Rebate ads' small type stirs big fight

August 25th, 2007

By Jim Sanders - Bee Capitol Bureau
Tuesday, September 25, 2007

HOT BUY: Laptop computer -- $699.

(After mail-in rebate.)

California legislators have passed a bill to ban such ads, which are common for products from cellular phones to home appliances.

Assemblyman Mike Feuer, D-Los Angeles, said his bill stems from a simple premise: "The consumer should pay the advertised price."

Customers are lured by bargain promises only to find in tiny type, often overlooked, that they'll have to pay more now but can file a rebate request later, Feuer said.

"This is fundamentally a truth-in-advertising bill," he said. "Fine print is fine print for a reason. If it were meant to be focused on, it would be in bold type."

Under Assembly Bill 1673, stores advertising mail rebates would have two choices: Either emphasize the higher price or honor the rebate immediately and seek reimbursement themselves.

Feuer's measure is one of a handful of consumer-related bills on Gov. Arnold Schwarzenegger's desk, including:

• Senate Bill 250 -- Enable consumers to redeem gift certificates for cash once their value falls below $10.
• Senate Bill 120 -- Require restaurant chains with 14 or more outlets to publicize calories, carbohydrates and nutritional data on each menu item.
• Senate Bill 220 -- Require labeling for bottled water to identify where the water was obtained, and mandate that water-vending machines be cleaned and serviced at least once every 31 days.
• Senate Bill 63 -- Require labeling to identify food for human consumption that is produced from a cloned animal.

The governor has taken no position on any of the bills and has until Oct. 14 to act. But most GOP legislators have rejected the five consumer measures, and a variety of business groups are urging the Republican governor to veto them.

The California Retailers Association has helped lead the fight against AB 1673 through a coalition that includes the California Grocers Association, American Electronics Association and California Chamber of Commerce.

The state's goal should be to improve rebates -- perhaps require faster reimbursement -- but not micromanage advertising practices, the coalition argues.

"AB 1673 could essentially eliminate the offering of rebates to consumers in California," the group said in a written statement.

William Dombrowski, president of the California Retailers Association, said the bill places the onus on stores for mail-in rebates that typically are offered by manufacturers.

Retailers would be placed in a can't-win situation: Advertising the higher price would defeat the promotional purpose of rebates, while providing instant redemption would require additional staff, training and cost, he said.

Consumers typically are sophisticated enough to determine from ads whether a bargain price is tied to a mail rebate, Dombrowski said.

"The price savings to consumers through rebate offers are popular to consumers -- the millions of rebates handled every year attests to their popularity," the coalition told lawmakers.

Richard Holober, president of the Consumer Federation of California, said the current process allows manufacturers to make discount promises they won't have to keep because many shoppers simply dump the rebate applications.

"The burden is on you," Holober said. "They do it knowing that people are just not going to bother to fill out forms. Why not just put the product on sale and give everyone that price?"

The Consumer Federation of California estimates that 40 percent of rebate offers are never redeemed, which amounts to about $10 billion in unpaid rebate offers nationwide, according to a legislative committee analysis of AB 1673.

Visitors to the Capitol on Friday had mixed views.

Miriam Stephenson, an El Dorado County resident in her 40s, said she once mailed a rebate request and was reimbursed quickly. She does not feel deceived by current ads.

"We've learned how to read the ads," she said.

But Trina Riepe, 38, also of El Dorado County, said checkout lines can slow as cashiers try to decipher whether a discount is a sale or rebate. Stores should honor all offers immediately, she said.

"If they want to sell it, it's their responsibility, I think," Riepe said. "It's at least a good service to their customers."

"Hardly ever do you have the time to find the receipt, cut the little code thing off the box, send it in, wait for the rebate -- and sometimes it's only for a couple dollars," she said.

David Welden, a Palm Desert retiree, turned thumbs-down on mail rebates.

"I'd go someplace else where I wouldn't have to put up with the hassle," he said.

Feuer said mail rebates have not been eliminated in Connecticut or Rhode Island, the only states that restrict advertising in a fashion similar to AB 1673. Critics claim that impacts would be far more severe in the nation's largest state.

Attorney Steve Carlson, representing the cellular phone and wireless electronics industry, said AB 1673 unfairly proposes a one-size-fits-all approach for retailers.

The wireless industry -- from cellular phones to text messagers -- is very different from that of other retailers, making instant redemption of rebates impractical, he said.

Cellular phones typically are packaged with service contracts. Rebates are conditioned upon participation for a minimum period of time -- perhaps 30, 45 or 60 days, he said.

Problems could arise if merchants provided an instant rebate, then buyers defaulted on the service contract, Carlson said.

"You'd have to unwind the whole transaction, chase the guy down and get the rebate back," Carlson said. "It becomes a whole different set of circumstances."

Feuer excluded vehicle dealers from his AB 1673, claiming that the process of marketing and selling cars is quite different from other products -- for example, buyers often can choose between a rebate or low-interest financing, he said.

The Los Angeles Democrat, responding to concerns by the Governor's Office, also deleted civil penalties of $2,500 per intentional violation.

But a city attorney receiving multiple complaints could file lawsuits to enforce AB 1673, Feuer said.