Consumer Federation of California

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.