The Federal Trade Commission said that, in April and May, it received record numbers of complaints from consumers related to online shopping. According to the FTC, during this period, it received more than 34,000 complaints about online shopping -- and more than 18,000 of those complaints related to products that were never delivered.
Why is this significant? When the FTC decides what types of cases to bring, and which companies to target, some of the important factors that the FTC takes into account is where the big issues are and where consumers are being harmed. And, when the FTC is really concerned about something, it often says something publicly about the issue -- as it is doing here -- to warn businesses that the problem is on the FTC's radar.
This isn't the first time recently that the FTC has warned businesses about online shopping issues. In March, the FTC's blog gave guidance to business about shipping products to customers. And then, in April, the FTC entered into a $9.3 million settlement with Fashion Nova over claims that it didn't comply with the FTC's Mail Order Rule. The FTC said that Fashion Nova failed to properly notify consumers when shipments would be delayed and failed to give proper refunds to consumers.
The FTC's Mail, Internet, or Telephone Order Merchandise Rule -- often called the "Mail Order Rule" -- has several key requirements.
First, if you tell consumers when you are going to ship merchandise to them that is covered by the Rule, you must have a "reasonable basis" for your shipping representation. If you don't tell consumers when you're going to ship their purchase, then you generally have to ship within 30 days.
Second, if you are unable to ship within the required time period, you must notify the customer and give the customer the option to cancel. Depending on how long the delay is going to be, you have different options about whether the right to cancel can be treated as opt-in or opt-out. Importantly, you must notify customers a reasonable time after you learn about the delay and no later than the time that you said you would deliver.
Third, when an offer is cancelled, you must give the customer a prompt refund. And this means actually giving consumers their money back -- not a coupon or a gift card (which was one of the issues in the Fashion Nova case).
The Rule is actually quite complicated, so it's definitely worth reviewing the Rule itself. The FTC also has a very helpful business guide that explains how to comply. For additional information, we've also blogged recently about the Mail Order Rule here and here.
If unhappy customers are not reason enough to comply with the Rule, there's one more important fact to keep in mind. If you violate the Rule, you can be held liable for civil penalties -- which are currently a whopping $43,280 per violation.
"But as online orders have increased, so too have reports to the FTC’s Consumer Sentinel Network about sellers failing to deliver on promises — or just failing to deliver, period" -- Emma Fletcher, Program Analyst, FTC