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Lexmark Accused of Falsely Advertising Rebate Program

Friday, September 07, 2001

Press release from the issuing company

SAN FRANCISCO, Sept. 6 According to a suit filed yesterday against Lexmark International, the company engaged in false and misleading advertising in its promotion of a rebate program for laser cartridges sold at lower prices than identical Lexmark cartridges. The complaint, brought in California state court in San Francisco by the Arizona Cartridge Remanufacturers Association, Inc. ("ACRA'') of Chandler, Arizona, alleges that the only difference between the differently priced cartridges is that consumers supposedly agreed -- by the act of opening up the rebated cartridge box -- not to recycle that cartridge to remanufacturers such as ACRA members that sell discounted remanufactured cartridges in competition with Lexmark. The complaint claims as false and misleading Lexmark's statement that its rebate program, which is called a Prebate because it occurs before any cartridge is returned to Lexmark, lowers the cost of printing and helps the environment. The real purpose of the Prebate, according to the complaint, is to deprive remanufacturers of the used cartridges that they need to provide low-cost competition to Lexmark and to provide recycling that benefits the environment. Laser toner cartridges operate with the widely used laser printer. Billions of dollars worth of such cartridges are sold new each year by original equipment manufacturers like Lexmark, Hewlett-Packard and Canon. According to the complaint, however, Lexmark is the only original equipment manufacturer that offers a discount in advance for a cartridge that it may ormay not receive back. The complaint further alleges that Lexmark has no enforcement mechanism to insure that the cartridge is returned because Lexmark's principal goal is simply to keep empties out of the hands of its low-cost competitors, the remanufacturers. "Such empties are the lifeblood of the remanufacturing industry,'' said Ronald S. Katz of the international law firm, Coudert Brothers, which represents ACRA. "Although Lexmark claims in its advertising that the Prebate lowers the cost of printing and helps the environment,'' continued Katz, "the opposite is true. Many bulky, toxic cartridges simply end up in landfills, and consumers are deprived of the choice of a low-cost remanufactured option, which creates savings in the same way that, for example, re-built carburetors do in the automotive parts industry.'' In addition to the Prebate program, the suit also alleges that Lexmark cartridges have certain technological devices to prevent competition. For example, a lock-out chip disables the printer if a remanufactured cartridge is inserted. "That would be the equivalent of a car manufacturer requiring a buyer to purchase only a certain kind of gasoline,'' said Katz.




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