Why do coupons say “value of 1/100 of 1 cent”?
In: Economics
You know how sometimes cheap, local restaurants have a customer loyalty card where after you’ve eaten X number of meals you get a free one?
Back in the late 1800’s those were a lot more common – just about *every* company gave out customer loyalty stamps and when you got enough stamps you could get a free thing.
The people of the day felt that this was an immoral form of deceptive advertising because the thing you were getting wasn’t actually free (since the cost of it was being baked in to everything else the company had sold you).
They couldn’t constitutionally outlaw these kinds of stamps, but they could regulate them. The way in which they regulated them was by mandating that customer loyalty stamps had to have a cash value that the company would pay for them if you chose not to redeem them for the free thing.
The model law on this came out of New York and was quickly adopted by most other US states. The problem was that the New York model law was really poorly written and resulted in cash redemption values that were so laughably low as to be meaningless.
The law didn’t get fixed because customer loyalty stamps fell out favor on their own shortly thereafter. At the time this law was written coupons didn’t really exist, but the law was so poorly written that it now applies to modern day coupons.
The thing about bad laws is that they stay on the books until someone removes them. But removing them is a long, time consuming process – unless someone is *really* interested in forcing it through it doesn’t happen. No one cares about the law as it applies to coupons – its so trivial to print “value of 1/100 of 1 cent” on a coupon and comply with the law that no one is willing to put the effort in to go state by state and get the law repealed wherever its still on the books.
As a result, the New York model law remains on the books in a bunch of states and big companies just slap that statement on their coupons to comply with it.
Trade stamps were once given with the purchase of a product. These stamps could be turned in for something, but they inflated product prices as the stamp values were passed onto the product. When people became aware of this, trade stamps had to have cash value. Coupons are just treated like trade stamps.
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There is still a reason for this value. If someone collected a lot of coupons, not copies, but originals and wanted to turn them in to the manufacturer – perhaps because the product was no longer offered. Perhaps the Chinese manufacturer can’t export masks because the Chinese government is keeping them for Chinese infected with the Wuhan, Hubei, China originated, COVID-19. It doesn’t matter why, this person with a lot of coupons could sue the manufacturer for the lost “savings” that they can no longer obtain. The collecting of the coupons started a contractual relationship.
If this occurs, rather than defend the lawsuit, which would be expensive – the manufacturer could just pay a dollar for every 10,000 coupons, when they were delivered to the location specified by the manufacturer. This causes anyone thinking about this lawsuit to not sue – creating value for the manufacturer that makes printing this on the coupon well worth the ink and questions.
Sometimes it says “cash value 1/100 of a cent,” because the reduction in price when used to by a product is much more.
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