Current through Register Vol. 63, No. 9, September 1, 2024
(1) Definitions: As used in this rule:
(a) The definitions of terms set forth in ORS
646.605 and OAR 137-020-0020 are
applicable;
(b) "Free" means
without charge or cost, monetary or otherwise, to the recipient and includes
terms of essentially identical import, such as "at no additional cost,"
"1¢ sale," "2 for the price of 1" and "give away" and, in the case of real
estate, goods or services described in subsection (2)(a), an offer of any
combination of real estate, goods or services at a single price. A free offer
in conjunction with the sale or lease of real estate, goods or services is one
that conveys to consumers the message that real estate, goods, services, gift
certificates, gift cards, cash cards, or any other things of value, are offered
at no cost in conjunction with the purchase of other real estate, goods or
services for no more than their regular price;
OFFICIAL COMMENTARY: Offers may be subject to this
rule even if they do not specifically use the word "free." Any time an
advertisement or solicitation is made that gives anything of value away in
conjunction with the sale or lease of real estate, goods or services, the
person making the offer should carefully analyze the offer to ensure compliance
with this rule.
Use of the term "included in the price" may be considered a
"free" offer depending upon the terms and conditions of the offer, including,
but not limited to, if the real estate, goods or services that are "included in
the price" are usually and customarily included with the sale of similar real
estate, goods or services. A merchant may not force a consumer to unknowingly
purchase other goods and services simply by listing them as "included in the
price." Conversely, it is not unlawful to sell a product with an accessory
included in the price, particularly if the price of the accessory is
individually disclosed and a consumer knows (s)he is paying an additional
amount for the accessory.There is no bright line on this issue and each offer
will be evaluated in its entirety to determine if the combination of real
estate, goods or services is a legitimate "free" offer. All factors will be
taken into consideration, including, but not limited to, whether the consumer
could purchase a similar product without the additional purchase of other goods
and services or if the free item is of de minimis value, such as batteries in a
toy or flashlight.
(c)
"Real estate, goods or services" has the meaning given that term in ORS
646.605(6). For
the purpose of this rule, it does not include loans made by a financial
institution or the opening of an account that is subject to the federal Truth
in Savings Act of 1991,
12 U.S.C.
4301 et seq., and implementing regulations
issued by the Federal Reserve Board or the National Credit Union
Administration, including, but not limited to, a savings or checking account,
money market account, share certificate or certificate of deposit;
(d) "Rebate" means the return of any part of
a payment made by a consumer in conjunction with the sale or lease of real
estate, goods or services and includes, but is not limited to, an offer of a
future cash refund, a direct or indirect payment of money to a consumer or a
voucher for a future payment;
(e)
"Regular Price" means the price, in the same quantity, quality and with the
same service, at which the seller or advertiser of the product or service has
openly and actively sold or leased the product or service in Oregon in the most
recent and regular course of business, for a reasonably substantial period of
time, i.e. a 30-day period, prior to the offer. For consumer products or
services which fluctuate in price, if the price change was due to changes in
the cost of the goods or services by the supplier or the price change is due to
price reductions inherent in the pricing of seasonal or perishable goods, the
"regular price" shall be the lowest price at which substantial sales were made
during a reasonably substantial period of time. Except in the case of
introductory offers, if no substantial sales were made, in fact, at the
"regular price," the price will be presumed to be arrived at through bargaining
with potential purchasers; and
(f)
"Verifiable retail value" means:
(A) A price
at which an offeror can demonstrate that a substantial number of free items
have been sold at retail in Oregon by a person other than the offeror;
or
(B) If substantiation described
in this section is not available to an offeror, no more than one and one-half
times the amount an offeror paid for a free item.
OFFICIAL COMMENTARY: If substantiation of
verifiable retail value, as required by paragraph (2)(b)(C), is not available,
and the offeror pays $10 for a free item, the verifiable retail value of that
free item would be $15.
(2) Unfair or Deceptive Use of "Free" Offers:
A person engages in conduct which is unfair or deceptive in trade or commerce:
(a) When the person makes a free offer in
conjunction with the purchase or lease of real estate, goods or services:
(A) The price, size, quantity, or quality of
which is normally arrived at through bargaining with potential purchasers,
unless the "free" item is offered by a manufacturer or another party that is
not the seller and there is no direct cost to the seller;
(B) When the item to be purchased or leased
can be purchased or leased for a lesser price without the "free"
item;
(C) At a price that is higher
than the "regular price;"
(D) That
is deceptive or misleading; or
(E)
During a home solicitation as defined by ORS
83.710(1),
unless:
(i) Exempted by ORS
83.710(2);
(ii) The goods or services are sold or leased
by a person or entity that has a franchise to operate and sell or lease its
goods or services by a unit of local government and pays franchise
fees;
(iii) The rates or prices of
the goods or services are regulated by local, state or federal government;
or
(iv) The merchant making the
home solicitation maintains a regular place of business where goods or services
are sold or leased at a regular price and the goods or services for sale or
lease during the home solicitation are being sold at their regular price or
less.
