Rebate Laws Generate Confusion

As the holiday shopping season kicks into full gear, many businesses seek to offer consumers rebates on the product's purchase price. Rebates, particularly when offered in conjunction with a manufacturer, offer a retailer the opportunity to provide consumers with a discounted price. Year ago, rebates were typically for a nominal amount of $1-2 dollars. Today, rebates can account for a significant portion of the purchase price- a fact that retailers want to convey to consumers.

At the same time the dollar amount of rebates is increasing, according to some reports, approximately 40 percent of manufacturer rebates are never redeemed, saving computer manufacturers an estimated $2 billion a year. The reliance on rebates to offer sales prices is leading lawmakers to consider legislation, which is leading to a hodgepodge of legislation. Connecticut appears to have been the leader in rebate legislation by its enactment of its landmark anti-math law. Concerned about how consumers might by confused if a retailer undertook the mathematical deduction of a rebate price for consumers, Connecticut law prohibits retailers from advertising the after-rebate price as the final price to be paid by the consumer.

Encouraged by Connecticut's trail-blazing legislation, this summer Rhode Island passed a similar law. Therefore, in Connecticut and Rhode Island a retailer cannot advertise the net price of an item after mail-in rebate in unless the retailer is willing to sell the item to the consumer at the net price (the store price less the mail-in rebate) at the point of sale. If the retailers don't wish to do this, they cannot advertise the after-rebate price as the final price to be paid by the consumer. In other words, in Connecticut and Rhode Island you are prohibited from doing the math for consumers deducting the rebate amount.

Similar anti-rebate math legislation is now pending in Maryland and New Jersey .

New York appears to have taken a more sensible approach. New York law prohibits advertising the price of an item after deduction of a rebate unless the actual selling price is displayed or announced, and clear and conspicuous notice is given in the advertisement that a mail-in rebate is required to achieve the lower net price. Thus, New York permits retailers to do the math as long as they clearly show how the numbers were calculated (i.e., that a rebate was involved)

However, a more recently-enacted law, General Business Law § 391-p is generating confusion for retailers - particularly those in the on-line channel. That law requires manufacturers to provide a rebate redemption form directly with the product or at the same location and at the same time that the consumer purchases the product, or at the time a contractual agreement for service is signed by the consumer. Alternatively, the manufacturer can supply a retailer with either of the following: (1) a sufficient quantity of rebate redemption forms based on reasonably anticipated sales; or (2) the means to create a rebate redemption form prior to or at the time and place of sale.

Because one cannot technical provide a rebate at the point of on-line purchase, the New York rebate law has a specific provision relating to Internet sales. Subsection (c) provides that for purposes of internet sales, a retailer can comply with the law by clearly and conspicuously displaying the rebate redemption form as a printable document on the internet page on which the product is purchased or on an internet page accessible by a hyperlink from the page on which the product is purchased shall comply with this section.

Thus, if offering a rebate in New York, whether on-line or off-line, a retailer must make sure that the forms are given at the time of purchase.

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