National Telecommunications and Information Administration 


47 C.F.R. 301


Docket Number: 0612242667-7051-01


RIN 0660-AA16


Rules to Implement and Administer
a Coupon Program for
Digital-to-Analog Converter Boxes





A. Eligible U.S. Households
B. Coupon Value and Use Restrictions
C. Application Process
D. Coupon Expiration
E. Coupon-Eligible Converter Box
F. Manufacturer Certification
G. Retailer Participation
H. Consumer Education
Procedural Matters


AGENCY: National Telecommunications and Information Administration, Commerce   PART 301 Digital-to-Analog Converter Box Coupon Program  
ACTION: Final Rule   Technical Appendices  

II. Discussion

G. Retailer Participation

103. In the NPRM, NTIA noted that participation by retailers in this program would be voluntary, and that NTIA would not compensate retailers that choose to participate. Given the nature of the program, NTIA proposed to permit consumers to redeem coupons at retailers that have established production and distribution channels and who have demonstrated that they can redeem coupons expeditiously and efficiently.[ 162 ] NTIA proposed to require retailers to adhere to and enforce coupon restrictions such as prohibiting coupon holders from using two coupons in combination towards the purchase of a single CECB and prohibiting consumers from using coupons to purchase any device other than an eligible converter box, pursuant to these regulations. NTIA proposed to reimburse retailers within 60 days after receiving sales information related to CECBs.[ 163 ]  

104. Several comments were received from retail companies, organizations and members of the public addressing these proposals and raising other issues affecting retailers. NTIA believes that the regulations of this one-time program should not discourage retailer participation. Some comments noted that there has not been a government-sponsored program involving retailers quite like the Coupon Program, but that other government programs such as the USDA’s Food Stamps and Women, Infants and Children’s benefits may provide examples for NTIA to follow.[ 164 ]

105. Commenters made recommendations and asked NTIA for clarification with respect to (a) retailer obligations to predict or meet demand for CECBs; (b) legal liability and additional operating costs for retailers who voluntarily participate in the program; (c) the timing for retailers to be ready to redeem coupons; (d) need for confidential treatment of sales data; (e) retailer certification criteria and procedures; (f) payment terms to retailers; and (g) consumer and retailer appeals.

a.         Retailer Obligations to Predict or Meet Demand

106. CERC stated that retailers and manufacturers should not be subject to sanction for an inability to predict or meet demand. They pointed out that the demand for converters may peak in the millions and then drop toward zero, all within a period as short as 90 days. At the end of the Coupon Program, excess inventory may be unsellable at any price.[ 165 ] RadioShack opposed an obligation on the part of the retailer to maintain inventory in all stores at all times because it would be burdensome and perhaps impossible to meet such a requirement.[ 166 ]

107. NTIA recognizes that the product cycle for converters is unknown and perhaps atypical of consumer electronics products generally. Furthermore, NTIA does not want retailers to decline to participate because they feel that our requirements are too burdensome or unrealistic. Therefore, NTIA will clarify that retailers are expected to follow commercially reasonable practices in ordering and managing inventories of CECBs.

108. CERC raised a related point in response to NTIA’s proposal that retailers accept the obligation “to honor all valid coupons that are tendered in the authorized manner.”[ 167 ] A reasonable interpretation, according to CERC, is that a retailer will honor valid coupons “if the retailer is offering subsidized Converters for sale at the time the coupon is presented by the consumer.”[ 168 ] NTIA agrees and will not expect retailers to attempt to redeem coupons if they have no CECBs available for sale.

b. Legal Liability and Additional Cost for Retailer Participation

109. CERC described NTIA’s statement in the NPRM that retailers must certify “under penalty of law” as “insufficiently vague to offer guidance yet daunting in their possible consequence.”[ 169 ] CERC stated that any interested retailer would reasonably want to be fully aware of the potential for liability, to third parties as well as to the government, before agreeing to participate.[ 170 ] Similarly, RadioShack asked us to clarify what was meant that retailer certification statements would be made “under penalty of law.” They suggested that penalties “would only apply to intentional efforts to defraud the program and that unintentional non-compliance or error would not be subject to penalties.”[ 171 ]