OFFICIAL COMMENTARY: No advertisement or promotion
for real estate, goods or services shall offer any free item in conjunction
with the purchase or lease of real estate, goods or services, the price, size,
quantity, or quality of which is normally determined by that seller or offeror
by bargaining with potential consumers. It is the express intent of this
section to prohibit the practice of advertising or offering something as
"free," when in fact, the cost of the "free" item can be passed on to the
consumer, in whole or in part, by raising the price of the real estate, goods
or services that must be purchased in conjunction with the "free" offer or by
decreasing the quality or quantity of merchandise that must be purchased in
conjunction with the "free" offer. Such "free" offers are illusory.
Examples of violations of this section include, but are not
limited to:
(I) A vinyl siding company
offering "free" installation with the purchase of any home siding
project;
(II) A construction
company offering one "free" window with every other two windows
purchased;
(III) A manufactured
home dealer offering a "free" vacation with the purchase of a manufactured
home;
(IV) A motor vehicle dealer
offering a "free" car with the purchase of another car;
(V) An offer of a "free" television with the
purchase of a vacuum cleaner sold during a home solicitation;
(VI) A men's clothing store offering a "free"
tie with the purchase of a shirt priced at $50.00 that has a regular price of
$35.00; or
(VII) A bridal dress
store, selling its dresses at a convention center wedding show, marks up all of
its dresses at the show by 10% over the regular price at which they are sold at
the store and offers "free" flowers for the wedding of anyone who purchases a
dress at the show.
(b) When the person makes a free offer and in
order to qualify for the offer, the recipient will be given a presentation
intended to result in the promotion of a business or sale or lease of real
estate, goods or services unless the offer contains a clear and conspicuous
disclosure:
(A) Identifying the business
promoted and the goods or services offered for sale or lease;
(B) That the recipient must listen to a sales
or promotional presentation in order to receive the free offer or that the
recipient is entitled to receive the free offer after refusing to listen to the
presentation, whichever is the case. If the free item described is not
immediately available for delivery to the recipient after the recipient has
listened to a sales or promotional presentation, the recipient shall be given
the verifiable retail value of the free item in cash or by a valid
check;
(C) Describing each
potentially free item and its verifiable retail value;
(D) That includes, if the free item is one or
more of a larger group and is received on a random basis, (in addition to
compliance with subsection (2)(d)) a description of the actual odds of
receiving each item based on the initial odds and revised to reflect actual
current odds at the beginning of each month of use of the free promotion; if
not on a random basis, a description of the method of selection used. The
description of the initial odds and the current odds shall include a statement
of the total number of each free item to be given away by the offeror and the
total number of chances to obtain the free item being distributed by the
offeror. If the promotion utilizing the free item involves distribution by more
than one offeror or sponsor, the description of the initial odds and the actual
current odds must also include a statement of the total number of each free
item to be given away by all offerors or sponsors and the total number of
chances to obtain the free item being distributed by all offerors or sponsors.
The odds and verifiable retail value shall be printed in the same size type as
the principal description of each free item and shall appear immediately
adjacent to said description; and
(E) In a telephone or door-to-door
solicitation, that includes the information required by ORS
646.608(1)(n)
within 30 seconds after beginning the conversation.
(c) When the person makes a free offer in
conjunction with the purchase or lease of real estate, goods or services and,
in order to receive the "free" offer, the recipient is required to pay money,
in addition to the cost of the real estate, goods or services purchased or
leased, to the offeror, promoter or any other person in order to accept or use
the "free" offer, including, but not limited to, postage, shipping, storage,
handling, processing, registration or verification;
OFFICIAL COMMENTARY: An offer is not "free" if the
recipient must pay a fee, over and above the actual cost of the real estate,
goods or services, in order to receive the "free" offer. Examples of violations
of this section include, but are not limited to:
(A) Offering "free" computer software on the
internet that requires the recipient to pay a postage and handling fee in order
to receive the "free" software; or
(B) Offering a "free" vacation with the sale
of a living room furniture set that requires the recipient to pay a
registration fee with the vacation company in order to reserve the future use
of the "free" vacation.
(d) In the case of all free goods or services
offered on a random basis as described in paragraph (2)(b)(D), unless it
retains for at least one year a list of the names and addresses of all persons
receiving free goods or services with a verifiable retail value of $10 or more;
and
(e) When a person makes a free
offer in conjunction with the purchase or lease of real estate, goods or
services, which is subject to any terms, conditions or limitations in order to
accept or use the "free" offer, and the person fails:
(A) To clearly and conspicuously display in
an advertisement of the "free" offer all material terms, conditions, and
limitations of accepting the "free" offer;
(B) To clearly and conspicuously disclose to
the consumer all terms, conditions, and limitations of accepting the "free"
offer prior to consummating any transaction; and
(C) To afford the consumer a meaningful
opportunity to reject the offer.
OFFICIAL COMMENTARY: All material terms,
conditions and limitations of a "free" offer must be set forth clearly and
conspicuously in any advertisement in close proximity to the "free" offer.
