FTC Settles Charges Against CompUSA

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For Release: March 11, 2005

The Rebate Debate: Why Were They Late?
FTC Settles Charges Against CompUSA

Action Is First Challenging a Retailer’s Promises for Third-Party Rebates

Under the terms of two separate consent agreements announced today, the
Federal Trade Commission has settled charges against nationwide computer
superstore CompUSA Inc. and the officers of computer peripherals
manufacturer Q.P.S. Inc., whose products were marketed and sold by
CompUSA, for allegedly failing to pay, in a timely manner, thousands of
rebates for products sold under the CompUSA and QPS brands. Under the
terms of the settlement with the superstore, CompUSA will pay consumers
who purchased QPS products at CompUSA their due or past-due rebates,
which ranged from $15 to $100 each.

Today’s case represents the first time the FTC has charged a nationwide
retailer over its rebate advertising practices, including its
advertising of manufacturer mail-in rebates. The administrative consent
agreements announced today settle all charges against CompUSA and QPS’s
principals Priti Sharma and Rajeev Sharma.

“When it comes to rebates, retailers must deliver on their promises,”
said Lydia Parnes, Acting Director of the FTC’s Bureau of Consumer
Protection. “The message to retailers is clear – the FTC is on the beat
and will take action if you advertise manufacturers’ rebates when you
know they aren’t honoring their promises.”

The Commission’s Complaints

In its complaint against the superstore, the FTC alleges that CompUSA
engaged in deceptive and unfair practices relating to rebate offers made
for both its own branded products, as well as QPS products that it
marketed and sold. Specifically, according to the FTC, CompUSA was
involved with the creation of the rebate program for QPS-funded mail-in
rebates for products sold at CompUSA. The complaint also alleges that in
marketing QPS’s rebates, it falsely represented that QPS-funded rebate
checks would be mailed to buyers of QPS products within six to eight
weeks, or within a reasonable period of time. Between September and
December 2001, however, many consumers experienced delays of between one
and six months before receiving their rebates, and some never received
the promised rebates at all. Similarly, between January and July 2002,
many consumers experienced delays and thousands never received their
rebates from QPS. Despite knowing about these problems, the FTC
contends, CompUSA continually advertised QPS’s rebates until shortly
before the company filed for bankruptcy in August 2002.

With regard to marketing CompUSA’s own branded products, the FTC’s
complaint alleges that CompUSA promised that it would deliver its
rebates, ranging from $3 to $100 in value, within six to eight weeks, or
within a reasonable period of time. Between September 2001 and June
2002, however, many consumers experienced delays ranging from a week to
more than three months before getting their money. Finally, the
complaint against CompUSA alleges that in many cases, after receiving
valid rebate requests for CompUSA-branded products, the company unfairly
unilaterally extended the time period in which it would deliver the
rebates, without consumers agreeing to the time extension.

The complaint against QPS principals Priti and Rajeev Sharma also
challenges their rebate-related conduct as deceptive and unfair. The
company is now in bankruptcy and is not currently operating.

Terms of the Consent Orders

The Commission has approved two separate consent orders, one addressing
the alleged conduct of CompUSA, and the second with QPS’s principals.

CompUSA. The consent order with CompUSA prohibits it from, among other
things, representing the time in which it will mail any cash rebate that
it will fund, unless it has substantiation for that claim. It also
prohibits CompUSA from failing to provide any such rebate within the
time specified to consumers, or, if no time is specified, within 30
days. The company also is prohibited from misrepresenting any material
terms of any CompUSA rebate program.

Further, the order addresses CompUSA’s role as a retailer in advertising
manufacturers’ rebates – that is, those to be funded by the
manufacturers. Under the terms of the order, CompUSA is prohibited from
advertising the availability of a manufacturer’s rebate unless: 1) it
has an established record with the manufacturer demonstrating that the
manufacturer has consistently paid rebates in a timely manner; or 2) if
it does not have such an established record with the manufacturer,
CompUSA has conducted a reasonable financial analysis of the
manufacturer that demonstrates the manufacturer’s ability to pay the

Finally, the order requires CompUSA to pay all valid QPS rebate requests
that were received from consumers who bought QPS products at CompUSA,
and which are due or past due. CompUSA also is required to send a rebate
to any eligible consumer who contacts CompUSA or the FTC within 75 days
after the order is served on the company.

The order also contains standard reporting and record-keeping
requirements to ensure CompUSA complies with its terms. In addition, the
order requires CompUSA to provide a copy of the order to manufacturers
currently offering rebates exclusively at the computer superstore and to
those that do so in the future.

QPS Principals. The order with QPS’s principals prohibits them from
engaging in practices similar to those alleged in the Commission's
complaint, specifically those related to any rebate program involving
any product or service.

The Commission vote to accept the consent agreements was 5-0. The FTC
will publish an announcement regarding the agreements in the Federal
Register shortly. The agreements will be subject to public comment for
30 days, until April 9, 2005, after which the Commission will decide
whether to make it final. Comments should be addressed to the FTC,
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, N.W.,
Washington, DC 20580. The FTC requests that any comment filed in paper
form near the end of the public comment period be sent by courier or
overnight service, if possible, because U.S. postal mail in the
Washington area and at the Commission is subject to delay due to
heightened security precautions.
NOTE: These consent agreements are for settlement purposes only and do
not constitute an admission by the defendants of a law violation.

Copies of the documents mentioned in this release are available from the
FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer
Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC
20580. The FTC works for the consumer to prevent fraudulent, deceptive,
and unfair business practices in the marketplace and to provide
information to help consumers spot, stop, and avoid them. To file a
complaint, or to get free information on any of 150 consumer topics,
call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint
form at http://www.ftc.gov .

The FTC enters Internet, telemarketing, and other fraud-related
complaints into Consumer Sentinel, a secure, online database available
to hundreds of civil and criminal law enforcement agencies worldwide.


     Mitchell J. Katz
     Office of Public Affairs


     Kerry O’Brien, Linda K. Badger, or Matthew D. Gold
     FTC Western Region, San Francisco

(FTC File No. 0223278)

(http://www.ftc.gov/opa/2005/03/compusa.htm )

Related Documents:

In the Matter of CompUSA Inc., File No. 022 3278

In the Matter of Priti Sharma and Rajeev Sharma, Individually and As
Officers of Q.P.S., Inc., File No. 022 3278

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