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Prepared By: Melissa C. Marsh, Los Angeles Business Attorney
Written: October 2000

Online sales continued to grow at an exponential rate. Unfortunately, In 1998 the steep increase in consumer use of online shopping apparently took some online sellers by surprise. Demand outpaced supply, which in turn caused inventories to fade and customers to be disappointed in the late arrival of their ordered goods.

The Federal Mail and Telephone Order Merchandise Rule spells out the rules for making promises about shipments, notifying consumers about unexpected delays, and refunding a consumer's money. Enforced by the Federal Trade Commission (FTC), the Mail and Telephone Order Rule applies to orders placed by phone, fax, or entirely on the Internet, as long as the telephone is used to transmit voice, computer data, or other electronic signals.

Complying With The Rule.

According to the Rule, the seller must have a reasonable basis for stating or implying that a product can be shipped within a certain time. So what if your advertising fails to include a shipping statement? Well, then by default, you must have a reasonable basis for believing that you can ship within 30 days. If you cannot ship when you promised or implied, then you must send a notice to the customer advising the customer about the delay and the customer's right to cancel. For delays up to 30 days, you may treat the customer's silence (failure to respond to a notice) as agreeing to the delay. But for longer periods of delay, or second and subsequent delays, you must get the customer's affirmative consent. If the customer does not actively give his okay, you must promptly refund all the money the customer paid to you without question.

When an unexpected demand makes it impossible for you to ship within the time stated in your ad, you should provide updated shipping information to add new customers and to each customer who had previously placed an order. You must, however, have a reasonable basis for the update. Updated information supersedes any representation in your ad and reduces your need to send delay notices. Finally, you have the right to cancel orders that you will not be able to fulfill in a timely way, but you must promptly notify the buyer of your decision and make a prompt refund.

For More Information.

Contact the FTC's Consumer Response Center for the complete Business Guide to the Mail or Telephone Order Merchandise Rule and Advertising and Marketing on the Internet: Rules of the Road.

You can file a complaint with the FTC by:

Telephone: 1-877-382-4537
TDD: 202-326-2502
Mail: Consumer Response Center
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Internet: FTC's Consumer Response Center's online complaint form.

Although the FTC cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations.

© 2000 Melissa C. Marsh. All Rights Reserved.