Internet Commerce and Mail-Order Rule

The Federal Trade Commission has developed two guides that will help Internet-based businesses comply with federal laws and better serve their customers in the coming holiday season. The Mail or Telephone Order Merchandise Rule and Advertising and Marketing on the Internet: Rules of the Road provide guidance for Internet entrepreneurs.

The Internet is the fastest growing source of mail order sales. It's estimated that consumers spent $14-$15 billion on Internet-based goods and services in 1998 -- $5 billion alone during the 1998 holiday shopping season. The explosive growth in the goods and services sold online took many online sellers by surprise: demand outpaced supply, depleting inventories and disappointing customers. The Federal Trade Commission is advising online merchants to review their obligations under the Mail or Telephone Order Merchandise Rule to better serve their customers this holiday season.

The Rule spells out the ground rules for making promises about shipments, notifying consumers about unexpected delays, and refunding consumers' money. Enforced by the FTC, the Mail or Telephone Order Rule applies to orders placed by phone, fax or the Internet. Compliance can have bottom line benefits for companies: satisfied customers are repeat customers.

Complying With The Rule

By law, businesses must have a reasonable basis for stating that a product can be shipped within a certain time. If advertising doesn't clearly and prominently state the shipment period, businesses must have a reasonable basis for believing that they can ship within 30 days.

If a business can't ship within the promised time (or within 30 days if it made no promise), it must notify the customer of the delay, provide a revised shipment date and explain the customer's right to cancel and get a full and prompt refund.

For definite delays of up to 30 days, businesses may treat the customer's silence as agreeing to the delay. But for longer or indefinite delays, and second and subsequent delays, businesses must get the customer's written, electronic or verbal consent to the delay. If the customer doesn't give his okay, businesses must promptly refund all the money the customer paid without being asked by the customer.

Finally, businesses have the right to cancel orders that they can't fill in a timely manner, but they must promptly notify the customer of their decision and provide a prompt refund.

Running Late? Overwhelmed with Orders?

The Rule gives businesses several ways to deal with an unexpected demand:

They can change their shipment promises up to the point the consumer places the order, if they reasonably believe that they can ship by the new date. The updated information overrides previous promises and reduces the need to send delay notices. Businesses should tell customers the new shipment date before they take the order.  

Businesses must provide a delay option notice if they can't ship within the originally promised time. The Rule lets businesses use a variety of ways to provide the notice, including e-mail, fax or phone.

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. For a complete list of FTC publications for consumers and businesses, visit us online. Or contact the Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580, Toll-free: 1-877-FTC-HELP (1-877-382-4357), TDD: 1-866-653-4261.

Your Opportunity to Comment:

The Small Business and Agriculture Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards collect comments from small business about federal enforcement actions. Each year, the Ombudsman evaluates enforcement activities and rates each agency's responsiveness to small business. To comment on FTC actions, call 1-888-734-3247.