Free Cellular Phone and Accessory Shipping Rules
What Does the Rule Cover?
It
applies to most goods a customer orders from the seller by mail, telephone, fax,
or on the Internet.
It does not matter how the merchandise
is advertised, how the customer pays, or who initiates
the contact.
What is the Mail or Telephone Order
Rule?
The Rule requires that when you advertise merchandise, you must
have a reasonable basis for stating or implying that you can ship within a
certain time. If you make no shipment statement, you must have a reasonable
basis for believing that you can ship within 30 days. That is why direct
marketers sometimes call this the "30-day Rule."
If, after taking the customer’s order, you
learn that you cannot ship within the time you stated or within 30 days, you
must seek the customer’s consent to the delayed shipment. If you cannot obtain
the customer’s consent to the delay -- either because it is not a situation in
which you are permitted to treat the customer’s silence as consent and the
customer has not expressly consented to the delay, or because the customer has
expressly refused to consent -- you must, without being asked, promptly refund
all the money the customer paid you for the unshipped merchandise.
How to Comply With the
Rule
The following information will help you
comply with the Rule.
What You Should Know Before You Make a
Shipment Representation
When you offer to sell merchandise, you must have
a "reasonable basis" for:
- any express or implied shipment representation,
or
- believing you can ship within 30 days of receipt of
an order -- if you make no shipment representation or if the shipment
representation is not clear and conspicuous.
Whenever you change the shipment date by providing a
delay notice, you must have a "reasonable basis" for:
- the new shipment date, or
- any representation that you do not know when you can
ship the merchandise.
When you take orders by telephone, you may choose to
provide prospective customers with updated shipment information. This may differ
from what you said or implied about the shipment time in your advertising. The
updated shipment information you provide on the telephone supersedes any
shipment representation you made in the advertising. You also must have a
reasonable basis for the updated shipment representation.
"Reasonable basis" means that the merchant has, at
the time of making the representation, such information as would under the
circumstances satisfy a reasonable and prudent businessperson, acting in good
faith, that the representation is true.
The evidence you need to demonstrate the
reasonableness of your shipment representations varies with circumstances. The
following, however, is important:
- Anticipated demand. Is the demand for each
advertised item reasonably anticipated?
- Supply. For each advertised item, is there a
sufficient inventory on hand or adequate sources of supply to meet the
anticipated demand for the product?
- Fulfillment system. For all promotions in the
relevant sales seasons, can the fulfillment system handle the cumulative
anticipated demand for all products?
- Recordkeeping. Are adequate records kept of the key
events (see section headed "Why You Should Keep Records" for a list of key
events) in each individual transaction to ensure that items can be shipped
within the applicable time, as established by the Rule?
Remember: Whether you make a shipment representation
or rely on the 30-day rule, your advertising should be unambiguous about when
you will ship.
What You Must Know Before Making Shipment
Representations in Sales Involving Credit Applications
If your customers
apply to you to establish an in-house new credit account or increase an existing
credit line to pay for the merchandise they order, the Rule provides the
following:
- If you make no shipment representation when you
solicit the order, you are allowed 50 (instead of 30) days to ship the order.
The extra 20 days is to enable you to process the credit application. If you
wish to use this provision of the Rule, you must have a reasonable basis to
believe you can ship in 50 days.
- If you do make a shipment representation when you
solicit the order, you must have a reasonable basis for being able to ship in
that time, regardless of whether the order is accompanied by an application for
credit or extension of a credit line. You are presumed to have factored in the
time needed to process the credit application or to have qualified your shipment
representation appropriately.
When Your Fulfillment Or Other Obligations Begin
("Properly Completed" Orders)
The "clock" on your obligation to ship or
take other action under the Rule begins as soon as you receive a "properly
completed" order. An order is properly completed when you receive the correct
full or partial (in whatever form you accept) payment, accompanied by all the
information you need to fill the order. Payment may be by cash, check, money
order, the customer’s authorization to charge an existing account (including one
you have created for the customer), the customer’s application to you for credit
to pay for the order, or any substitute for these transactions that you
accept.
