With our big move, we’ve been involved with more than our fair share of commerce recently. As a result, we’ve run into the inevitable but dreaded rebates. Rebates are very unpopular with consumers, and for good reason. They are a hassle, they cost postage and time, there’s a risk that the rebates will be lost or denied, they are hard to keep track of, and it’s virtually impossible to pursue a rebate that doesn’t show up. And sales taxes are computed on the higher pre-rebate sales price. Finally, from a social welfare perspective, the transaction costs associated with rebates seem awfully wasteful.

Now, I’m a laissez-faire guy, so I’m not going to complain about rebates generally. I don’t like them and prefer not to deal with them, but I don’t generally object to their existence. But this weekend, I ran into a rebate that crossed my line.

We subscribed to AT&T’s DSL service and, in connection with that, got 2 different rebates: (1) a rebate on the modem’s purchase price, and (2) a $50 gift card. Instructions on the modem rebate came with the DSL kit, and I dutifully sent it in. Annoying, but not noxious.

In contrast, the $50 gift card wasn’t mentioned in the DSL box. Instead, a couple of weeks later AT&T sent me a notice saying that I could return the attached coupon for my $50 gift card.

Huh? The coupon merely asked me to restate information that AT&T already knew–name, address, phone number. Why did AT&T mail me a coupon asking me to self-report what it already knew, when it could have cut out the extra 2 steps (letter to me, return letter from me) and just sent the gift card?

Clearly, AT&T was playing the arbitrage game. If it had just sent the gift card, there would be a 100% redemption rate on the rebate. But, by sending out the letter and asking for our response, there was going to be less than 100% redemption–some percentage of its letters would be lost, some percentage of consumers wouldn’t respond, and some percentage of responses would be lost. Presumably, AT&T believed that the overall amount of losses justified doing the separate mailing of the gift card announcement (compared to putting the notice in the box or just sending the gift card). Not only is this sleazy in my book, but what a huge waste of society’s time and resources.

The bad news is that we’re locked into a 12 month contract with AT&T. The good news is that Google/Earthlink are wiring Mountain View for free wireless Internet access. The best news is that a streetlight right in front of our house has one of Google/Earthlink’s transmitters. Yay!

UPDATE: Mike Langberg discusses the move away from rebates and cites a prediction that mail-in rebates will be gone in 2-3 years.