110. The Act did not include any specific government remedies or civil or criminal penalties for violations or non-compliance with the statute or the regulations promulgated by NTIA thereunder. Retailers should be aware, however, that other statutes provide for civil or criminal penalties for wrongdoing in connection with federal programs such as the Coupon Program.[ 172 ] For example, the False Claims Act establishes penalties for “any person who knowingly presents, or causes to be presented, to an officer of employee of the United States Government . . . a false or fraudulent claim for payment or approval.”[ 173 ] NTIA clarifies that it does not intend to sanction retailers for unintentional non-compliance or error. NTIA encourages retailers and other participants in the Coupon Program to familiarize themselves with the laws that impose liability for making false statements to the Federal government, for making false claims, or engaging in other activities that violate Federal law.

111. CERC and other commenters expressed concern that they may incur substantial costs to participate in the program. CERC stated that the “[c]onverter is a unique, limited occasion product that is likely to be subject to unique laws of supply, demand, and subsidy. As a matter of public policy, there are simply too many novel costs and risk factors, and imponderables, for NTIA to place these investments, expenses, and risks solely on the backs of retail vendors who come forward to participate in this program."[ 174 ] The electronically trackable coupon will necessitate custom changes to retailers’ point of purchase systems. RadioShack added that “[i]n a normal retail environment, a retailer would likely consider this cost as an investment, amortized against the sales life of the many products sold in its stores. . .[But] there is nothing against which to amortize this cost - - the shelf life of the eligible converter box is as short as the 18 months of the program and the system upgrade is only required for the purchase of the few models of eligible converter boxes.”[ 175 ] Best Buy also pointed out that their “current electronic processing systems are not able to limit an Electronic Coupon Card to a single product purchase.”[ 176 ]

112. CERC stated that it would be prudent to use some of the administrative funds authorized for the Coupon Program for “NTIA’s contract(s) with its vendor(s) to provide - - in light of the apparent inadequacy of existing commercial channels - - for the distribution of the necessary software and other system support to participating retailers as an included cost of the program.”[ 177 ] RadioShack said such payments could be “considered analogous to the manufacturers’ common payment to retailers of fees for the handling of their manufacturing coupons.”[ 178 ] In the NPRM, NTIA stated that it will not compensate retailers for participating in the program. NTIA maintains that it does not intend to compensate retailers directly for participation in the program. NTIA, however, fully intends to distribute and process coupons consistent with reasonable commercial practices that do not place undue burdens on participating retailers.

c. Timing of Retailers to be Ready to Redeem Coupons

113. Best Buy urged NTIA and its contractor to “avoid the holiday months of October, November, December and January to require participating retailers to implement or upgrade any POS systems.”[ 179 ] Best Buy stated that because these months include the heaviest shopping traffic and volume of transactions of the year, it could not risk any costly down time of its systems or employees caused by complicated upgrades.[ 180 ] CERC said that “once into the holiday shopping season, it would be very difficult for retailers to modify their point of sale and other hardware and software systems so as to be ready by January 1, 2008.”[ 181 ]

114. NTIA reiterates that it is its intent to establish regulations and procedures that are reasonable and practical in light of commercial constraints. The Act requires NTIA to accept requests for coupons between January 1, 2008 and March 31, 2009, and thus, it proposed that retailers be ready to redeem coupons starting January 1, 2008, consistent with the statutory guidance. NTIA expects widespread retailer POS system modifications to occur in the first quarter of 2008.