It is irrelevant when you post or deposit payment,
when checks clear, or when your bank credits your account. The clock begins
to run when you receive a properly completed order.
Note, however, that if a customer’s check is returned
or a customer is refused credit, the Rule stops the shipment clock. It is reset
at day one when the customer gives you cash, the customer’s check is honored, or
you receive notice that the customer qualifies for credit. At this point, you
may take the amount of time you originally stated to fulfill the
order.
What You Must Do If You Learn You Cannot Ship on
Time
When you learn that you cannot ship on time, you must decide whether
you will ever be able to ship the order. If you decide that you cannot, you must
promptly cancel the order and make a full refund.
If you decide you can ship the order later, you must
seek the customer’s consent to the delay. You may use whatever means you wish to
do this -- such as the telephone, fax, mail, or email -- as long as you notify
the customer of the delay reasonably quickly. The customer must have sufficient
advance notification to make a meaningful decision to consent to the delay or
cancel the order.
Some businesses adopt internal deadlines that are
earlier than those set by the Rule to ensure that their delay notices give all
customers a meaningful opportunity to consent to the delay. If businesses fail
to ship or give delay notifications by their internal deadlines, they
automatically cancel the orders and make refunds.
In any event, no notification to the customer can
take longer than the time you originally promised or, if no time was promised,
30 days. If you cannot ship the order or provide the notice within this time,
you must cancel the order and make a prompt refund.
What a First Delay Option Notice Must
Say
In seeking your customer’s consent to delay, the first delay notice
you provide to the customer (the "delay option" notice) must include:
- a definite revised shipment date or, if unknown, a
statement that you are unable to provide a revised shipment date;
- a statement that, if the customer chooses not to
wait, the customer can cancel the order and obtain a full and prompt refund;
and
- some means for the customer to choose to cancel at
your expense (e.g., by providing a postage prepaid reply card or toll-free
telephone number).
- the following information when you cannot provide a
revised shipping date:
- the reason for the delay, and
- a statement that, if the customer agrees to the
indefinite delay, the customer may cancel the order any time until you ship the
merchandise.
If your first delay option notice provides a
definite revised shipping date of 30 days or less, you must inform customers
that their non-response will be treated as a consent to the
delay.
Thus, your delay option notice might look something
like this:
We will be unable to ship the merchandise
listed above until [date 30 days or less later than original promised time]. 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) 555-1234. If we do not hear
from you before we ship the merchandise to you, we will assume that you have
agreed to this shipment delay.
(Many merchants add clarifying language such as
"Remember, if you want the merchandise, don’t
call.")
If your first delay option notice provides a
definite revised shipping date of more than 30 days or states that you do not
know when you will be able to ship, you must tell your customers that if they do
not respond, the order will be cancelled automatically within the originally
promised time plus 30 days.
For example, suppose you have a reasonable basis for
being able to ship in 30 days and you have chosen to make no shipment
representation in your advertising. Within the 30 day period after you receive
the customer’s properly completed order you learn that you cannot ship in time
and, although you believe you will be able to ship at some point, you don’t know
when. Your delay option notice to the customer might look something like
this:
Because [explanation of backorder problem], we
are unable to ship the merchandise listed above. We don’t know when we will be
able to ship it.
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) 555-1234. If we do not hear from you and we have not shipped by
[date 30 days later than original promised shipment time -- in this example, 60
days after receipt of the properly completed order], your order will be
cancelled automatically and your money will be refunded.
If you do not want your order automatically
cancelled on [date 30 days later than original promised shipment time], you may
request that we keep your order and fill it later. If you do request that we
keep your order and fill it later, you still have the right to cancel the order
at any time before we ship it to you. You may use our toll-free number, (800)
555-1234, either to request that we fill your order later or to cancel
it.
Remember: You are required to explain the
nature of the backorder problem only if you provide an indefinite
revised shipment date. This explanation should be detailed enough to permit the
customer to judge what the possible length of the delay might be.
You also have the option of seeking your customer’s
affirmative agreement to the delay. In any event, you must indicate what will
happen if the customer does not respond.
