In response to concerns that businesses were profiting from expired, unredeemed gift cards, provincial governments across Canada recently enacted gift card legislation to prohibit expiry dates, among other things. A similar concern has recently arisen over consumer rebates. Offering rebates to consumers can be an effective marketing tool for businesses since consumers are more inclined to buy a product according to its perceived “after rebate” price. However, according to the Competition Bureau (Bureau), approximately only 1% of consumers actually redeem their rebates. These unclaimed rebates generate significant profit for manufacturers and retailers, and raise a concern that the fact that so few rebates are redeemed could lead to false and misleading rebate advertisements. To address this concern, the Bureau has established a special research group for false and misleading consumer rebate advertisements. A bulletin is expected to be released for public consultation by March 2009.
A rough draft of the bulletin was created in June 2008 and released to The Canadian Press under the Access to Information Act. In the draft bulletin, the Bureau stipulates that displaying the “after rebate” price in the largest font in advertising is misleading. Furthermore, the Bureau recommends that businesses clearly disclose how a consumer would receive the “after rebate “price and not be misled to think that this price is the “actual price” of the good or service. The Bureau’s draft bulletin also advises consumers to:
(1) ensure that all of the terms and conditions of the rebate offer can be met before deciding to purchase the product;
(2) request a duplicate original invoice when purchasing the product as an original receipt is usually required to be mailed in; and
(3) keep a copy of everything sent to the business in the event that the rebate payment is delayed or not paid.
The Bureau has been investigating the use of rebates in Canada since early 2008 and has expressed concern in the past over rebate non-payment by third party fulfilment houses. Although it is not clear whether the forthcoming bulletin will address this issue specifically, the Bureau has previously warned that reliance by advertisers and manufacturers on their contracted fulfilment houses will not absolve them from blatant fulfilment defaults. In those circumstances, it will be the entity offering and promoting the rebate offer, not the fulfilment house, that will be on the hook for misleading rebate campaigns and non-fulfilment. Accordingly, advertisers and manufacturers must conduct their due diligence in choosing a fulfilment house and should ensure any risk of non-performance is adequately addressed in the services agreement.
At this time, the Bureau is not expected to prohibit rebate offers in Canada. It has stated that the prohibition in the Competition Act against false and misleading representations adequately addresses the issue and, accordingly, no legislative changes are anticipated.