June 15, 2016
Earlier this month, two Colorado residents and their company were ordered by a Denver city and county court to pay over $11 million in connection with the outfit’s telemarketing and rebate marketing practices.
How can you minimize legal risk in connection with mail-in and instant rebates?
Alleged Telemarketing and Rebate Marketing Practices
According to court documents filed by the Colorado Attorney General’s Office, Subscriber Services, Inc. (“Subscriber Services”) sold magazine subscriptions to consumers via telephone. Among other things, Subscriber Services allegedly enticed consumers to purchase magazine subscriptions by offering $250 “Reward Vouchers.”
In reality, Subscriber Services’ rebate marketing program reportedly gave consumers the possibility of receiving ten $25 rebate checks, but only if consumers complied with 16 separate conditions, which included:
- spending $1,000 on non-grocery items in increments of at least $100 in ten consecutive months at the same store;
- making all applicable purchases with a major credit card; and
- mailing the consumer’s completed registration form, a self-addressed stamped envelope and a copy of his or her valid driver license by Certified U.S. Mail.
Court records indicate that only 268 out of 35,692 participating consumers (0.75%) received rebate payments of any kind from Subscriber Services.
Lawsuit and Judgment
In February 2015, Colorado Attorney General Cynthia H. Coffman commenced legal action in the District Court for the City and County of Denver (Case No. 2015CV30672) against Subscriber Services, as well as two individuals involved in the company’s operation (collectively, “Defendants”). The lawsuit claimed that Defendants’ telemarketing and rebate marketing practices violated six separate provisions of the Colorado Consumer Protection Act.
On June 1, 2016, Attorney General Coffman announced that the Court ordered Defendants to pay approximately $11.1 million in restitution, unjust enrichment and penalties. The judgment is meant to redress injuries suffered by over 47,000 consumers between 2010 and 2014.
Make Sure Your Rebate Marketing Practices Are Compliant
Rebate marketing can be an effective method for sellers and marketers to boost product sales. However, as the above-referenced case demonstrates, state and federal rebate laws, rules and regulations can restrict the manner in which mail-in and instant rebates should be marketed and processed. As such, before launching a new rebate marketing campaign, it is critical that marketers speak with an experienced marketing attorney to remain abreast of ever-evolving regulations in this space.
If you are a seller or marketer offering consumer rebates, or if you have been served with legal process relating to your rebate marketing practices, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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