As the bustling holiday season quickly approaches, and in light of COVID-19’s impact on global supply chains, retailers face many challenges in their business operations, but also in maintaining regulatory compliance relating to shipping—and shipping representations. This is especially true for retailers selling goods online, by phone, or by mail, who must be mindful of both federal and state regulations.
Major state regulators are already cracking down. Four California county district attorneys recently filed suit against Kanye West’s Yeezy Apparel brand, alleging violations of California Business & Professions Code, Section 17538, which requires in pertinent part that businesses selling goods online (or by mail or telephone) to California customers must ship the goods within 30 days of a completed order or provide a full refund, send written notice of the delay and offer a refund, or provide substitute goods and offer a refund. The law allows the state to seek civil penalties of $2,500 for each violation.
The complaint alleges Yeezy repeatedly failed to ship items within 30 days and to provide adequate delay notices or refund offers to its customers. It also accuses Yeezy of making false or misleading statements about its ability to ship goods within a certain time frame. Finally, the state alleges that Yeezy advertised goods without the intent to supply a reasonably expectable demand, and without disclosing the limit of quantity in its advertising. The parties announced a settlement on November 8, with Yeezy paying $950,000.
On the federal side, the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (MITOR) requires sellers to have a reasonable basis on which to expect that the advertised goods will ship within the represented time frame. If no time frame is stated in advertising, sellers must have a reasonable basis for believing the merchandise can be shipped within 30 days after receiving a properly completed order from the buyer. If you, the seller, cannot ship within the stated time frame (or within 30 days if no shipping time was advertised), MITOR requires you to seek the customer’s consent to the delayed shipping. If the customer’s consent cannot be obtained, you must provide the customer with a refund.
The FTC can seek civil penalties and consumer redress from violators of MITOR. Shipping delays this holiday season could lead to a rise in consumer complaints, something the FTC will surely monitor. For more on your obligations under MITOR, check out our previous breakdown here.
As online shopping begins to ramp up for the holidays, be sure to:
- Confirm that your shipping practices comply with MITOR and similar state laws.
- Avoid making affirmative shipping time representations in your ads or on checkout webpages without adequate support that you can meet those timelines.
- Expect delays this season and make sure that your shipping representations and communications with consumers reflect this reality.