A study of the Mobile Cashback Controversy
Alhamdulillah, we are steadily moving forward. To those who have accepted the invitation, Jazakumullahu Khaira!
The mobile phone cashback issue being one of the topics that came under scrutiny and debate during our union, I thought I should put forward my humble understanding on this forum. What I have understood is from what our revered Shaykh Taqi Usmani has said regarding the issue during this visit and also in a previous fatwa.
This issue, to the best of my knowledge, was first raised by Shaykh Haitham al-Haddad who concluded that this type of contracts involve some element of Riba or Rishwah.
Before we delve into further detail, some clarifications need to be made: In cases where the Service Provider itself offers half price line rental for an initial period of service, that is beyond the scope of this debate, as that is effectively hatt-uth-thaman min qibal-il-bayi’. Secondly, this contract seems to be not that of ijarah (although we call the payments Line ‘Rentals’), but that of bai’-al-istijrar for various reasons which can be deliberated upon, if needed, some other time. The following arguments are based on this precept.
My first thought at reading Shaykh Haytham's fatwa was that the parties invloved in the transaction had not been aptly identified. Hence, I've tried to illustrate this in a diagram.
The different stages of this transaction are as follows (please look at the diagram):
- A makes an agency agreement with B, on the basis of which A will provide B with cheap handsets with SIMs or give him a commission if B is able to introduce a number of customers on a particular tariff. Usually, a group of high street shops form a company and get these deals through the company, thus receiving a greater commission. In our diagram, this transaction would be A1.
- B analyzes the commission amount, and after keeping a portion for himself, promotes the deal with the extra amount to be given as cash back as an incentive to attract customers.
- D contacts B and shows his consent to enter into a contract with A. B concludes the contract between A and D as an agent on behalf of A either by obtaining D’s signature or through a verbal/online agreement. In our diagram, this transaction would be the dotted arrows in C2. At this point, B ceases to be the agent for A for this contract as all future correspondence and payments for the service will go directly to A. This is the complete line of C2 in our diagram.
- C his initial promotion offer to D either instantly (very rare!) or conditional to continuation of the service with the same provider for a period of time. This would be P1.
There are certain other points to be kept in mind:
- The promised cash-back is never given by the service provider. The service provider only provides the service to the customer and a commission to the agent for fulfilling his agency agreement. So, the benefits given by the service provider to the two parties are very distinct to each other. Also, this shows that the cash back is not coming from the same jihah (direction) as the airtime service.
- The contract between the SP (service provider) and the customer does not have any mention of the cash back, as SPs have no connection to it. These contract forms are standard application forms requiring personal data of the customer, choice of tariff and payment details. The agent only writes his Agent ID provided by the SP for identification purposes.
- The customer pays line rentals to the SP and the cashback comes from the agent, not in his capacity as the agent (as the agency for this particular contract has ended with the application), but as a now third party to the contract.
- The SP advances the commission to the agent as soon as the application is successful. That is why some retailers advance the full cashback amount to the customer in the first month of service. The only reason why most retailers don’t do so is not because they haven’t received the commission, but only because if the customer fails to submit the required documents within the specified time period, his entitlement to the cashback is forfeited due to his negligence; which gives the retailer the advantage of promoting an attractive offer and restricting the customer’s entitlement to benefit from this offer.
- To understand this better, the customer, on application, agrees to enter into a 12 month or 18 month binding contract and cannot cancel the contract after the 14-day guarantee period. So whether or not the customer uses the service provided to him, he is still liable to pay the monthly line rental amount to the SP. The payments for the SP are secured by the contract, so there is no reason for them to withhold the commission to the agent.
- Also if the customer decides to terminate a 12 month contract, say after 4 months, the SP will oblige him to pay the remainder of the instalments upfront to release him from the contractual agreement. If he does so, his contract has terminated in 4 months. If the first cash back instalment was due, say on providing the sixth monthly bill, he will be unable to do so. In this case, the retailer will not provide him with any cash back at all. (I have confirmed this!) This shows that this promise is not a contractual agreement.
- Traditional fuqaha have differed on the legal enforceability of a promissory undertaking, although they all agree that is enforceable diyaanatan. But the contemporary scholars all agree that if an individual has undertaken a risk based on a promise given to him, this promise will be enforceable qadha’an too. Therefore, we can’t argue that if something is legally enforceable, it automatically assumes the nature of a contract.
- Since it is a promise, and not a contract, all attributes of a promise can be mentioned in its documentation. The retailer may stipulate that he’ll only reimburse the customer provided he produces certain set number of monthly bills within a specified time period or that he stays with the same tariff for a specified period of time or even that he’ll not sell his phone to someone else or transfer the contract to someone else’s name. These conditions have no connection with the SP. (Apart from the ‘same tariff for a time period’ condition apparently, but that agreement with the SP is in the actual contract – so these are two separate agreements.) Some of these conditions are ghair mulaaimah lil-aqd but are enforceable because this is not a contract, but a promise. Its like saying, “I’ll give you £100 if you jump that hurdle.” – which is okay; what’s not okay is to say, “I’ll pay you for your item only if you jump that hurdle.” The first is a promise and the second a contract of sale.
The conclusion is that, generally, these are two separate transactions in fiqhi terms, and there is no element of Riba involved.
But, what we’ve got to discuss is, if the customer also signs on the redemption agreement, does mujarrad signing on the paper take this agreement out of the nature of a promise into that of a contract, even if the above mentioned differences are still found in this agreement?
This is because I was told that some agents do take a signature from the customer on the redemption agreement too. Although I’ve never witnessed this and have not found this to be the case in general after consulting some friends who are in the business. However, they say that even if this happens, it will just be a measure undertaken for customer satisfaction.
My humble opinion is that this would not change the legal aspect of this agreement. Please deliberate on this issue.
Wal ‘Ilmu ‘indallah al-Latif al-Khabeer