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Online Order Fulfillment:Online Order Fulfillment:Meeting Expectations andMeeting Expectations andComplying With the LawComplying With the Law

Heather A. Hippsley

Division of Enforcement

Federal Trade Commission

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ONLINE HOLIDAY PURCHASES ONLINE HOLIDAY PURCHASES QUIZQUIZ What percentage of online holiday

purchases arrived in time this year?

A. 88 percent

B. 75 percent

C. 60 percent

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CONSUMER SATISFACTION CONSUMER SATISFACTION QUIZQUIZ What percentage of consumers who

needed online customer service help stopped shopping at the website because of their poor experience?

A. 60 percent

B. 42 percent

C. 27 percent

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Online Order FulfillmentOnline Order Fulfillment

The FTC’s Mail or Telephone Order Merchandise Rule applies to online sellers as well as traditional mail and telephone order catalog businesses.

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What Does the Rule Require?What Does the Rule Require?

Ship when you promise Have a reasonable basis for your promises Notify consumers when you can’t ship on time Allow consumers the option to cancel their

purchase when you are late and make prompt refunds

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Not Complying is COSTLYNot Complying is COSTLY

FTC Federal Court actions and civil penalties State Attorneys General actions Class actions Loss of customer good will

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Holiday 1999 – Project Holiday 1999 – Project TooLate.comTooLate.com FTC sued seven e-tailers Penalties totaled $1.5 million

Macys.com Kbkids.com Toysrus.com Cdnow.com Patriot.com HoneyBaked.com Minidiscnow.com

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Triggering the RuleTriggering the Rule

“Order by [date] for delivery by Christmas.” “Usually, we fill your order within 24 hours

and start it on its way to you.” “All in-stock items are shipped within 24

hours.” “All in-stock items ship immediately.”

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In Addition to Those Shipment In Addition to Those Shipment Promises . . .Promises . . . Remember:

Silence creates a 30-day shipment claim It’s okay to change your shipment

promise prior to sale

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What’s a “Reasonable Basis” What’s a “Reasonable Basis” for Shipment Promises?for Shipment Promises? Claim is based on facts, not hopes

How many orders expected How many orders can be shipped daily

Fulfillment capabilities and claims match up Claims are evaluated on what you knew

when you made the promise

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What Does it Mean to What Does it Mean to Ship When I Promised?Ship When I Promised? “Clock” starts from receipt of a “properly

completed order” All the info needed to ship (e.g., size and color) Billing info

The clock continues ticking even if you have not processed the payment

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Shipping QuizShipping Quiz

A. Send the ordered goods that you have in stock and send the rest of the order when you can.

B. Substitute goods and send to customer.

C. Forewarn customers that sometimes there are delays.

D. Apologize, tell customer of delay and tell customer to “hang in there.”

E. None of the above.

What If I Can’t Ship on Time?

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AnswerAnswer

E. None of the above.

You can’t do

any of those things!

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What If I Can’t Ship on Time?What If I Can’t Ship on Time?

You MUST notify your customers Use mail, e-mail or telephone As SOON as you can and no later than within

the promised shipment time Say when you now expect to ship Give option of waiting, or canceling and getting

prompt refund Provide means for customer to notify you

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Example of a Delay Option Example of a Delay Option NoticeNotice

January 30, 2001

Re: Order #1234; shipment expected 2/2/01

Dear Customer:

We won’t be able to ship the ladies’ jeans that you ordered until February 15, 2001. If you don’t want to wait, you may cancel your order and receive a prompt refund by calling our toll-free customer service number, (800) XXX-XXXX. If we don’t hear from you before we ship the merchandise, we will assume that you have agreed to this shipment delay.

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Another OptionAnother OptionWhen Timely Shipment is Not When Timely Shipment is Not PossiblePossible Cancel the order

Do it within promised shipment time Give timely notice of cancellation Provide prompt refund

Send goods that are in stock (partial shipment) provide delay notice or cancel other items

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How Do I Get a Customer’sHow Do I Get a Customer’sConsent to a Delay?Consent to a Delay? If new shipment date is less than 30 days

Advise consumers that their silence means they consent to the delay

If new shipment date is more than 30 days Tell consumers that they must contact the

company and say that delay is OK Tell consumers that if company doesn’t hear

from them, then company will cancel the order

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What If I Don’t Know When I What If I Don’t Know When I Can Send the Delayed Can Send the Delayed Shipment?Shipment? If you don’t know when you can ship, say

so Advise consumers that they must contact

the company and say OK to delay You must also tell customers about their

continuing right to cancel

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What If I Can’t Send the What If I Can’t Send the Shipment by the Revised Date?Shipment by the Revised Date? Send another notice as soon as possible

Within the promised shipment time

Provide new revised shipment date Advise consumer of rights

Can agree to delay–must be affirmative Consumer silence = cancel order, send refund

promptly

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What Does It Mean to Provide a What Does It Mean to Provide a “Prompt Refund”?“Prompt Refund”? If account has been charged

Provide a credit within one billing cycle

If account has not been charged Advise that no charge has been posted

If payment is made by cash, check or money order Send refund within seven working days

Store credits are not acceptable

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Violations We’ve Observed . . .Violations We’ve Observed . . .

No reasonable basis for shipping representations

Failure to timely offer option to consent to delay or cancel

Delay notices did not contain proper information

Failure to deem certain orders canceled in the absence of a notice

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More Violations We’ve More Violations We’ve ObservedObserved Failure to respond to changes in ability to

ship as promised No change of shipment promise on web site or

in “shopping carts”

Compliance with Rule not built into business plan at all!

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Compliance: Compliance: It’s the Law and It’s Good It’s the Law and It’s Good BusinessBusiness Rule incorporates basic principles of

contract law Can’t unilaterally change the terms

Rule incorporates common sense and good business practices Not doing what you say annoys customers Not doing what you say leads to complaints with

FTC, BBB, States

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Online Order Fulfillment:Online Order Fulfillment:Meeting Expectations andMeeting Expectations andComplying With the LawComplying With the Law

Heather A. Hippsley

Division of Enforcement

Federal Trade Commission