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Trading Stamps and Coupons

A comprehensive term for any type of tickets, certificates, or order blanks that can be offered in exchange for money or something of value, or for a reduction in price when a particular item is purchased.

U.S. businesses attempt to attract customers by using advertising, promising low prices, and claiming to offer high-quality goods and services. Another way of attracting business is by offering potential customers incentives, such as trading stamps, coupons, and price rebates. Though trading stamps have declined in popularity since the 1960s, the idea of awarding some type of credit for purchasing goods and services has survived. When commercial airlines award "frequent-flier miles" to their passengers, they are offering a variation on the trading stamp concept.

Trading stamps became popular during the Great Depression of the 1930s. They are printed stamps that can be saved and pasted into booklets until the individual collecting them has a sufficient number to exchange them for a particular item of merchandise. A trading stamp company negotiates agreements that allow retail merchants to give stamps to customers in proportion to how much they spend at the merchant's store. When the books are filled, they can be offered in exchange for merchandise provided by the trading stamp company through a catalog or at a redemption center. In effect, the customer receives an additional benefit for the price she pays for merchandise.

The merchant receives the benefit of the advertising done by the trading stamp company. The merchant also expects to attract more customers than a merchant who charges the same price for goods but does not offer stamps. The trading stamp company earns money by selling the stamps to the retailer.

In the heyday of trading stamp collection, various trading stamp companies competed for this lucrative market, which drew much of its business from grocery stores. The largest and most famous was the Sperry and Hutchinson (S&H) Company, which offered S&H Green Stamps. S&H filed lawsuits in the 1960s to prevent its stamps from being brokered by persons and companies other than licensed retailers. Though the lawsuits were unsuccessful, the downfall of trading stamps came from retail merchandisers who offered consumers price discounts large enough to lure them from merchants who offered stamps. In addition, in the burgeoning consumer economy of the 1960s and 1970s, merchandise was easily affordable, and consumers were no longer willing to defer their purchases while they patiently collected stamps.

Though trading stamps have virtually disappeared, the concept is still used. For example, airline frequent-flier miles allow the customer who flies commercial airlines to accumulate miles toward free tickets. The airlines believe that a person will prefer to "earn" miles by flying with one company. Computer technology has also spurred experiments with recording points electronically when a person makes a retail purchase.

Whether the points are measured in stamps or miles, the law recognizes them as tokens of legal obligations. The points are not merchandise in and of themselves, but they do represent a promise by the company offering the incentive to redeem them for something of value. Ownership of the stamps, miles, or points remains with the offering company. This gives the company the ability to control the manner in which the rights represented by the incentives can be transferred.

Merchandise coupons are a popular way to attract business to a particular store or to a particular product. Coupons can be printed and distributed in advertising circulars, newspapers, and magazines or be enclosed with packaging for a product. A coupon gives rise to legal obligations based upon its terms. In general, the coupon constitutes proof of a promise by a manufacturer to give something of value to an individual who purchases the product of the manufacturer and presents the coupon for redemption. The coupon may be in the form of a rebate to be mailed to the purchaser from the manufacturer. To obtain a cash rebate, the purchaser must usually send in the rebate coupon and a sales slip as proof of purchase of the product, but individual companies may impose different requirements.

A number of coupons offer a discount that is granted at the time of purchase. The coupon informs the merchant that it may be returned to the manufacturer for the face value of the coupon plus a small service charge for each coupon returned. The merchant is required to submit proof that a sufficient amount of stock was purchased to have made the sales claimed.

The promise of the manufacturer on the coupon constitutes a unilateral contract that is enforceable as soon as a retail merchant accepts the offer of the manufacturer. The manufacturer has the right to require proof of purchase as a condition to performing the contract.

The obligations that are created by advertising coupons may be enforceable by criminal penalties as well as by contract law. In many jurisdictions misuse of coupons is a form of business FRAUD. For example, a merchant who returns thousands of coupons to a manufacturer and claims a refund without ever having sold the product may be guilty of a criminal offense in some jurisdictions.

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