d.       Confidential Treatment of Sales and Inventory Data

115. Consistent with the legislative history regarding measures to reduce fraud and abuse, NTIA intends to establish a system for coupon redemption that is easily audited.[ 182 ] NTIA will need to ensure that only valid coupons are redeemed by those actually requesting them, how many CECBs are being sold, how many are available in the market, and how demand is pacing for the program’s initial and contingent funding. NTIA will need cooperation from retailers to provide reports of that nature. CERC pointed out that NTIA will receive “sales data, pertaining to individual retailers and manufacturers, that ordinarily would be held confidential by these entities. Accordingly, it will be necessary to protect the non-aggregate sale data of particular retailers and their vendors, as highly confidential.”[ 183 ] RadioShack urged NTIA to clarify that its vendor “will retain such proprietary information confidentially” and that it will “not be released to the public or to other retailers or manufacturers.”[ 184 ]

116. Again, because NTIA wishes to encourage participation by a wide range of retail entities in the Coupon Program, competitively sensitive or proprietary information provided by retailers in non-aggregated form to NTIA will be treated confidentially consistent with federal law and regulations, including Freedom of Information Act requests and court orders.

e. Retailer Certification and Procedures

117. Commenting parties generally supported NTIA’s proposal that retailers comply with specific requirements by certifying that they will: (1) provide information to customers about the necessity for and the installation of a CECB; (2) have in place systems that can be easily audited as well as systems that have the ability to prevent fraud and abuse in the Coupon Program; (3) are willing to be audited at any time during the course of the Coupon Program; (4) have the ability to electronically provide NTIA with sales information related to coupons used in the purchase of CECBs, specifically tracking each serialized coupon by number with a corresponding certified converter box purchase; and (5) will only submit coupons for redemption as a result of purchases of CECB models certified by NTIA.[ 185 ]

118. CERC stated that certification should entail representations by retailers that they have “established production and distribution channels and have demonstrated that they can redeem coupons expeditiously and efficiently.”[ 186 ] Radio Shack urged NTIA to require participating retailers “to demonstrate that they have experience in consumer electronics retail.”[ 187 ]

119. NTIA agrees that retailers must have experience in consumer electronics retail sales sufficient to support the sale of CECBs as an additional CE product. We do not think that this program is appropriate for brand new ventures, either of the bricks and mortar type or online sellers. NTIA agrees with CERC that demonstrated capabilities as to staff, training, capacity to carry inventory and to order and take delivery of CECBs through commercial channels is important.[ 188 ] As a result, retailers will need to certify that they have been engaged in the consumer electronics business for at least one year prior to their application. This requirement may be waived by NTIA upon a showing of good cause. A determination of “good cause” will be based on a showing of what is the best interest of the coupon program. This application process will provide NTIA with information well in advance of the 2008 launch of which retailers will participate and what markets will be served.

120. The comments from retailers were unanimous that NTIA should dispense with the proposed consumer certifications regarding eligibility. CERC said that the two per household limit “can be complied with by the simply electronic means of not allowing the system to allocate more than two coupons to any specific household address.”[ 189 ] RadioShack said that “fraud would be minimized by use of an electronic coupon card” with several suggestions on how the request, distribution, and redemption system would work.[ 190 ] NTIA agrees that an electronically trackable system will enable NTIA to reduce the chance that no more than two coupons are sent to a given household. NTIA agrees that retail employees should not be placed in the position of having to judge whether a particular customer is eligible to purchase the product. However, NTIA expects retailers to report suspicious patterns of customer behavior to NTIA. Recognizing that many scenarios may exist for fraudulent activity, NTIA will leave it to the retailer's discretion as to the type of behavior that requires notification to NTIA.

121. Some commenters addressed the need for retailers to provide information to customers about converter boxes. In support of NTIA’s proposal, RadioShack said that retailers should be required to demonstrate that their sales people have received “specific training on the necessity for and use of the converter box so that consumers can ask questions and receive accurate answers. [B]ecause the need for specific features and capabilities will vary based on the age and location of televisions, knowledgeable sales people are essential to the success of the converter box program.”[ 191 ] Best Buy said that “[w]hile it is reasonable to expect participating retailers to inform consumers on which converter boxes are eligible for the coupon subsidy, they should not be legally required to invest in displays, placards, or advertisements. Retailers should be allowed flexibility to incorporate the list of eligible converters into existing consumer education and communications plans and materials at their own discretion.”[ 192 ] NTIA agrees and will not specify how retailers are to market or promote CECBs.

f.        Payment Terms.

