FTC Settles Two Complaints Charging Rebate-Fulfillment Violations

Under the terms of separate consent agreements announced today, the Federal Trade Commission has settled charges against two companies for unfair and deceptive rebate practices. The Commission’s complaint against Soyo, Inc., alleges that most of Soyo’s rebates were delivered late – in some cases, consumers had to wait a year or longer for their checks to arrive. The Commission’s complaint against the InPhonic alleges that, in connection with its advertised rebate offers, among other things, the company failed to provide promised documents needed to obtain rebates, to send out rebate checks in the time promised, and to disclose adequately certain material terms and conditions prior to purchase. The settlements bar the companies from similar violations in the future and require them to pay outstanding rebates to affected consumers.

“When it comes to rebates, protecting consumers’ rights is a Commission priority,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “Rebate terms must be disclosed up-front and clearly, and rebates must be delivered on time.”

The complaints and administrative consent orders announced today settle the FTC’s charges against Soyo, a Nevada corporation with its principal place of business in Ontario, California, and InPhonic, a Delaware corporation with its principal place of business in Washington, DC.

The enforcement actions taken against Soyo and InPhonic were announced at the FTC’s “Rebate Debate” public workshop, held today in San Francisco, California. The workshop gathered representatives from consumer groups, industry, academia, and government to debate the costs and benefits of rebates and explore the “best practices” that companies should follow when offering and fulfilling rebates. Each of the enforcement actions is described in more detail below.

Soyo, Inc. The Commission’s complaint against Soyo charged it with making deceptive claims in connection with its rebate program for computer motherboards and other consumer electronics products. According to the FTC, thousands of consumers who submitted valid rebate requests since 2004 experienced significant delays in getting their rebate checks, including delays of one year or more. Specifically, between October 2004 and March 2006, more than 95 percent of Soyo’s rebate checks were delivered to consumers later than 12 weeks after the date on which a valid request was postmarked. The average delivery time for the company’s rebates to consumers was about 24 weeks, although Soyo’s rebate forms expressly state that they would mail rebate checks “in 10-12 weeks after the postmark date of the program.” The complaint also charged the company with misrepresenting to consumers that the rebate checks would be mailed in a reasonable amount of time.

The order settling the Commission’s charges prohibits Soyo from misrepresenting the time in which it will mail any rebate, as well as from failing to provide any rebate within the time specified, or if no time is specified, within 30 days. The order also prohibits Soyo from misrepresenting any material terms of a rebate program and contains a redress program that requires the company to pay out all the valid rebate requests it has that are past due.

InPhonic. Inc. The Commission charged InPhonic, an online retailer that offers substantial rebates on mobile phones bought in conjunction with wireless phone service, with making deceptive claims and engaging in unfair practices in connection with its rebate offers. According to the FTC, in advertising its rebates InPhonic failed to disclose adequately prior to purchase that, among other things, consumers would have to wait at least three to six months to submit their rebate requests and would have to wait at least six to nine months after their purchase to get their rebate.

Further, the FTC alleged that InPhonic misrepresented that consumers would have a reasonable opportunity to resubmit rebate applications in the event that InPhonic deemed them incomplete. In addition, InPhonic allegedly misled some consumers about the number of wireless bills that had to be submitted with their rebate application, resulting in these consumers submitting applications after the time period allowed had expired. The company rejected these applications as untimely. Finally, InPhonic allegedly unfairly failed to provide other consumers with the materials needed to submit a complete rebate application, and in some cases, consumers received their rebates weeks or months after the promised delivery time.

The order settling the charges against InPhonic prohibits the company from misrepresenting the material terms of any rebate program and requires InPhonic to disclose all terms related to rebates prominently on any rebate form. The order prohibits InPhonic from misrepresenting the time in which it will mail any rebate, as well as from failing to provide any rebate within the time specified, or if no time is specified, within 30 days. Finally, the order contains a redress program, under which InPhonic will pay consumers who applied for a rebate with the company but were denied a check based on the company’s deceptive and unfair practices.

The Commission vote to accept the complaints and consent agreements in each case was 5-0. The FTC will publish an announcement regarding the agreements in the Federal Register shortly. The agreements will be subject to public comment for 30 days, until May 29, 2007, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC requests that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S.
postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: Consent agreements are for settlement purposes only and do not constitute an admission by the defendants of a law violation.

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies worldwide.

(FTC File Nos. 0623094 and 0623066)