What Later Notices Must Say
If you cannot
ship the merchandise by the definite revised shipment date included in
your most recent delay option notice, before that date you must seek the consent
of your customers to any further delay. You must do this by providing customers
a "renewed" delay option notice. A renewed delay option notice is similar in
many ways to the first delay option notice. One important difference: the
customer’s silence may not be treated as a consent to delay.
A renewed delay option notice must
include:
- a new definite revised shipment date or, if
unknown, a statement that you are unable to provide any date;
- a statement that, if the customer chooses not to
wait, the customer can cancel the order immediately and obtain a full and prompt
refund;
- a statement that, unless you receive notice that the
customer agrees to wait beyond the most recent definite revised shipment date
and you have not shipped by then, the customer’s order automatically will be
cancelled and a prompt refund will be provided; and
- some means for the customer to inform you at your
expense (e.g., by providing a postage prepaid reply card or toll-free
telephone number) whether the customer agrees to the delay or is canceling the
order.
- the following information when you cannot provide a
new definite revised shipping date:
- the reason for the delay, and
- a statement that, if the customer agrees to the
indefinite delay, the customer may cancel the order any time until you
ship.
If you have provided an appropriate and timely delay
option notice and the customer agrees to an indefinite revised shipment
date, no additional delay notices are required.
When You May Cancel an Order
Instead of
seeking the customer’s consent to delay, you can always cancel the order and
send a refund. In that case, you must notify the customer and send the refund
within the time you would have sent any delay notice required by the
Rule.
When You Must Cancel an Order
You
must cancel an order and provide a prompt refund when:
- the customer exercises any option to cancel before
you ship the merchandise;
- the customer does not respond to your first notice
of a definite revised shipment date of 30 days or less and you have not shipped
the merchandise or received the customer’s consent to a further delay by the
definite revised shipment date;
- the customer does not respond to your notice of a
definite revised shipment date of more than 30 days (or your notice that you are
unable to provide a definite revised shipment date) and you have not shipped the
merchandise within 30 days of the original shipment date;
- the customer consents to a definite delay and you
have not shipped or obtained the customer’s consent to any additional delay by
the shipment time the customer consented to;
- you have not shipped or provided the required delay
or renewed option notices on time; or
- you determine that you will never be able to ship
the merchandise.
The following is one example of a delayed order
scenario:
- You have a reasonable basis to be able to ship the
merchandise in 30 days. That being the case, you make no shipment representation
in your advertising. When your prospective customer calls to place the order on
July 1, nothing has happened to change your belief that you can ship in 30 days,
so in accepting the order you provide no updated shipment information. You plan
to ship the order by July 31.
- On July 10, you realize you cannot ship by July 31.
Within a few days (reasonably quickly so the customer has time to make a
decision), you send a delay notice with a revised shipment date. Based on
information such as customer demand for the merchandise and information you
recently received from your suppliers, you reasonably believe that you will be
able to ship 30 days from the original shipment date. The revised shipping date
you provide in the delay notice is August 30, i.e., 30 days from July 31. Your
delay notice explains that, unless the customer tells you otherwise, you will
assume that the customer is willing to wait for the merchandise until
then.
- Having heard nothing from the customer, on August 10
you realize that you will not be able to ship by August 30, so reasonably
promptly you send a second delay option notice saying when you now reasonably
believe you will be able to ship. The notice tells the customer that the order
will be cancelled automatically on August 30 unless you have already shipped by
then or the customer expressly tells you not to cancel.
How Quickly You Must Make a Refund
When you
must make a Rule-required refund, the following applies:
- If the customer paid by cash, check, or money order,
you must refund the correct amount by first class mail within seven working days
after the order is cancelled.
- If the customer paid by credit, you must credit the
customer’s account or notify the customer that the account will not be charged,
within one customer’s billing cycle, after the order is cancelled.
How Much You Must Refund
If you cannot ship
any of the merchandise ordered by the customer, you must refund the
entire amount the customer "tendered," including any shipping, handling,
insurance, or other costs. If you ship some, but not all, of the merchandise
ordered, you must refund the difference between the total amount paid and the
amount the customer would have paid, according to your ordering instructions,
for the shipped items only.
