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. Last Updated: 07/27/2016

Microsoft Suspends Rebate After Loophole Exploited

Microsoft Corp. apologized to consumers and retailers for the inconvenience as it suspended a $400 Internet-access rebate in California and Oregon that inadvertently came with no strings attached.

It acted a day after thousands of people heard of the slipup and mobbed Best Buy, Office Depot, Office Max and Staples, all of which had versions of the Microsoft rebate.

Customers stood in line for hours at some stores after grabbing anything worth $400 on the way home from work, planning to return and exchange the goods in the next few weeks.

"People do have it in for Bill Gates," said analyst Mark Specker of SoundView Technology Group in San Francisco.

Internet chatter and the fine print in advertisements notwithstanding, Microsoft said it was withdrawing the offer that allowed customers in the two states to use the rebate money toward purchases, then cancel the three-year, $21.95 monthly contract without returning the rebate.

"We hope to get it back up and running within days," Microsoft spokesman Tom Pilla said. This time, the deal will come back the way it has been operating in the other 48 states: If you cancel the contract, you have to pay the rebate money back.

Those who felt a special joy in getting electronics for free from Microsoft shouldn't be deluded about their impact.

If 10,000 people took advantage, as Specker estimates, that's about $4 million in cash. Microsoft earns that much profit in five hours.

The company made the unusual no-strings offer in California and Oregon beginning last year because it mistakenly thought consumer protection laws in those states forbade some rebates tied to purchases.

The fine print alerted some consumers to the possibility of immediate cancellation, and word spread via the Internet, word-of-mouth and traditional media.

Retailers and Microsoft declined to give sales figures, but Microsoft said the "abuse" forced it to pull the plug just two weeks after it extended the offer to Office Max and Office Depot.

Retailers, who benefited from the boom, said they had to honor Microsoft's request.

"Despite the fact that it's in our ad, we can no longer offer it," Best Buy spokeswoman Joy Harris said.

Microsoft said it would honor its previous agreements with customers.