FTC Charges Indiana Firm with Failing to Live Up to Rebate Promises

The Federal Trade Commission today announced a complaint against an Indiana-based firm and its president for failing to pay rebates due to thousands of consumers nationwide within the time promised, and leaving many others with no rebate checks at all for the computer equipment and other electronics they purchased. Under the terms of a proposed court order settling the Commission’s charges, the defendants, who are repeat offenders, would be barred from any involvement in the development, marketing, fulfillment, or funding of any rebate program. They also would be subject to a suspended monetary judgment of more than $330,000. The proposed settlement’s provisions are among the strongest ever imposed by the FTC in a rebate-related case.

According to the Commission’s complaint, since April 2006, the defendants have disseminated rebate forms for mail-in rebates that included language such as:

Get $100 Back by mail
Hanns-G 19" LCD Monitor
It’s Fast & Easy
. . . .
Allow at least 10 weeks for processing; and

Get $100 Back by mail
Hanns-G 19" LCD Monitor
It’s Fast & Easy
. . . .
Allow at least 10 weeks for processing

The purported rebates were for computer-related hardware and other electronics equipment advertised, offered for sale, and sold by Market Development Specialists (MDS), doing business as Wintergreen Systems, and its president John Levy. The Commission contends that MDS acted as a re-seller of many products, including monitors and portable DVD players. MDS distributed these products to the public through retailers including Office Depot, PC Connection, Buy.com, PCMall, and Woot.com. To make its products more attractive to retailers, it offered many mail-in rebates ranging in value from $20 to $150.

Some consumers who bought MDS’s products and applied for rebates, however, found they were in for a long wait – in some cases up to two years – to get their money. In other cases, the defendants never mailed rebate checks to consumers who bought the advertised products, and while consumers did receive rebate checks, thousands of payments were delayed up to 10 weeks or longer. The Commission therefore charged the defendants with violating the FTC Act by engaging in unfair or deceptive acts or practices in or affecting commerce.

The proposed order settling the FTC’s charges contains both strong injunctive and monetary relief. First, it bans Levy and Wintergreen from “any involvement in the development, marketing, fulfillment, or funding of any rebate program” to ensure they do not engage in conduct similar to that alleged in the complaint in the future. The ban is accompanied by another provision that applies to future claims the defendants make regarding any type of promotional premium or bonus.

The provision prohibits them from making any misrepresentations regarding any “bonus,” which is defined as “any premium, gift, award or other consideration (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer in exchange for purchasing a product or service.” The Commission believes such strong fencing-in relief is appropriate because Levy is a recidivist, having violated an April 2006 assurance of voluntary compliance with the State of Indiana related to his rebate practices.

Under the proposed order, the defendants would face a judgment of $330,240, an amount equal to the value of all rebates owed to consumers as a result of their alleged conduct. While this judgment has been suspended based on the defendants’ inability to pay, it will become due if they are later found to have misrepresented their financial condition. Finally, the proposed order contains standard monitoring, reporting, and record keeping requirements to ensure the defendants’ compliance with its terms.

The proposed court order announced today settles the FTC’s charges against the following defendants: Market Development Specialist, Inc., d/b/a Wintergreen Systems, and John Levy, individually and as an officer of Market Development Specialists, Inc.

The Commission vote authorizing the filing of the complaint and stipulated final order in consent of the court action was 4-0. The complaint and proposed order were filed the U.S. District Court for the Northern District of California, San Francisco Division, on January 12, 2009.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the stipulated final order are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(Market Development.final.wpd)
(FTC File No. 072-3201; Civ. No. 09-0124)