For example, if you charge a flat fee for shipping
and handling regardless of the total number or cost of the items ordered, you
need not refund any shipping and handling charges if you ship some items.
On the other hand, if your shipping and handling charges are indexed to the
number of items or the dollar amount of the order, you can keep only those
shipping and handling charges that are appropriate to the number or dollar
amount of the items actually shipped.
When making Rule-required refunds, you cannot
substitute credit toward future purchases, credit vouchers, or
scrip.
When the order is paid for in whole or in part by
proofs of purchase, coupons, or other promotional devices, you must provide
"reasonable compensation" to the customer for the proofs of purchase plus any
shipping, handling, or other charges the customer paid. (The circumstances of
each promotion may affect what is deemed to be reasonable.)
Why You Should Keep Records
Although you
are not required to keep records, an accurate, up-to-date recordkeeping system
can help show that you are complying with the Rule. This is especially important
because, in any action to enforce the Rule, if you cannot document your use of
systems and procedures for complying, the Rule provides that you bear the burden
of proving you do comply. Your documentation should provide answers to the
following questions.
- Substantiation for shipment representations. How is
demand anticipated? How is inventory monitored? How is inventory acquisition
coordinated with customer demand and order cancellation? How are demand needs
communicated to and met by buyers/suppliers/drop shippers?
- Fulfillment system. How is the fulfillment system
designed to meet the requirements of the Rule? Are the delay option notices in
compliance? Does the customer’s active or passive exercise of any cancellation
option result in a prompt refund response?
- Recordkeeping. Are adequate records kept for each
individual order demonstrating the date you received the order; the contents of
and date you provided any delay option notice; the date you received any
exercise of a cancellation option; the date of any shipment and the merchandise
shipped; the date of any refund and the merchandise for which the refund was
made?
If you provide delay option notices by telephone, you
may want to keep accurate records of the scripts you use. To help document your
compliance with the Rule, you may find it useful to maintain a chronological
record of all calls you make, including the number from which the call is made,
the called number, the party contacted, and the duration of the
contact.
Businesses often ask how long they should keep their
records relating to Rule compliance. The statute of limitations on actions to
enforce the Rule is three years for consumer redress and five years for civil
penalties. State statutes of limitations for individual customer or state
actions are sometimes longer. Check the state laws where you plan to do
business.
What the Rule Does Not Cover
The following
sales are exempt from the Rule:
- magazine subscriptions (and similar serial
deliveries), except for the first shipment;
- sales of seeds and growing plants;
- orders made on a collect-on-delivery basis (C.O.D.);
and,
- transactions covered by the FTC’s Negative Option
Rule (such as book and music clubs).
The Rule also does not cover services, such as
mail order photo-finishing. In the question and answer section that follows, you
will notice other circumstances in which mail or telephone order merchandise may
not be covered by the Rule.
Why You Should Comply with the
Rule
Merchants who violate the Rule can be sued by the FTC for injunctive
relief, monetary civil penalties of up to $11,000 per violation (any time during
the five years preceding the filing of the complaint), and consumer redress (any
time during the three years preceding the filing of the complaint). When the
mails are involved, the Postal Service also has authority to take action for
problems such as non-delivery. State law enforcement agencies can take action
for violating state consumer protection laws.
Apart from this, your failure to ship on time, or
your failure to notify your customers promptly about delays and to obtain their
consent to the delays, or your failure to make full and prompt refunds when your
customers do not consent to delayed shipment, can adversely affect your business
by discouraging repeat purchases. Accordingly, most businesses regard compliance
with the Rule as simply good business practice.
Questions and Answers About the
Rule
The FTC staff receives questions from mail or telephone order
merchants who want to know how to comply with the Rule in certain circumstances.
Provided below are commonly-asked questions and staff responses.
Using a Fulfillment House or Drop-Shipper
Q:
Who is liable for Rule violations caused by a fulfillment house or drop
shipper?
A: The seller is. This is because the person
soliciting the order, not the agent fulfilling it, is the seller under the Rule.
The person soliciting the order can control -- among other things -- the
shipment representations made in soliciting the sale and the choice of
fulfillment houses. The seller can adjust the shipm
