Company Shutdown Sparks Consumer-Rebate Horror Show

Things get ugly for Buy.com customers when rebates go missing.

Tom Spring, PC World

Taking advantage of rebates can be a frustrating experience in general. Among the thousands of consumers who bought discounted Connect3D memory cards and LCD TVs sold on Buy.com in January, however, many say they're living through the mother of all rebate fiascos.

In the seven months since Buy.com offered the rebate promotions, Buy.com has filed a lawsuit against Connect3D, the U.S. division of Connect3D appears to have vanished, and most of the Buy.com customers promised a rebate by Connect3D have yet to receive it.

The problems started at the beginning of the year, when customers responded to several Buy.com "Weekly Deals" and snapped up steeply discounted (after manufacturer's rebate) memory cards and LCD TVs offered by the California-based U.S. division of computer components manufacturer Connect3D.

Many of the deals for memory products proved nearly irresistible, as most of the rebates equaled the cost of the merchandise--making the products "free after rebate." Connect 3D's offers on LCD TVs, on the other hand, did not make the sets "free after rebate." The offers ranged from $20 to $50 for memory products and went up to $200 for the TVs.

Descent Into Rebate Hell

Problems surfaced in February and March, as consumers realized that they had not received their expected rebate checks. E-mail inquiries sent to Connect3D regarding the promised rebates went unreturned, some customers told PC World. Buyers who succeeded in contacting the company via e-mail were informed that they would have to wait six to eight weeks for a rebate.

Telephone calls to the company were fruitless, says Jody Hounshell, of Dayton, Ohio, who purchased a 2GB USB drive for $60 with a $50 Connect3D rebate. "Every time I called Connect3D customer service, I was told that the person I needed to speak to had 'just stepped out,'" Hounshell tells PC World. Bad turned to worse for Hounshell when his new Connect3D USB drive stopped working. "I was stuck with a $60 piece of worthless plastic," he says.

In April, Connect3D sent a message to customers, stating: "Due to the lack of payment from our distributor, there has been a significant delay in rebate payments for products purchased at Buy.com." Soon after this Connect3D e-mail appeared, customers calling the company's California office discovered that they were out of luck.

"Connect3D phone lines went dead, and the Web site was gone," says David Casey, of Mechanicville, New York, who purchased 2GB and 1GB SD Cards--both "free after rebate."

Where Did the Company Go?

When PC World attempted to contact Connect3D on July 18, calls to the main number delivered a prerecorded message stating that the number had been disconnected. The U.S. Web site for Connect3D doesn't appear to be working; instead of displaying company information, it shows an advertisement for the Web hosting firm GoDaddy, suggesting that the Web site is nonfunctional.

"The last we heard from Connect3D was in April," says Zach Vander Meeden, public relations director for the Better Business Bureau that serves San Jose, California, where Connect3D's U.S. office is. Vander Meeden says that Connect3D seems to have packed up and called it quits. The Silicon Valley BBB has received 435 complaints through July 18 against Connect3D for failure to honor rebates, Vander Meeden says, mainly for products purchased through Buy.com but also including some sold through Amazon.com and Office Depot.

The BBB report for Connect3D's U.S. office states: "According to the former President of the company, Connect 3D is currently insolvent and is no longer performing any business functions."

Connect3D's UK Counterpart

The status of Connect3D's United Kingdom-based parent company is unclear. Hong Kong graphics card manufacturer Twintech3D says that it purchased the Connect3D brand name (but not the business) from Connect3D's parent company, Connect Components Limited, also based in the UK.

A company representative for Connect Components Limited confirmed the sale of the Connect3D brand name to Twintech3D. The representative says that Connect Components Limited will continue to manufacture video cards and other components, functioning only as a system integrator. The representative declined to answer questions regarding the status of the U.S. office.

Twintech3D, which has manufactured video cards based on nVidia chips since 1999, bought the Connect3D brand to begin selling a line of Connect3D video cards with ATI chips in Europe, says Helene Poon, sales manager at Twintech3D-Hong Kong.

According to AMD's graphics-card division ATI, the UK-based Connect3D was a purchaser of ATI graphics processors up until earlier this year. Connect3D manufactured video cards, some of which PC World has reviewed.

Buy.com Feels the Heat and Sues

Many Connect3D customers have turned to Buy.com--which promoted the Connect3D rebates--for help and for rebate payments.

Under the rules of the Federal Trade Commission that govern consumer protection laws, Buy.com has no legal obligation to honor Connect3D's rebate, says Matthew Gold, staff attorney for the FTC. Despite this, Buy.com has honored nearly $33,000 worth of rebates on Connect3D's behalf, according to a Buy.com civil lawsuit filed against Connect3D on July 6 in the Superior Court of Orange County, California. (See a PDF of the lawsuit.)

The suit alleges that Connect3D and Indiana distributor Wintergreen Systems acted as one to sell heavily discounted (after manufacturer's rebate) memory cards and LCD TVs through Buy.com in January 2007. When it came time to send consumers rebate checks, neither company did, the suit alleges. The suit claims that Connect3D and Wintergreen engaged in fraud, breach of contract, and misrepresentation.

Buy.com declined to comment on the case. Connect3D couldn't be reached for comment. And Wintergreen president John Levy says his company acted only as a third-party distributor and is not part of any formal business agreement between Connect3D and Buy.com.

Lawsuit Details

According to the lawsuit, Buy.com customers purchased 48,683 Connect3D products from Buy.com's Web site that were eligible for rebate. Sales of those products totaled $3.1 million. By Buy.com's estimates, if the consumers requested rebates within the allotted time, Connect3D should pay out $2.3 million in rebates. Buy.com claims that Connect3D has not honored any rebates that were part of the sales through Buy.com.

The suit also states that, when Buy.com asked Connect3D why it wasn't honoring the rebates, the company explained that it was waiting to receive payment from distributor New England Technology Incorporated (NETi) first.

Unbeknownst to consumers, a brouhaha appears to have erupted between Connect3D's distributors--Wintergreen and NETi--both of which channeled merchandise for Connect3D to Buy.com for sale. Proceeds from the sale of Connect3D SD Cards, USB drives, and LCD TVs were supposed to travel upstream back to Connect3D. But a disagreement between Wintergreen and NETi on money owed stalled payment back to Connect3D, according to Wintergreen's Levy, who is named in the Buy.com lawsuit as a defendant.

Levy says NETi owes his firm money for the Connect3D merchandise. However, David Romano, president of NETi, says that his company paid Wintergreen all but about $100,000 of what it owes the firm.

Meanwhile, customers are stuck with no rebates and looking to the BBB, their state's attorney general, and the Federal Trade Commission for assistance. The bad news is, even if any of these agencies decide to intervene, it could be some time before consumers see a dime of their rebate money--if they see any money at all.