The FTC has recently filed enforcement actions for companies who have had delayed orders during Covid-19. Therefore I thought it a good idea to remind those of you who sell merchandise of the requirements of the FTC’s Mail Order Rule, Reasonable Basis for Promises Made or For Delivery within 30 Days
First, you need a reasonable basis for any shipping representations or for the default assumption that the consumer will receive the merchandise within 30 days.
Initial Delay Notice
If you cannot ship the merchandise by the promised time frame or within 30 days, you must notify the customer and give the option to cancel the order and obtain a full and prompt refund.
The first delay notice must contain:
- a definite revised shipment date or, if unknown, a statement that you are unable to provide a revised shipment date;
- a statement that, if the customer chooses not to wait, the customer can cancel the order and obtain a full and prompt refund; and
- some means for the customer to choose to cancel at your expense (e.g., by providing a postage prepaid reply card, toll-free telephone number, or website).
In addition, the following information must be included when you cannot provide a revised shipping date:
- the reason for the delay, and
- a statement that, if the customer agrees to the indefinite delay, the customer may cancel the order any time until you ship the merchandise.
If your first delay option notice provides a definite revised shipping date of 30 days or less, you must inform customers that their non-response will be treated as a consent to the delay.
Subsequent Delay Notices
If you are unable to ship by the date included in your first delay notice, prior to that date, you must send a “renewed” delay notice. Although this notice must include much of the same information as the first delay notice, at this juncture a customer must expressly consent to further delay.
A renewed delay option must contain:
- a new definite revised shipment date or, if unknown, a statement that you are unable to provide any date;
- a statement that, if the customer chooses not to wait, the customer can cancel the order immediately and obtain a full and prompt refund;
- a statement that, unless you receive notice that the customer agrees to wait beyond the most recent definite revised shipment date and you have not shipped by then, the customer’s order automatically will be cancelled and a prompt refund will be provided; and
- some means for the customer to inform you at your expense (e.g., by providing a postage prepaid reply card, toll-free telephone number, or website) whether the customer agrees to the delay or is canceling the order.
In addition, the following information must be included when you cannot provide a new definite revised shipping date:
- the reason for the delay, and
- a statement that, if the customer agrees to the indefinite delay, the customer may cancel the order any time until you ship.
When You May Cancel an Order
Instead of sending a delay notification, you can always cancel the order and send a refund, as long as you notify the customer and send the refund within the time you would have sent the consent notification.
Exemptions to the Rule
Services are not covered by the Mail Order rule and some merchandise is exempt: magazine subscriptions (and similar serial deliveries) except for the first shipment; sales of seeds and growing plants; orders made on a collect-on-delivery basis (C.O.D.); and transactions covered by the FTC’s Negative Option Rule (such as book and music clubs).
Keep in mind however, that the FTC can still always challenge practices it deems allegedly unfair or deceptive. Regardless of the product or service I always recommend notifying consumers about shipping delays and to offering options for cancellation and/or a refund.
Enforcement
Keep in mind that the FTC can extract large civil penalties for violations of the Mail Order Rule: up to $43,280 per violation plus consumer redress. When the mails are involved, the Postal Service also has authority to take action for problems such as non-delivery. State law enforcement agencies can also take action for violating state consumer protection laws
Takeaway: Given the challenges posed by reduced work forces, supply chain disruptions, manufacturing shifts from regular inventory to medical necessities, and other disruptions caused by Covid-19 make sure that you are abiding by the Mail Order Rule, particularly (although not exclusively) if you are selling any PPE which has been the focus of recent FTC enforcement.
