Hold That Tiger…Responsible

I wonder what those people who do believe that conspiracies never happen, think about rebates?

Rebates are a marketing gimmick that has spawned a mini-industry of its own. Like any marketing gimmick, they are designed to modify the behavior of consumers; and since they arise from the coordinated actions of manufacturer, retailer, and rebate fulfillment house, they are by definition a conspiracy. (Remember, the word "conspiracy" is morally neutral; it doesn't have to be for evil ends. If you and your pals plan a surprise party, that's a conspiracy whether you intend to kill the guest of honor or just present her with gifts.)

The most common question consumers ask about rebates is, "Why bother? Why not just drop the price on the item?" The reasons for this are subtle, but significant. Studies show that people remember prices; they're aware when prices rise and when they drop. But, for some reason, people react more negatively to a price rise, than they react positively to a price drop. In other words, if Diet Rite, which normally sells for $1.07 for a 2-liter bottle, goes on sale for a couple of weeks for just 77¢ a bottle, that will make us happy (and more likely to buy). But when the price goes back up to $1.07, that makes us unhappier than the price drop made us happy! And that unhappiness translates to an annoyance at the brand itself (and, to a lesser extent, the store). But Economics 101 tells us that excess product or sluggish sales can be moved by lowering the price, raising it when conditions change. Rebates allow the price to be lowered, without making it seem to rise when the sale is over.

In other words, it's all about perception, and inducing the consumer to perceive things in a way that is more beneficial to the manufacturer.

Rebates, potentially, offer benefits to the consumer as well as to the manufacturer and retailer. A couple of years ago, I was able to buy a tower of 100 blank CD-ROMs at an out-the-door price of $50, but with a rebate of $55—meaning, they were willing to pay me to take their product! A no-conspiracies-ever simpleton must wonder how they can afford to do such a thing, or maybe he imagines it was a mistake on the part of the store from which he can benefit. But the fact is, a complex set of realities—all of which are familiar to marketing people—made this a beneficial arrangement to the manufacturer as well as to the store (which happened to be Staples):

• The blank CDs came from a manufacturer that was trying to break into the very competitive CD-ROM market. People put their precious data on these disks, and anyone who burns CDs regularly knows that the number of "coasters"—that is, bad CDs—is higher among no-name manufacturers than with the big names like Memorex or Verbatim. By offering the CDs effectively for free, hesitant buyers would be lured into trying out the new brand; and if their experience was successful, they might buy more CDs from that company even when the rebate was over and the CDs had to be paid for.
• Not everyone actually applies for a rebate, even if the rebate price was the consumer's reason for the purchase. Usually, it's just disorganization that results in the consumer procrastinating until the receipts, UPC from the box, or rebate form have been lost. This tendency caused Business Week magazine to describe the rebate mechanism as a "tax on the disorganized," since people who do not file (and receive) the rebates owed them end up paying more for goods than those who do. Estimates of the actual percentage of people who send in their forms are difficult to obtain, and range from 5% to 80%.
• It's obviously to the rebating company's advantage to reduce the number of applicants for a given rebate. This is done by imposing various "requirements" any of which, if not met, negate the rebate. Customers are customarily required to provide a copy of the receipt, the UPC from the product packaging, and some household information including the consumer's phone number. That last item alone causes a certain percentage of consumers to abandon a rebate. Others hesitate to cut the UPC from the box, knowing that once they've done so most stores will refuse to take it back should the product turn out to be defective.
• Some rebates take advantage of the tendency to lose sight of a rebate as time goes by, and force procrastination by building a delay into the already-complex requirements. For example, some cell-phone rebates will not allow the consumer to apply until after six months have passed. In another instance, Microsoft offered a rebate for Windows' upgrades, but when the consumer examined the rules, he or she discovered that it was the UPC from the original copy of Windows, not the new upgrade, that was required! Anyone who skimmed the directions and sent the UPC from the upgrade was disqualified; and of those who did read the directions, very few had kept the packaging from the original version of Windows all those years.
• Nearly all rebates will not send a check to a post office box, or to addresses outside the United States. So if you happen to use a P.O. box for your address, as millions of rural dwellers do, you are simply out of luck as far as your rebates go.
  
• The information you provide the rebate fulfillment company—your name, address, age and, yes, your phone number—are sold to mailing list companies which use the data to generate junk mail and, increasingly, junk email. They make more money from such specialized lists than you might guess.

