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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