122. NTIA proposed that retailers participating in the Coupon Program would be required to present to the Government coupons for payment within 30 days of the redemption transaction and retain hard copies of sale information for one year, and that payment from the Government would be made to the retailer for all validly redeemed coupons within 60 days of receipt by the Government.[ 193 ] Commenting parties asserted that if an electronic system is used, there would be no need for a records retention requirement, and that the proposed 60-day payment would be unnecessarily long.

123. RadioShack said that “a retailer may be reluctant to participate in the program, knowing that they are in effect lending the government $40 for each sale for at least 60 days.”[ 194 ] Instead, RadioShack suggested that “reimbursement should occur immediately upon a transaction. . . [W]ith an electronic coupon card system, the reimbursement would be automatic with the transaction, saving an endless amount of time in the transaction settlement process.”[ 195 ]

124. Payments from program funds to retailers will be accomplished in a commercially reasonable manner. While it may be possible for payment to occur within a day or two if an electronically trackable system is used, payments will typically be processed no later than 3 business days after the retailer submits an authorized transaction to NTIA or its contractor. For purposes of these payments to retailers, “business day” means a calendar day other than a Saturday, Sunday or a federal holiday. To ensure that vendors are paid promptly, they will be required to complete a Central Contractor Registration (CCR). CCR validates the registrant information and electronically shares the secure and encrypted data with the federal agencies’ finance offices to facilitate paperless payments through electronic funds transfer (EFT). To ensure payment to the retailer and provide a closed loop audit trail, NTIA will require retailers to provide positive verification that payment has been received for authorized coupon redemption transactions. With respect to retaining hard copies of sales information for one year, in view of the decision to allow the use of ECCs, NTIA will not require retailers to retain hard copies of this information. However, for auditing purposes, sales information must be retained for at least one year and to the extent that retailers choose to retain it electronically, they should be prepared to convert it to a hard copy format if requested by NTIA.


[ 162 ] NPRM, 71 Fed. Reg. at 42,070.


[ 163 ] Id.


[ 164 ] RadioShack Comments at 2-3.


[ 165 ] CERC Comments at 4.


[ 166 ] RadioShack Comments at 16.


[ 167 ] See NPRM, 71 Fed. Reg. at 42,070.


[ 168 ] CERC Comments at 11.


[ 169 ] CERC Comments at 12 (quoting NPRM, 71 Fed. Reg. at 42,070).


[ 170 ] Id.


[ 171 ] RadioShack Comments at 16.


[ 172 [ See e.g., 18 U.S.C. § 1001 (“False Statement Statute”); 31 U.S.C. § 3729 (False Claims Act).


[ 173 ] 31 U.S.C. § 3729(a).


[ 174 ] CERC Comments at 11.


[ 175 ] RadioShack Comments at 17.


[ 176 ] Best Buy Comments at 2.


[ 177 ] CERC Comments at 11.


[ 178 ] RadioShack Comments at 17.


[ 179 ] Best Buy Comments at 2.


[ 180 ] Id.


181 CERC Comments at 4.


[ 182 ] See Conf. Rep. at 202.


[ 183 ] Id. at 12.


[ 184 ] RadioShack Comments at 15.


[ 185 ] NPRM, 71 Fed. Reg. at 42,070.


[ 186 ] CERC Comments at 11.


[ 187 ] RadioShack Comments at 15.


[ 188 ] CERC Comments at 11.


[ 189 ] CERC Comments at 9.


[ 190 ] RadioShack Comments at 10-11.


[ 191 ] RadioShack Comments at 15.


[ 192 ] Best Buy Comments at 3.


[ 193 ] NPRM, 71 Fed. Reg. at 42,070.


[ 194 ] RadioShack Comments at 16.


[ 195 ] Id.


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