A benefit to the retailer is that the store is allowed to post a sign with an item's after-rebate price even though the out-the-door price may be much higher. They do have to include an "After Rebate" disclaimer, but a startling number of people, once they get to the cash register, will not return an item that costs more out-of-pocket than they thought, and that they can't really afford. So rebates equal increased sales.

Now, given that rebates can be a good thing for the manufacturer, retailer, and the consumer—is this really a benign conspiracy? Or can it have its sinister side?

Rebates are great when they come through, no doubt about it. But the thing is, the rebate system is built on a dishonest concept. You may think you're buying a $200 computer, but if you have to put out $300 out-of-pocket, it's not really a $200 computer until you have that rebate check in hand. And knowing that you can get that $100 check only because the manufacturer knows that most purchasers won't, in fact, apply for it successfully, doesn't make you clever; it just makes you a passive conspirator.

The rebate system falls into an interesting gray area of morality. It isn't clearly good or bad. Making use of it does take advantage of those who don't make use of it; but isn't everything in life like that? Do smart people owe it to stupid people to enable their stupidity? Are organized people morally obligated to give slack to disorganized people?

I would answer "no" to both questions. Yet, there must be some point beyond which the rebate conspiracy becomes immoral.

Take, as an example, the companies TigerDirect and OnRebate. These are both Internet companies which would appear to dovetail nicely, and to the advantage of their customers: TigerDirect sells merchandise, mostly electronics like computers, TVs and cameras, at steep discounts. In its advertisements, when there is a rebate, it lists the price after rebate, not before; it's not until you reach the checkout screen that you learn what you are really spending out-of-pocket to buy the merchandise.

OnRebate is a rebate fulfillment company. It, too, is Internet-based; in most cases, you fill out an online form, although you still have to send the cut-out UPC via snail mail. (Requiring the actual UPC rather than a copy is not q quirk—it intentionally makes it impossible to return an item, allowing the store to claim a generous return policy that it seldom has to honor.) TigerDirect uses it, exclusively, to fulfill its rebates. If you have a problem getting a rebate, TigerDirect will tell you to contact OnRebate; OnRebate will tell you the problem is with TigerDirect.

Except, both companies are actually owned by the same third company, First, look at their web domain registrations:

ONREBATE.COM
Registrant: Highspeedbackbone.net
Domain Name: ONREBATE.COM
Administrative Contact: Amato, Peter
ATTN: ONREBATE.COM

TIGERDIRECT.COM
Registrant: Highspeedbackbone.net
Domain Name: TIGERDIRECT.COM
Administrative Contact, Technical Contact: Amato, Peter

TigerDirect is a subsidiary of Systemax, a publicly traded company run largely by one Robert Leeds and his family. The Leeds family seems to dominate the OnRebate board of directors as well. OnRebate's address is Systemax headquarters. The two corporations share an address, a registered agent and at least one officer. Joseph Dunn is registered as the President of OnRebate.com and the Vice President of TigerDirect.

What does this mean? It means that TigerDirect and OnRebate are the right and left hands of a single entity. And when corporations attempt to hide themselves behind the mask of other corporations, you can bet that they are trying to take unfair advantage of someone.

The most obvious way to cheat at the rebate game is to decrease the number of successfully refilled rebates. Now, it's pretty hard for a manufacturer to do this without colluding with the retailer. However, retailers also offer rebates and you can't tell, in most cases, whether it's the retailer or the manufacturer who's offering one. If the retailer and the rebate fulfillment company are, in fact, one and the same, collusion becomes almost too tempting to resist because the stakes are so high. In effect, the crime becomes false advertising, because the advertised, "after-rebate" price will never, or almost never. be honored. But you've got to be clever about it. If you simply never honor a rebate, you'll be taken to court in no time. But by sometimes honoring a rebate, you effectively disprove the accusations of those whose rebates were "lost" or "incorrectly" filled out.

Let's look at the circumstances under which a rebate might not be fulfilled. The items in black are legitimate; the items in bold are likely to be dishonest.

• The rebate is simply never sent in.
• The rebate is sent in past the deadline.
• The rebate omits a required component, such as the UPC, order number, or personal information.
• The rebate is genuinely lost in the mail.
• The rebate is said to be lost in the mail when it isn't.
• The rebate is incorrectly claimed to have omitted a component.
• The rebate incorrectly claims a component is incorrect (wrong UPC, invalid order number, etc.)
• The rebate check is never sent.
• The check is sent but bounces when cashed.

