Staples, Inc. to Pay $850,000 Penalty For Alleged Mail Order Rule Violations

Obtaining the second-largest civil penalty ever for alleged violations of its Mail or Telephone Order Merchandise Rule (Mail Order Rule), the Federal Trade Commission today settled a complaint charging office superstore Staples, Inc. with misleading customers on its Web site about the "real time" availability of its products and its ability to deliver purchases in the time promised.

Under the terms of a consent order reached with the FTC settling the charges, Staples will pay $850,000 and is prohibited from: 1) making "real time" inventory claims that are not accurate; and 2) promising customers they will receive their shipments in one day, or any other specified amount of time, if it does not have a reasonable basis to expect it can meet these deadlines. The consent order also requires Staples to tell customers if their orders will be late and offer them the chance to cancel the order if they do not agree to the delay.

The complaint and settlement announced today were filed by the U.S. Department of Justice (DOJ) on behalf of the Commission. The $850,000 civil penalty is second only to a $900,000 Mail Order Rule penalty paid by Iomega Corporation, the world's largest manufacturer of portable data and storage products, in 1999.

"All sellers are obligated to keep their promises to consumers about when their products will be delivered," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "Real-time promises demand real-time performance."

The Commission's Complaint

According to the Commission, before Staples corrected its Web site in response to the FTC's investigation, the site contained misleading information regarding the availability of its office supply products, as well as the company's ability to ship ordered products to its customers in the time promised.

According to the FTC, up until May 2002, Staples told customers that they were viewing "real time" inventory, when, in fact, Staples' Web site was not updated in real time. In addition, Staples allegedly made false delivery claims to certain customers on the Web site regarding the company's ability to deliver products in one day. In fact, according to the Commission, the company's policy was to deliver merchandise in one day only to customers who lived within "local trading areas," no farther than 20 miles from a Staples store. Moreover, according to the FTC, Staples misled customers to believe that the company's one-day delivery promise meant that Staples would deliver products on Saturday or Sunday, when that was not the case. The alleged misrepresentations, the Commission's complaint stated, were made in violation of the FTC Act and the Mail Order Rule.

Further, according to the complaint, Staples also violated the Mail Order Rule by failing to send adequate delay option notices to customers who purchased products from Staples via its Web site and catalog. Staples allegedly did not always notify customers that their orders were delayed. In addition, even when Staples did notify customers of delays, the company allegedly did not offer customers the right to cancel their orders rather than accept the delay.

Terms of the Proposed Order

Under the terms of the proposed consent order, which requires court approval, Staples will pay a civil penalty of $850,000 and is prohibited from engaging in the behavior alleged in the Commission's complaint to have violated the FTC Act and Mail Order Rule. Specifically, the consent order prohibits Staples from misrepresenting that customers are viewing inventory in real time. Further, the proposed order bars the company from representing to customers that merchandise is currently available for shipment or delivery unless it has a reasonable basis for such a representation. Accordingly, the order requires Staples to have adequate substantiation for all "in stock" claims it makes on its Web site or in its catalog. Finally, the order contains language prohibiting Staples from violating the FTC Act and Mail Order Rule in the future, as well as record-keeping and compliance provisions.

The Commission vote to refer the complaint and proposed consent decree to the DOJ for filing was 5-0. The complaint and consent were filed on behalf of the FTC in the U.S. District Court for the District of Massachusetts on May 22, 2003. This case was brought with the invaluable assistance of the U.S. Attorney's Office in Boston, Massachusetts.

NOTE: The proposed consent decree is for settlement purposes only and does not constitute an admission of a law violation. Consent decrees have the force of law when signed by the judge.

Copies of the documents mentioned in this release are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov.

The FTC enters Internet, telemarketing, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC File No. 012-3192)
(Civ. No. 03-10958 GAO)