WASHINGTON, July 26, 2000 -- Seven large Internet e-tailers agreed to settle Federal Trade Commission charges they
violated the Mail and Telephone Order Rule during the 1999 holiday shopping season by
providing buyers inadequate notice of shipping delays or continuing to promise specific
delivery dates when timely fulfillment was impossible.
CDnow, KBkids.com, Macys.com, Minidiscnow.com, Toysrus.com, The
Original Honey Baked Ham Company and Patriot Computer Corp. have agreed to change their procedures to ensure
that such violations will not recur this year, and to pay civil penalties totaling $1.5
million for last season's violations.
"Last December, a large number of e-commerce buyers didn't get the type of notice of late shipment which the law requires and were misled about delivery dates. Many retailers ended up looking more like Scrooge than Santa," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.
Bernstein added that "the requirements of the Rule apply to online and offline commerce equally; today's settlement shows the FTC takes violations of the Rule by e-tailers seriously, and will expect e-tailers either to comply with the law or face stiff penalties."
The Rule requires that retailers ship goods within the date promised, or if no date is promised, within 30 days of the order's receipt. If the company cannot ship as promised, it is required to provide Notice to the buyer with a revised shipping date, giving the opportunity for the buyer to agree to the delay or to cancel the order.
The staff investigation revealed that some e-tailers repeatedly violated the Rule by failing to send Rule-required Delay Option Notices, sending Notices that were deficient, and in some cases, making shipping representations without a reasonable basis.
The proposed consent decrees with six of the companies call for civil penalties ranging from $45,000 to $350,000 -- Macys.com ($350,000), KBkids.com ($350,000), Toysrus.com ($350,000), CDnow ($300,000), Patriot Computers ($200,000), and The Original Honey Baked Ham Co. ($45,000). In addition, Macys.com is required to fund an Internet consumer education campaign about the Mail Order Rule. The campaign will consist of banner ads that alert consumers that they have certain rights when shopping online. The penalty amounts sought against KBkids.com, Toysrus.com, and The Original Honey Baked Ham Co. take into account the amount of money the companies spent in mitigating consumer injury caused by their Rule violations. CDnow's penalty amount is waived except for $100,000 due to its poor financial condition. The seventh company, Minidiscnow.com, will be required to fully reimburse each consumer who has ordered, but not received, any of the company's products.
