October 10, 2014

Online Retailer Updates

This Client Alert highlights new legal developments impacting our retail clients conducting e-commerce sales over the Internet.

FTC's Mail, Internet, or Telephone Order Rule

On September 11 , 2014, the Federal Trade Commission ("FTC") approved amendments to the Mail, Internet, or Telephone Order Rule, effective December 8, 2014 (the "Final Rule"). The purpose of the Final Rule is to ensure retailers who solicit online sales have a reasonable basis to expect to ship the merchandise within 30 days of the order, and to ensure retailers provide an option to consumers to either ( 1) consent to delayed shipment or (2) cancel the order and receive a prompt refund. A retailer's noncompliance with the notification and shipment requirements of the Final Rule constitutes an unfair method of competition and an unfair or deceptive trade practice.

Application

The Final Rule in large part extends the familiar provisions of the FTC's longstanding rule on mail and telephone order merchandise that is temporarily out of stock. The Final Rule expands the existing rule to formally cover e-commerce and Internet sales.

Compliance

The Final Rule lays out the requirements for retailers providing online ordering and shipment step by step. Retailers should review the Final Rule and set up policies and procedures that will automatically trigger required actions such as extending offers and renewed offers for delayed shipping. Form notifications for each situation of delay should be created so that when a shipping delay occurs, the form may be filled in and sent to the consumer within the requisite time period. Any action undertaken by retailers must have a reasonable basis, i.e. information based on the circumstances satisfies a reasonable and prudent businessperson, acting in good faith, that the representation is true.

The Final Rule does not mandate record keeping; however, the burden of proving compliance with the Final Rule falls on the retailer if the FTC investigates or brings an action against the retailer. Therefore, it is in the retailer' s best interest to track and record dates that orders are received, dates of shipment, dates of notifications in delay of shipment, and dates of receipt of a consumer' s consent, along with copies of all notices sent to customers. At a minimum, records should be maintained for five years based on the federal statute of limitations for an action enforcing the Final Rule

Enforcement

The FTC may bring an action against a retailer for violation of the Final Rule. If the retailer is unable to produce records or other documentary proof establishing its use of systems and procedures to assure shipment of merchandise in the ordinary course of business, then a rebuttable presumption that the retailer lacked a reasonable basis for any expectation of shipment is created. Therefore, retailers need to maintain records of all contacts with customers.

If you have any questions regarding the FTC's Final Rule, please do not hesitate to contact us.