Rebates: Up for Debate

Rebates, in their myriad forms, are a form of price discrimination. We have probably all received them. They allow retailers to keep the price on a good high, but advertise it for a much lower one. They allow retailers obtain more money from the consumer on purchase, with the promise of return a few months later. Some consumers won't even send in their rebate forms and the company will keep the money the consumer paid - over and beyond the advertised price.

Consumers who demand a lower price are separated from other consumers by their willingness to complete several additional steps past purchasing a product and to wait weeks to receive their 'discount' in the mail. While consumers certainly self-select their price by complying or not-complying with the terms of the rebate, and even before this by searching for items that have rebates offered in the first place, the complexity of the situation becomes immediately apparent when companies advertise prices that not all consumers receive (by not completing the rebate process or doing so incorrectly) or when companies simply do not fulfill their promises.

Highlighting their interest in the topic, the FTC will be holding a day of Rebate Debates to garner information concerning best practices and common problems that according to consumers, retailers, and academics. There are companies that do not, as the existence of Rebate Report Card verifies, comply to customer standards. During 2005 the FTC brought a case and won against well-known CompUSA for extending the time in which they delivered on rebate returns without their consumers' knowledge. Similarly, a high level of complaints against the process has prompted some companies, such as Best Buy, to curtail their rebate programs.

What the FTC will conclude concerning rebates remains unknown, though it is likely that the issues presented here will be some of those that they discuss.

Posted by: Tiffany Luong and Vicky Ukritnukun