The Federal Trade Commission announced that it sued online marketer Trend Deploy, charging the company with violating the FTC's Mail Order Rule by making false claims that it could quickly deliver face masks and other personal protective equipment during the COVID-19 pandemic and by failing to give consumers notice of the delay, an opportunity to cancel, and a prompt refund. The FTC also alleged that the company advertised "N95" masks, but delivered cloth masks instead. In the complaint, the FTC is alleging that the company violated the Mail Order Rule, the COVID-19 Consumer Protection Act, and the FTC Act, and is seeking monetary relief for consumers and civil penalties.
While, on one level, this is just a case about a PPE marketer selling masks during the pandemic and then failing to deliver the advertised products, when they were promised, the allegations in the complaint also provide some useful insights into complying with the Mail Order Rule for all marketers who sell products online.
Under the FTC's Mail, Internet, and Telephone Order Merchandise Rule, marketers must have a reasonable basis for stating or implying that they can ship products within a certain period of time. That means that the marketer must have such information as would, under the circumstances, satisfy a reasonable and prudent businessperson, acting in good faith, that the representation is true. Some of the factors to take into account include what the anticipated demand is, whether there is sufficient inventory on hand to meet the anticipated demand, whether the fulfillment system can handle the demand, and whether the marketer has records that demonstrate that it makes on-time deliveries.
Then, if the marketer learns that it cannot ship when promised, it must seek the customer's consent to the delay. And, if consent is not obtained, the marketer must provide a prompt refund. While the Rule lays out complicated procedures for how to do this, one of the most important things to understand is that the delay notification must occur by the time you originally promised to ship the product. So, if you're promising "next day shipping," then the marketer only has one day to provide the notification (and get consent to the delay) if it won't be able to deliver on time.
In the Trend Deploy case, the FTC alleged that the company offered consumers two shipping options -- "Fast Shipping (5-15 days)" and "Standard Shipping (3-5 weeks)." The FTC also alleged that while no disclaimers, or qualifying information, accompanied these shipping claims, there were other "hidden shipping disclaimers" located on other parts of the the Trend Deploy website. For example, the "My Cart" page included hyperlinks to "Shipping" and "FAQ" pages, which included explanations that the the company's "Fast Shipping" and "Standard Shipping" options did not include an additional 1-5 business days of "shipping and processing time." The FTC also alleged that, for several months, the Shipping page also stated that events such as holidays, sales, and weather conditions may affect delivery times, and that orders may take up to 40 days to arrive. When consumers complained about delays, the FTC alleged that the company sent out a standard e-mail that explained that orders may take up to 60 days to arrive, even though the company knew that it wouldn't be able to deliver within that time frame. And, when customers asked for refunds, the FTC alleged that the company either didn't provide refunds or only offered store credit.
These allegations highlight some important issues for all online marketers.
First, if you're advertising shipping times, it's critical that those be the actual shipping times. If you need additional time for processing, you should build that time into the claim itself. The FTC is never going to be convinced that promising one delivery time to consumers, and then extending that time through disclaimers or on pages that consumers that will never see, complies with the Mail Order Rule.
Second, if you do experience unusual delays or shortages, sending a stock e-mail to consumers providing general information about the delay and an estimated delivery time, isn't likely to do the trick. The Mail Order Rule requires marketers to provide specific information when they learn that they can't ship when promised -- which includes, for example, providing consumers with a definite revised shipping date (or a statement that you don't know when you can ship), an explanation that consumers are entitled to a refund, and a means for consumers to cancel. When a marketer can't provide a revised shipping date, the Mail Order Rule requires the marketer to explain why and to tell consumers that they have the right to cancel at any time prior to shipping.
Third, marketers can't just apply their own standard refund policies when providing refunds required by the Mail Order Rule. Under the Rule, marketers can't just offer a store credit. Consumers are entitled to their money back -- including all shipping, handling, insurance, and other costs. In addition, for third party credit card purchases, customers must get their refund within one billing cycle. (For any other types of purchases, such as store credit cards, payment by check, etc., refunds must be provided within seven business days.)
In the last decade, the Mail Order Rule hasn't gotten a lot of attention from the FTC. But, with the pandemic, and with consumers relying on online purchases more than ever before, it's not surprising that the Rule is making a comeback. While the FTC's recent enforcement in this area has been largely focused on COVID-19 related products, it's likely that this will change in the coming year. Don't forget that the FTC's record-breaking $9.3 million Mail Order Rule settlement last year had nothing to do with the pandemic.
"Defendant's shipping promises were, in many cases, false"