FTC Order Bars Firm From Failing to Provide Timely Rebates

A company that sold telephones and telephone services through retailers nationwide has been barred from failing to provide the rebates it promised to consumers in a timely manner. The Federal Trade Commission charged the company with deceptive marketing by promising consumers they would receive their rebates within eight weeks of submitting properly completed forms. In reality, tens of thousands of consumers did not receive their rebates within the time promised, and some had to wait up to a year or more for their checks.

According to the Commission’s complaint, American Telecom Services, Inc. (ATS), based in Atlanta, Georgia, offered numerous rebates to consumers as part of its business as a distributor of telephones and phone services. The company has sold both traditional and Internet phones bundled with communications services.

Offering mail-in rebates ranging in value from $5 to $50 for its “Pay ‘N Talk” program, ATS has used third-party fulfillment houses to process and pay rebate requests received from consumers who bought its products. The FTC contends that the company misrepresented that consumers who bought eligible ATS products would receive their rebate checks within eight weeks after the company received their properly completed rebate requests.

Since 2006, however, the Commission alleges that tens of thousands of consumers who filled out their rebate request forms correctly and submitted them on time experienced substantial delays in receiving their rebate checks, including, in some cases, delays of a year or more. According to the complaint, the delays stemmed from ATS’s inability to pay its third-party rebate fulfillment houses, as well as its refusal to pay fulfillment houses with which it had disagreements over rebate-related issues.

The proposed consent order prohibits ATS from misrepresenting the time in which any rebate will be mailed and from failing to provide any rebate within the time it specifies – or within 30 days if no time is specified in the offer. It also prohibits ATS from misrepresenting any material terms of any rebate program, including the status of the rebate or reasons for delay in providing a rebate. The order also contains record-keeping and reporting provisions designed to ensure ATS’s compliance with its terms.

The Commission vote authorizing the issuance of the complaint and to accept the administrative consent agreement for public comment was 4-0. A copy of the agreement containing consent order will be published in the Federal Register shortly and will be subject to comment for 30 days, starting today and continuing until April 9, 2009. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

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 respondent actually has violated the law.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $16,000.

Copies of the documents related to this case 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.

(FTC File No. 082-3114)

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