Now, any of the items in bold could occur due to honest mistake. The savvy consumer will then get on the phone and try to correct the error. That leads to this dishonest circumstance:

• The consumer is put on hold for so long he or she gives up.

Now let's look at some genuine complaints consumers have made about TigerDirect and OnRebate, found on the web. (A Google search for the terms "TigerDirect" "OnRebate" and "scam" turned up 942 hits.) I've left the original spelling as I found it.

RebateRoullette.com

I purchased the item. it was a hard drive and the rebate only worked if you bought the hard drive with some anti-virus software from CA (Computer Associates), called Internet Security. So I paid about $170. And there are a total of 3 rebates in this deal. I mailed them all off. A few day later I get an email saying one was approved, another email saying, that one of my Rebate was Rejected because I did not include the UPC! BS! I even have proof, as my wife helps me with all paperwork cause of my health problems. I have her help with paperwork cause my hands shake. I stapled the orignal UPC to this place! along with everything else they asked!!

I also always take photocopies!

RedFlagDeals.com

when i finally got my cheque. i see it was postmark several day ago but it was printed out 3 month ago when i try cash it it bounce on me. on top of it envelope was completely different from my address. i know i write very clear on rebate form and say and repeat many time on phone. miracle that bounce check even arrive me

ResellerRatings.com

How did you get past their automated attendent? I chose to scream "I want to speak to a human" repeatedly until it acquiesced. I had to resubmit as well so as to include a barcode I had omitted originally. My rebate was "accepted" as of August 15. Still haven't seen that check…

RebateReportCard.com

They said the offer code wasn't correct (which was submitted online), I double checked this and it was right, asked them to check again and never heard back from them.

In my case, I bought a computer for my sister-in-law at a surprisingly low price—after the $100 rebate; the out-of-door (out-of-web?) cost was just so-so. That's when I fell into the OnRebate spider web. OnRebate's web site includes a feature that lets you track your rebate's progress through their system. So it says. However, my rebate always seemed to have not arrived, even though I had sent it with delivery confirmation requested, and had, in fact, received the confirmation from the Post Office. When I tried to complain, I found that OnRebate's web site had no contact information! That's when I started searching the web and found the other tales of woe. Fortunately, one had an email address so I began my long correspondence.

As months went by, I continued to send emails. Only when I sent one would I hear from them; and still the money hadn't been deposited. (I had agreed to give them $9 of my rebate in exchange for their "expediting" the request and making the deposit directly into my PayPal account.) Then my emails were returned, with a "no such address" error. I had to return to Google to get another, newer, name, finally getting a response from _____.

Finally, yesterday—seven months after I initially applied for the rebate—I got it. Or, rather, the remaining $92 left after the fee for "expediting" the rebate was subtracted.

For every ten on-line complaints that OnRebate hasn't made good, there is one that says something like,

I had sent them 4 rebates (3 of which are free after rebates) items and I did get money back. Just have to follow instructions to the teeth and you will get your money. I did not choose the 'expited service' but it did take longer than 10 weeks for some rebates to arrive. Customer service is not the best out there but at least you get your money back.

They only have to fulfill some rebates to make it impossible to take them to court. Obviously, for them it isn't a matter of being honest but, rather, how dishonest can they get away with being?

The web sites cited above are good sources for determining in advance how much trouble it will be to collect a given rebate—I wish I'd known about them before. But the truth is, I'd probably have bought that computer anyway, because the price seemed to be so good and, in fact, I did eventually get my rebate. Well, most of it. Unless you count the hours I spent on the phone, and at the computer, and at the keyboard, trying to get it.

To hold the merchant responsible for the contract implied in a rebate, you may well have to make it your business to follow up on it, even though you shouldn't have to. As long as we allow big business to operate for profit rather than the collective good of mankind, we'll have to insist that we be treated fairly; because it won't happen on its own.

We humans love bargains. And it seems we'll continue to go for them, no matter how much they cost us in the end.

Update

A couple of days after this was posted, I received an email from the president of OnRebate, who said the company was now under new ownership and management, and would in the future deal more fairly with its customers.

He did not offer to reimburse that $9 "expediting" fee, however.