New York state attorney general Andrew M. Cuomo announced a $2.63 million agreement with AT&T Mobility over a misleading sales promotion involving rebate offers.

The attorney general's agreement requires AT&T to provide more than $2.63 million to consumers who received rebate cards in fulfillment of its rebate offers on mobile phones and other wireless equipment and services. AT&T also has to change future rebate ads as part of the settlement.

"A number of states, including New York, have laws that regulate how rebate offers can be structured and advertised," said Gonzalo Mon, attorney with Washington law firm Kelley Drye & Warren.

"But the issue here had less to do with a specific rebate law than it had to do with general principles of advertising law," he said. "In general, advertisers are required disclose all of the material terms of the offers.

"In this case, AT&T advertised that consumers could get a rebate card, but allegedly failed to disclose various restrictions associated with the cards, including that the cards weren't redeemable for cash, couldn't be used for cash withdrawals and expired 120 days from issuance."

The attorney general's office found that AT&T failed to adequately disclose the card's conditions and limitations in its marketing materials for the promotion.

AT&T also allegedly deceived consumers with offers for free products when, in fact, consumers had to pay the full price up-front and then submit a mail-in rebate form from which they were sent the aforementioned rebate card with its accompanying limitations.

"AT&T Mobility did not admit any wrongdoing and the attorney general noted that the company cooperated with the investigation, so there has been no determination that the company broke any laws," Mr. Mon said.

In addition to the $2.63 million to consumers, the attorney general's settlement requires AT&T to clearly disclose all the terms, conditions and limitations of any rebate offers and stop referring to the cards used to fulfill the rebate offers as debit cards in its advertising unless the cards are redeemable for cash.

The agreement also requires AT&T to clearly disclose any conditions in marketing and advertising materials.

Consumers potentially eligible to receive funds will be notified by AT&T.

"Although other carriers are not bound by the terms of the settlement, they -- as well as any other company that issues rebates -- should certainly pay close attention," Mr. Mon said. "This case demonstrates that states are taking a close look at how companies market their rebate offers."

It is worth noting that AT&T Mobility is involved in a class-action lawsuit in California related to the same offers that New York challenged.

Although the case is pending, rumor has it that the parties may be close to a settlement.

According to Mr. Mon, Florida has made a name for itself by bringing cases against companies that advertised "free" content, but fail to disclose some of the costs associated with that content.

For the New York settlement, qualifying consumers will receive new rebate cards that are fully protected under the terms of the New York State Gift Card Law and which may be used both to purchase products and services anywhere that Visa cards are accepted and to pay consumers' AT&T wireless bills.

AT&T cooperated fully in the investigation.

"The main lesson is that advertisers must always disclose the material terms of their offers," Mr. Mon said. "If there are significant restrictions on how a rebate or any other offer will be fulfilled, those restrictions will likely have to be disclosed to consumers prior to purchase.

"It doesn't do much good to only disclose these terms after the purchase," he said.

In addition to general laws governing ads, companies that issue rebates need to be aware that many states have specific laws governing rebates.

These laws regulate, among other things, what can and cannot be said in rebate ads, what disclosures must be made, what consumers can and cannot be required to do in order to redeem a rebate, and the time in which rebates must be fulfilled.

"Many of these laws have been passed over the last few years, so it looks like regulators are paying close attention to this topic," Mr. Mon said. "If a company wants to run a rebate program, it should consult with its legal counsel to make sure it is complying with all applicable laws."

Mickey Alam Khan reported.