, or
packaging element that is clearly and conspicuously
marked as the necessary proof of purchase for the
rebate offer;
c) The consumer's name;
d) The consumer's address;
e) The consumer's telephone number;
f) The consumer's membership number, if applicable;
g) The consumer's signature; and,
h) In the event that the eligibility for the consumer
rebate is triggered by an electronic transaction, a
valid proof of the electronic transaction.
7)Requires a copy of the receipt to be sufficient unless
the consumer is provided with a duplicate original
receipt for each product associated with a rebate, in
which case the duplicate original may be required.
8)Permits the company to request reasonable proof of
ownership of another product or service if the consumer
rebate offer is contingent upon ownership of another
product or service.
9)Specifies that a company has the right to reject a
consumer rebate claim or to request reasonable additional
documentation to verify a claim, if it has reason to
believe that the individual consumer submitting the
rebate request is attempting to commit fraud, has already
received the offered rebate, or that the proof of
purchase is not from a legitimate company product or
service.
10)Requires a consumer 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
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rebate request. However, for purchases of a company's
product that occur over a website operated or maintained
by that company, a website or other electronic means may
be provided instead of the telephone number to check the
status of his or her consumer rebate.
11)Permits a company to require the consumer to write the
model number or other identifying number on the consumer
rebate form only if the receipt does not reveal the
product name, type, model, or other identifying number.
12)Prohibits a company offering a consumer rebate from
requiring personal information other than the consumer's
name, address, telephone number, membership number if
applicable, and signature.
13)Permits a company to require, instead of a telephone
number, a consumer's e-mail address with respect to
products purchased over the Internet, Internet-based
services, or Internet rebate redemptions.
14)Requires a company offering a consumer rebate to provide
the rebate redemption form directly with the product, or
at the same location and at the same time that the
consumer purchases the product. Permits a company that
does not provide rebate forms directly with its product
to comply with this provision by supplying the retailer
with either of the following:
a) A sufficient quantity of rebate redemption forms
based on reasonably anticipated sales; or,
b) The means to create a rebate redemption form at the
time and place of sale.
15)Specifies that for purposes of Internet sales, a
generally accessible company Web page that includes a
rebate form, complies with provision 14) above relating
to providing a rebate form. Specifies that for purposes
of telephone sales, directing consumers to a generally
accessible company website that includes the rebate form,
and, upon request, sending the rebate form via the
consumer's choice of regular or electronic mail or
telecopy, also complies with this provision.
16)Specifies that the provisions of this bill do not apply
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to either of the following:
a) Rebates and rebate programs that are offered by gas
or electric corporations through their energy programs
under the jurisdiction of the Public Utilities
Commission.
b) Rebates and rebate programs that are offered by
local publicly owned electric utilities, as defined in
Section 9604 of the Public Utilities Code, through
their energy programs funded pursuant to Section 385
of the Public Utilities Code.
17)Delays the implementation of this bill until July 1,
2007.
18)Prohibits anything in this bill from imposing on any
manufacturer any obligation to recall any product or
service offering consumer rebates made available to
retail sales outlets or consumers prior to July 1, 2007.
Specifies that any rebate offer in effect prior to July
1, 2007 is deemed to be in compliance with this bill.
FISCAL EFFECT: Unknown. This bill is keyed "nonfiscal" by
Legislative Counsel.
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 1737 sets reasonable timelines for consumers to submit
rebate requests and for companies to make good on their
offers. SB 1737 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
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the time of purchase.
Specifically, SB 1154 contains the following provisions:
The rebate offer must allow at least 30 days from
purchase to submit the rebate request.
The check must be in the mail within a minimum of
60 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 phone number.
Additionally, copies of the receipt would be
permitted (instead of only the original).
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
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.
2.Prior Legislation. The Author states that this bill is a
reintroduction of
SB 1154 (Figueroa) from 2004, which was vetoed by the
Governor. This bill is virtually identical to the
version of SB 1154 vetoed by the Governor. The Author
states that as SB 1154 moved through the legislative
process, there were extensive negotiations with numerous
companies and organizations in the retail, manufacturer,
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and cellular telephone industry, among others. These
negotiations resulted in significant amendments that
addressed most, if not all, of the concerns expressed,
and the bill garnered bipartisan support in both houses
of the Legislature. However, the Governor vetoed the
bill, stating in his veto message the following:
"While this bill purports to provide flexible options
for compliance for companies offering rebates, the
bill will have the effect of reducing the number of
rebates offered by manufacturers. This bill will
present unnecessary barriers for companies doing
business in multiple states since the rebate terms for
California residents would differ from those in the
rest of the country.
Existing contract law and federal and state consumer
protection laws make this bill unnecessary and could cause
conflicts for companies that make nationwide rebates
offered that would encourage companies to exclude
California from their nationwide consumer rebate offers."
3.New York Rebate Legislation. In 2005, New York passed a
law, in part based on SB 1154 (Figueroa) of 2004, that
required companies offering rebates to (1) provide a
rebate redemption form at the time of purchase (using
language almost identical to that used by this bill and
SB 1154), (2) allow consumers a minimum of 14 days to
submit a rebate redemption request, and (3) mail the
rebate check within 60 days of receipt of the redemption
request. The bill also established civil penalties of
between $100 and $1,000 for each violation.
4.Arguments in Support. This bill is supported by
Consumers Union (CU), which states that while some
retailers have moved away from rebates, consumers
continue to experience delays and difficulties in
obtaining rebates. When rebate processing rules or
practices make it difficult for consumers to get the
promised rebate, CU states that the consumer is in
essence paying a higher overall price for the goods than
what was advertised as the post-rebate price. CU states
that the protections in this bill will help to ensure
Californians receive rebates, rather than runarounds, and
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the rebates do not serve as a way to advertise a low
post-rebate price that is not truly available because the
rebate can't be obtained in a timely fashion.
The California Alliance for Consumer Protection (CACP) also
supports this bill, stating that even though many
companies advertise rebates, it is clear that they don't
actually give them, and when they do, the hassle that
consumers have to go through to actually follow-up on the
rebate and then collect it far outweighs the amount that
is collected. CACP makes some suggestions to strengthen
the bill, including requiring companies to purchase a
bond that guarantees the rebate will actually be
delivered, clarifying the tax status of rebates (whether
business expense deductions should be based on the price
initially paid or the post-rebate price, and also how
rebates affect the taxation of companies that offer the
rebates), and establishing a "rebate bank" to help
consumers redeem their rebates.
5.Arguments in Opposition. The California Manufacturers &
Technology Association (CMTA) opposes this bill, stating
that it unreasonably limits the information a
manufacturer can request in order for a consumer to
establish proof of purchase. CMTA states that while the
bill purports to provide flexible options for compliance,
the options are extremely insufficient to protect against
fraud. CMTA states that this bill would have the
undesirable effect of reducing the number of rebates
offered by California manufacturers. Specifically, CMTA
argues that this bill is unnecessary, increases a
company's exposure to fraud, contains duplicative and
burdensome requirements, restricts contractual rights,
and creates interstate issues which could result in
companies excluding California from rebate offers.
SUPPORT AND OPPOSITION:
Support:
American Federation of State, County and Municipal
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Employees
California Alliance for Consumer Protection
Consumers Union
Opposition:
California Manufacturers & Technology Association
Consultant: Vincent D. Marchand