Regulating Rebates

Posted on February 09, 2005
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We've all been there.  Usually after purchasing the newest electronic gizmo, we eventually file through the endless receipts, instructions, and warranty cards to find the rebate offers.  Only, you now realize that perhaps your purchase doesn't qualify or you missed the eligible time frame.  Such an experience may prompt you to curse the manufacturer and retailer, but you resolve to be more aware of such offers in the future.

But a group of state lawmakers decided to go one step further and install new regulations on companies that offer rebates. The Arizona House Commerce Committee fortunately rejected the proposed legislation "that would have required specific timelines and disclosure information," as the Phoenix Business Journal reports.

However well-intentioned or seemingly minor this regulation may appear, it is an additional cost on manufacturing and retail businesses (big and small) that would manifest itself in any number of unintended ways: the legislative committee was wise to reject this bill supported by "consumer advocates."  Businesses may have first reacted by not offering rebates at all, or by increasing prices to compensate for the increased compliance costs.  In the end, this would have done more to hurt consumers than help them.  As ABC investigative reporter John Stossel puts it, "these [kinds of] regulations make things worse, not better, for ordinary people."

It is nearly impossible to pinpoint the actual costs of any given regulation, because either a business will spend money to avoid complying, lobby to have rules written that favor them over others, or they will pass on compliance costs to a number of groups. In Burdensome Barriers: How Excessive Regulations Impede Entrepreneurship in Arizona, Tim Keller, executive director of the Arizona Institute for Justice, illustrates how just a sampling of ostensibly well-meaning regulations do significant harm to potential entrepreneurs, ultimately discouraging them to enter the marketplace, and dragging down the state's economy.

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