InPhonic Settles Lawsuit Over Rebates

Dan Simms , left, and Kolin Morlatt check orders for InPhonic. The District firm sells wireless phones and plans. (By Frank Johnston -- The Washington Post)

InPhonic Inc., a District-based retailer of wireless phones and services, has reached an agreement with the D.C. attorney general to settle a lawsuit over its mail-in-rebate practices.

The District sued the company in June, saying InPhonic made it "difficult or impossible" for consumers to obtain promised rebates on cellphones. InPhonic accumulated more than 2,000 consumer complaints over the past three years.

The terms of the settlement include changes to the company's online advertisements and payment to certain consumers for rebates that had been rejected, company spokesman Tripp Donnelly said.

"We have had a very good working dialogue with the office of the attorney general, and we believe final settlement should be reached shortly," Donnelly said.

The company said its financial results for the third quarter include $3.8 million to cover the cost of the settlement "and related expenses."

InPhonic sells cellphones made by Motorola Inc., Samsung Electronics Co. and other major brands, as well as wireless plans from carriers such as Verizon Wireless Inc., Cingular Wireless LLC and T-Mobile USA Inc., through several Web sites.

The company has been reducing its reliance on consumer mail-in rebates in recent months. During the third quarter, the company used them with 25 percent of wireless phone shipments, a decline of about 60 percent from the third quarter of 2005, Donnelly said.

Bennett Rushkoff, chief for the consumer and trade protection section of the D.C. attorney general's office, declined to comment on the negotiations.

InPhonic yesterday reported a loss of $4.8 million (13 cents a share) for the third quarter, compared with a loss of $5 million (14 cents) a year earlier. Revenue increased 11 percent, to $102.2 million.