Last last year, the New York Attorney General sued Sonjia Posh Boutique and Prestigious Marketing Concepts, alleging that, although the defendants marketed and sold video game consoles online, promising to deliver the products prior to the holidays, many consumers didn't receive the products when promised or never received them at all.  The NYAG also alleged that, when consumers asked for refunds, the marketers failed to provide them.  

Earlier this week, the NYAG won its lawsuit, with a New York State Supreme Court enjoining the marketers from engaging in further illegal conduct and ordering them to pay restitution to consumers and to post a $100,000 performance bond.  NYAG Letitia James said, "Defrauding consumers for personal gain is unconscionable and will not be tolerated by my office." 

Under New York's Executive Law, the NYAG is authorized to sue for injunctive and other relief when a marketer engages in repeated or persistent fraudulent conduct.  In order to determine whether the conduct is fraudulent, the court looks at whether the conduct "has the capacity or tendency to deceive, or creates an atmosphere conducive to fraud."  Significantly, whether the conduct is fraudulent isn't judged by the typical "reasonable consumer" standard.  Instead, the law protects "the ignorant, the unthinking, and the credulous" consumer.  Violation of the state's false advertising laws also constitutes illegal conduct under the Executive Law as well.  New York law prohibits ads that are "misleading in a material respect" (judged using a "reasonable consumer" standard).  

With so much of our economy moving online, it's more important than ever to ensure that you can live up to your delivery promises. Here are a few important take-aways from this action.  

While typically thought of as an issue enforced by federal regulators, as this case shows, states are now going after marketers for failed delivery promises as well.  The NYAG also recently brought an action against a bridal retailer, and the Los Angeles County District Attorney, along with various District Attorneys, sued an online sneaker company.  And the Florida Attorney General recently partnered with the Federal Trade Commission to bring an enforcement action against a marketer of magazine subscriptions. 

The FTC also continues to enforce the Mail Order Rule more aggressively than it has in past years, including enforcement actions against an online fashion retailer, an online marketer of masks and other personal protective equipment, and another online marketer of PPE, The 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.  The Rule has a lot of detailed requirements, so definitely check out the full Rule for all of the details.

Even if you're doing a good job generally getting products to consumers on time, don't just look at the statistics.  Consider whether there are meaningful numbers of consumers who aren't getting their deliveries when promised.  The NYAG's action here involved only 96 consumer complaints.  In other words, don't assume that just because only relatively small numbers of consumers are affected that regulators will look the other way. 

Finally, while any marketer could run into trouble for failing to ship or deliver when promised, there are several themes that tend to run through these cases.  They are often brought when there is something special about the delivery promise -- that wedding dress you need for your wedding day, that gift you've ordered for the holidays, those masks you urgently need to protect yourself, or that item you've paid extra to get delivered within a short period of time.  These cases also involve significant failures in customer service.  When products aren't delivered on time, consumers often have trouble getting information about the status of the order and aren't provided with prompt refunds.