• Are You Fulfilling The Promise of E-Commerce?
  • May 2, 2003 | Author: Ann M. Ladd
  • Law Firm: Fredrikson & Byron, P.A. - Minneapolis Office
  • In the race to the Web, some e-tailers forget about details such as establishing a reliable supplier and distribution network, and good customer service and support systems, were overlooked. The consequences of poor distribution planning can include the obvious loss of customer loyalty, and in some cases, adverse action by the federal government.

    The Federal Trade Commission (FTC) can sanction e-tailers who fail to ship customer orders on a timely basis under a federal rule known as the "Mail or Telephone Order Rule". This Rule applies to orders placed by phone, fax or the Internet. It spells out the ground rules for making promises about shipments, notifying consumers about unexpected delays, and refunding consumers' money when delays are too long. The Rule has been on the books for years, but with the explosive growth of on-line sales, the FTC is now advising on-line merchants to review the obligation under the Rule.

    To comply with the Rule, you must either give your customers a date by which you reasonably believe you will ship their order, or, if you choose not to give a specific ship date, have a reasonable basis to believe that you will ship their order within 30 days. When you notify your customers of the expected ship date, the information should be "clear and conspicuous".

    If you find that you can not meet a promised shipping date, the Rule gives you several ways to respond:

    If you can not ship within the promised time (or within 30 days if you made no promise), you must notify the customer of the delay, provide a revised shipment date and explain the customer's right to cancel and get a full and prompt refund. You may provide this notice by mail, e-mail, fax or phone.

    If the delay will be longer than 30 days, if you can't give a definite revised date for shipment at all, or if this is not the first time this order has been delayed, you must get the customer's written, electronic or verbal consent to the delay. If the customer does not give you an okay, you must promptly refund all the money the customer paid to you.

    On the other hand, for definite delays of less than 30 days, you may treat the customer's silence as agreeing to the delay.

    You always have the right to cancel orders that you cannot fill in a timely manner, but you must promptly notify the customer of your decision and make a prompt refund.

    The FTC enforces the Mail or Telephone Order Rule, and has the authority to impose fines for violations. To reduce the risk of an inadvertent violation, we recommend that you keep a record of what your shipping notices state, when you provide the notices, and your customers' responses.