Banished E-Tailer Seeks Reinstatement to NTIA Coupon Program

“We're working with the NTIA,” said Convertmy.tv COO Jay Rao: “We've answered their questions. We believe we didn’t act intentionally in error but acted in good faith.” Rao said “the NTIA is asking forward-looking questions. They want a time line from us, and to see our controls. We hope to be brought back up and running.”

Convertmy.tv began selling coupon-eligible boxes in late March, one of the first e-tailers to redeem NTIA coupons, Rao said. It began selling boxes and redeeming NTIA coupons assuming that Maxmedia would deliver boxes in early April, Rao said. NTIA rules bar a certified retailer from redeeming coupons for boxes it doesn’t have in stock. “Then in the first week of April, Maxmedia informed us it found a chipset problem that caused poor channel reception, and would have to switch chipset vendors,” Rao told us. Maxmedia also changed the box’s model number to MMDTVB02 from MMDTVB03.

“We went into a scramble mode, and where we made a mistake was in posting the ‘02 model on the site,” Rao said, acknowledging his company made an already-bad situation even worse. “The NTIA told us we were no longer selling a box that was available for coupon redemption. We had assumed Maxmedia was just swapping out the chipset and that it was a running line change. But Maxmedia said it was a major change and the NTIA would have to test and re-certify the new box.”

Convertmy.tv then told customers the new model wouldn’t be available until June. Meanwhile, customers’ coupons were redeemed, as required, at the time of sale, with NTIA paying the retailer $40 for each, Rao told us. “That money is in an account that hasn’t been touched,” he said. “We offered to the NTIA to pay $40 back to the customers for their coupons, but the NTIA said we shouldn’t.” That might violate agency rules against cash refunds for coupons, he said he was told. The site sold “only 15 to 20 a day” of the Maxmedia boxes, Rao said.

Redeemed coupons remain valid for customers who choose to keep orders active, waiting for the Maxmedia box’s delivery in June, Rao said, assuming Convertmy.tv wins reinstatement to the program. “I've been in business a long time and I do things the right way,” he said. “There was some careful thought behind this, but when you get a snowball running, things can get out of control. I had to ask myself, ‘Would I rather have delivery problems now, or product problems later after the box is in the consumer’s hands?’ The big rush for boxes won’t come until later this year. I think we'll come out of this a lot better for the bitter experience.”

That experience may point up a big potential hole in the NTIA program -- what consumers are supposed to do if they've used NTIA coupons at a retailer that can’t deliver a box but processed the voucher for federal reimbursement. NTIA is “reviewing this situation, and working on the proper approach to make consumers whole,” a spokesman told us Monday.

We became aware of the snafu when Convertmy.tv never sent us a Maxmedia box we ordered late March with a coupon. Convertmy.tv since has canceled our order, offering a $19.99 refund to our credit card for out-of-pocket expenses -- though it never charged the card. But NTIA’s status screen confirms that the coupon we submitted at Convertmy.tv when ordering the Maxmedia box March 30 “has been used to purchase a converter box and is no longer active.” It’s not known for sure how many consumers redeemed coupons at Convertmy.tv for the Maxmedia box, but Convertmy.tv and Maxmedia have been Topic A on CE blogs for days.

Under NTIA rules, once a coupon is used, its value can’t be restored if the box in question is returned, exchanged or not delivered. By law, households are limited to two coupons each, so NTIA has said it won’t allow consumers issued two coupons to replace them if lost, stolen or expired. Convertmy.tv is vowing to make good on the nonexistent boxes for which it accepted coupons. But it’s a quandary how the agency in the future might treat victims scammed by an NTIA- approved retailer differently from consumers whose coupons were lost, stolen or expired.

Convertmy.tv originally may have landed in hot water with NTIA because back-ordering “is not permitted when transacting business with the federal government,” NTIA’s vendor said in response to a question frequently posted at NTIADTV.com, its site for retailers. The answer was updated April 7, the site says, though it’s not clear whether the Convertmy.tv snafu prompted the update. “In other words, payment cannot be requested until a product is delivered to the consumer,” it says. “So, before requesting payment by redeeming the coupon card, the product must be in the process of being delivered to the consumer.” The key is that a coupon-eligible converter box is “reserved” for the consumer when the coupon is charged, “and that a consumer’s right and ability to pick up that CECB is unrestricted,” the site says.

It’s all right, for example, for a retailer to turn in a coupon card for payment while a box is at a distribution center “as long as the CECB, within hours or days, is reserved for the consumer and begins the shipping process,” the site says. But it’s “not acceptable for the card to be redeemed if the timing of the shipment is unknown or if the retailer does not have a method of assuring the consumer that a CECB will be available at some known time in the future,” it says.

“So, a retailer may not present the coupon for payment if, for example, the consumer needs to check back every few days to see if CECB’s have come in,” the site says. “Likewise, the retailer may not present a coupon for payment if, for example, the consumer is told to come back next Thursday when the shipment arrives, but no CECB is set aside from that shipment for a particular consumer. If the consumer must ‘compete’ for inventory on the shelf with consumers whose coupons have not yet been redeemed, the retailer may not charge the coupon.”