Q-Bate and Switch: Court Order Closes Case on N.Y. Web Retailer That Kept Consumers Waiting for Cash Back

The Federal Trade Commission today announced it has settled an action against a New York-based Internet retailer that allegedly left over a thousand consumers in the lurch after failing to provide hundreds-of-thousands of dollars worth of promised cash rebates. According to the FTC, UrbanQ and its principals told consumers who bought items from their Web site that they would receive the rebates – which they called ‘Q-bates’– within 12 weeks of their purchase. However, many of the Q-bates, which often ranged from 70 to 100 percent of the original purchase price, failed to arrive within the time promised, and many never showed up at all. Under the terms of the court settlement reached with the Commission, the company and individual defendants will be prohibited from engaging in similar behavior and will pay $600,000 in consumer refunds.

“A rebate is part of the deal with the consumer. It’s not just bait,” said Howard Beales, Director of the FTC’s Bureau of Consumer Protection. “You can’t lure consumers with promises of cash back and then not keep your word.”

UrbanQ’s Business Practices

UrbanQ, which began doing business in early 2000, is a Nevada limited liability company, with its principal place of business in Cedarhurst, New York. According to the FTC, in September 2000, it began selling consumer products – typically apparel – through its UrbanQWeb site. On the site, the company offered consumers generous rebates, known as “Q-bates,” for up to 100 percent of the purchase price of the product. Buyers had 60 days to submit their Q-bates, with the company promising to pay these rebates within 12 week of their receipt. The manufacturer did not provide the rebates – instead, UrbanQ would pay all rebates, which were offered on approximately 70 percent of all items sold on the Web Site.

The Commission’s Complaint

The FTC’s complaint charges UrbanQ and its principals Daniel Greenberg, majority owner Michael Konig, and Steven Krausman with violating Section 5 of the FTC Act by falsely representing that consumers who bought the company’s products would receive cash rebates within 12 weeks of their order. In fact, many consumers never received any rebate at all.

Terms of the Stipulated Order

The proposed stipulated order prohibits the UrbanQ defendants from:

1. misrepresenting the terms or conditions of any rebate offer, including, but not limited to, the time in which any rebate in the form of cash or credit towards future purchases will be
   provided to purchasers;
2. failing to provide any rebate within the time specified or, if no time is specified, within 30 days;
3. offering a rebate without having a reasonable basis or ability to pay it;
4. violating any provision of the Mail Order Rule in connection with any rebate in the form of merchandise;
5. failing to provide any rebate in the form of services or any other consideration within the time specified; and
6. 6) misrepresenting any material terms of any rebate program, including the status of the rebate and reasons for any delay in providing it.

In addition to this fencing-in relief, the proposed order contains a judgment indicating that the defendants are liable for $789,838 in monetary relief, which will be suspended after a payment of $600,000 is made to the Commission. The FTC also will retain the right to reopen this provision if defendant UrbanQ or Greenberg are found to have misrepresented the value of their assets.

Further, the proposed order contains a performance bond, requiring that each of the proposed defendants post a $500,000 bond when offering certain rebates. Finally, the defendants are required to comply with certain reporting and monitoring terms to ensure their compliance with the terms of the proposed order.

The Commission vote to accept the proposed consent order and place a copy on the public record was 5-0. It was filed in U.S. District Court for the Eastern District of New York on June 26, 2003. The proposed consent order will become final after being signed by the judge. The New York State Office of the Attorney General, which is a co-plaintiff with the Commission, assisted the FTC is bringing this action.

NOTE: This stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Stipulated judgments have the force of law when signed by the judge.

Copies of the complaint and proposed consent order 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, D.C. 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, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 022-3138;

Civ. No: CV-0333147)