FTC Settles With Vendor Accused of Reneging on Rebates
In what it called the heftiest penalties ever sought in a rebate-related case, the Federal Trade Commission announced Tuesday a proposed court order negotiated with a company that the commission said failed to pay timely rebates to consumers nationwide. Many CE and PC product buyers received no rebate checks at all, the FTC said. The order requires a judge’s approval.
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The FTC called the defendants “repeat offenders” and its president “a recidivist” in rebate violations. Under the proposed settlement, defendants Market Development Specialists, doing business as Wintergreen Systems, and John Levy, its president, will be banned from product-rebate programs for a time to be determined. The defendant also is liable for monetary damages, the FTC said. In an interview with Consumer Electronics Daily and in papers filed in U.S. District Court in San Francisco, defendant Levy said he and his company denied the FTC’s allegations but agreed to the settlement “to avoid the uncertainties and costs of litigation.”
Levy seemed surprised by our call for comment on the FTC’s news release on the proposed settlement, which he and court documents said he signed Dec. 17. The filings cite MDS/Wintergreen as an intermediary distributor for brands that included Memorex for portable DVD players and Hann-G for LCD monitors. MDS/Wintergreen distributed those products to bricks-and-mortar and online retailers including Office Depot, PC Connection, Buy.com, PCMall and Woot.com, the FTC said.
Levy blamed his company’s failure to pay $330,000 in consumers’ rebate claims on extenuating circumstances. “We weren’t paid by vendors for the products we sold,” he told us. “Had we been paid, there should have been ample funds for the rebates,” he said. “We've paid out more than $5 million in valid rebates in the past.”
The defendants claim they can’t pay about $330,000 in overdue rebates, the FTC said. That’s an “amount equal to the value of all rebates owed to consumers as a result of their alleged conduct,” the commission said of MDS/Wintergreen. “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.”