Disclosure of the terms of the offer, referenced by an asterisk and placed in a
footnote at the bottom of the offer is not clear and conspicuous. Likewise, if
the offer is on the internet, reference to the material terms, conditions and
limitations of the offer by use of a hyperlink or only disclosing them during
the checkout process is not clear and conspicuous. The definition of "clear and
conspicuous" set forth in OAR 137-020-0020 has been incorporated by this rule
and should be reviewed before advertising any "free" offer to ensure
compliance. The complete offer, including all terms, conditions and
limitations, must be fully explained to the consumer before the transaction is
consummated and the consumer must be given a meaningful opportunity to reject
the offer before committing to the transaction. Examples of violations of this
section include, but are not limited to:
(i) A consumer shopping for an engagement
ring is told he would receive a fully paid "free" vacation for two to Mexico
with the purchase of a diamond ring that costs over $10,000.00. No other
information is given the consumer. The consumer and his new bride are, in fact,
flown to the destination for free. However, the new bride and groom are booked
into a dirty, unsafe and uncomfortable hotel with poor food. Once there, the
new couple is told that if they check out they will not be able to use their
return tickets. The consumer is given the choice of staying in the miserable
accommodations or paying an exorbitant "upgrade" fee to get into a reasonable
hotel;
(ii) An electronics store
advertises a "free" 3-day Caribbean Cruise for two with the purchase of a
complete home entertainment center package. The advertisement fails to clearly
and conspicuously disclose that the consumer must purchase his/her own airfare
through the cruise company, that there are many blackout dates when the cruise
is not available and that the price of a cruise with additional days is at a
cost that is 50% more than the price of a comparable cruise.
(iii) A computer software company, through
television advertisements, offers two "free" compact discs of educational
software. The advertisements do not disclose that the consumer must actually
accept delivery of three CDs in order to get the "free" offer. If, within 15
days, the consumer does not mail back the third CD that is not "free," the
consumer is billed $79.95, the total regular cost of three CDs. All three
examples may be violations of paragraph (2)(a)(D) because they are deceptive
and misleading.
(3) Unfair or Deceptive Use of "Rebate"
Offers: A person engages in conduct which is unfair or deceptive in trade or
commerce when the person makes a rebate offer in conjunction with the purchase
or lease of real estate, goods or services:
(a) By offering rebates that are deceptive or
misleading;
(b) The price, size,
quantity, or quality of which is normally arrived at through bargaining with
potential purchasers, unless the rebate is offered by a manufacturer or another
party that is not also the seller, independent of the seller and without the
seller's participation; or
(c) When
the advertisement or solicitation of the rebate fails to clearly and
conspicuously display in close proximity to the rebate offer all material
terms, conditions, limitations and costs of receiving the rebate.
OFFICIAL COMMENTARY: Examples of misleading or
deceptive rebate offers include, but are not limited to:
(A) A motor vehicle dealer or construction
company purchases cash vouchers from a third party and advertises that the
voucher reduces the cost of real estate, goods or services. Strict criteria of
the marketer for filing and later claiming the rebate are so onerous that it is
almost impossible for the average consumer to receive anything. In addition,
the amount of money retained in trust by the marketer for claims is only a
small fraction of the total amount of the vouchers issued.
(B) Advertising these vouchers as rebates is
misleading and deceptive because:
(i)
Consumers are led to believe they are actually going to get a rebate on the
cost of their purchase; and
(ii)
The promotion is intentionally designed to make the consumers fail in either
the initial submission of the voucher application or the claim process, which
in some cases may not occur for four to five years from the initial
transaction. Further, it is very possible that there will be insufficient funds
to pay the entire amount of the "rebate" claims years later when the vouchers
mature.In this particular example, offering such a voucher would also be an
unlawful "free" offer pursuant to paragraph (2)(a)(A) because both motor
vehicle sales and construction contracts are negotiable price
transactions.
(C) A
retail store advertises rebates for home computer systems and fails to clearly
and conspicuously disclose the material terms, conditions and limitations of
the rebate in close proximity to the rebate offer. Examples of such material
terms, conditions and limitations include, but are not limited to:
(i) Rebates must be submitted within 7 days
of purchase;
(ii) To qualify for a
rebate, the consumer must subscribe for a two year internet subscription with
XYZ Corp;
(iii)The rebate will not
be for cash, but only merchandise from the manufacturer;
(iv) In order to qualify for the rebate, the
consumer must purchase a printer at the same time (s)he buys the
computer;
(v) The consumer must
finance the computer system with ABC Finance Company to be eligible for the
rebate;
(vi) To receive the entire
rebate, the consumer must submit four different rebate forms to four different
companies (in this example, the advertisement must clearly and conspicuously
contain the terms for all four rebates to not be misleading or
deceptive);
(vii) The rebate is
limited to only one per address or household; or
(viii) The disclosure of material terms of
the rebate are not in close proximity to the advertised rebate offer in the
newspaper, but placed at the bottom of the page and referenced by an
asterisk.
Stat. Auth.: ORS
646.608(4)
Stats. Implemented: ORS
646.608(1)(u)
