Online retailers are well aware of how the promise of quick delivery can influence consumer purchasing decisions. Especially in times like these, when delivery times have slowed for many companies, marketers might be even more tempted to promise fast delivery as a way to entice consumers to place an order. A recent enforcement by the Federal Trade Commission (FTC) highlights the risks companies face if they promise delivery deadlines that they cannot reasonably expect to meet. Now more than ever, companies should familiarize themselves with the requirements of the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (commonly known as the Mail Order Rule), because a pandemic will not excuse a violation of this rule and FTC scrutiny of false delivery promises may be heightened during this period.
Last month, the FTC announced a $9.3 million settlement with online retailer Fashion Nova for alleged violations of the Mail Order Rule. According to the FTC’s complaint, the brand ‒ which has over 18 million followers on Instagram ‒ promised shoppers they would receive their “looks” quickly, with claims such as “Fast Shipping,” “2-Day Shipping,” and “Expect Your Items Quick!” Not only did Fashion Nova fail to keep its promises, the FTC alleged that it also failed to provide its customers the remedies available to them under the Mail Order Rule.
The Mail Order Rule gives sellers two options with respect to delivery time claims ‒ specify a delivery time frame, or don’t. If a seller opts not to specify a time frame, the seller is expected to deliver within 30 days. If a seller cannot meet its shipping obligation within the required or specified time frame, the Mail Order Rule requires the seller to notify the customer of the delay and present “an option either to consent to a delay in shipping or to cancel the [customer’s] order and receive a prompt refund.” For a first delay that is 30 days or less, if the consumer does not respond to the notice, consent to the delay is presumed. For a second delay, or if the first delay is for more than 30 days, the seller must cancel the order unless the consumer affirmatively consents to the delay. The Mail Order Rule has other detailed requirements relating to the notice and consent procedures. Importantly, the Mail Order Rule also requires that the seller have a reasonable basis to believe it can meet any delivery or shipment promises made.
The FTC alleged that Fashion Nova violated the Mail Order Rule in three ways: (i) it failed notify customers of shipping delays; (ii) relatedly, it failed to give customers the option to consent to shipping delays or, alternatively, to cancel the order and receive a refund; and (iii) at times, it issued gift cards (in lieu of refunds) that could be used only on the Fashion Nova website. As part of the settlement agreement, Fashion Nova must change its marketing practices to bring them into compliance with the Mail Order Rule, and must identify, notify and issue refunds to eligible customers equal to the balance remaining on eligible Fashion Nova gift cards (defined as those gift cards issued in lieu of refunds when a product did not ship or a materially different item was shipped instead).
Takeaways: First and foremost, marketers should understand the full scope of their company’s order fulfillment process, from intake to delivery, in order to better represent estimated delivery times. A purported delivery time is treated as an express claim that consumers rely upon when making purchasing decisions, and as such, any representations should be tailored to the company’s actual shipping capabilities. In light of the pandemic and supply chain disruptions, companies may need to reassess what delivery time frames they can promise to consumers. Relatedly, the Mail Order Rule acknowledges that things happen, and time frames may need to be adjusted. To that end, the Mail Order Rule requires that consumers be notified of any changes and be presented with an opportunity to cancel and receive a refund. Importantly, the FTC does not treat a gift card as a refund under the Mail Order Rule. Instead, a refund is a full return of the amount paid by the consumer.