Saturday, January 08, 2000
Microsoft suspends $400 rebate offer in Calif., Oregon
The Associated Press
SEATTLE — For a brief, shining moment, Bill Gates was buying hundreds of people in California and Oregon a new TV. Or VCR. Or bread maker.
Customers lined up outside Best Buy stores and other retailers in those two states for hours on Thursday to take advantage of a poorly worded contract that allowed them to get a $400 rebate on any purchase for signing up with Microsoft's MSN Internet service.
What Microsoft learned to its dismay was that the contract also allowed customers to then cancel the service whenever they liked, and still be able to keep the rebate.
“It doesn't feel immoral,” said Jenny Ives, a 20-year-old college student in California who used her rebate to buy a bread maker and a combination television-videocassette recorder.
Once consumers started making a run on the stores, Microsoft realized what was happening and suspended the offer Friday morning.
“This is just a shame, because this simply offered consumers an inexpensive way to get wired to the Internet,” said Microsoft spokesman Tom Pilla.
While the program was suspended in California and Oregon for now, Mr. Pilla said the company is reviewing the program to close the loophole and continue the rebates.
At the Best Buy store in West Los Angeles, hundreds of people stood in line for more than three hours with televisions, computers, DVD players and other electronics. The queue stretched to the back of the store and snaked again to the front.
“There wasn't a DVD player left. There were very few TVs left,” said Becky McConnell, 23, of Los Angeles. “The shelves were really bare.”
Microsoft offered the rebate nationwide, reaching agreements with different retailers depending on the products they carry. In most states, anyone who cancels service in less than three years has to return the rebate, usually on a pro-rated basis. But Microsoft officials said provisions in state laws prevented them from adopting that provision in California and Oregon.
California officials said the law was designed to prevent car dealers and mortgage lenders from forcing people to buy insurance from them in order to get financing. However, Microsoft officials feared the rebate program could be considered an illegal loan forced upon people wanting the $21.95-a-month Internet connection.
“We wanted to do the right thing and stay within the bounds of the law,” Mr. Pilla said. “If anything, we were interpreting the law far too conservatively.”
Officials in California have said they would not have gone after Microsoft for linking its rebate to an ISP contract.
CompuServe, the other major online service that offers rebates, said it is having success with its $400 rebate deal, which is also linked to a three-year contract for Internet service, and is not facing similar problems.
While Microsoft has suspended the program, it will let people who canceled keep their rebates. It is expected Microsoft will reintroduce its rebate program — with stricter language closing the loophole — within the next week.
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