Beanie Baby Market Charged With Violating FTC Mail-Order Rule

Cyrk, Inc., a Gloucester, MA company that markets the Beanie Babies Official Club (BBOC) and related merchandise, said yesterday that it agreed to pay $216,000 in civil penalties for failure to make timely deliveries or prompt refunds in the sale of its “Clubby” Beanie Baby–a royal blue bear with a tie-dyed ribbon and a BBOC button.

The agreement is part of a settlement resolving Federal Trade Commission charges that the company violated the FTC’s Mail or Telephone Order Rule.

The complaint and the proposed consent decree were filed by the Department of Justice on behalf of the FTC, in the U.S. District Court, District of Massachusetts, in Boston. The proposed settlement is subject to court approval.

According to the FTC, in early 1998, hundreds of thousands of Beanie Babies enthusiasts purchased a kit that enters them in to the BBOC at specialty retailers. They then filled out a mail-in order form from the kit and sent it back to Cyrk requesting to order “Clubby.” Cyrk, however, was not able to ship some or all of the orders by the time promised and failed to tell buyers of the delay or offer them the option to agree to the late shipment or cancel the order and get a refund.

According to the FTC, in Cyrk’s solicitation, the company stated that orders would be delivered within four to six weeks of Clubby’s “birthdate” in July of 1998. When Cyrk was unable to ship orders to buyers within that time, it allegedly failed to comply with the Rule’s requirements. The FTC’s complaint detailing the allegations states that Cyrk violated the Mail Order Rule by:

failing to offer consumers the option to consent to a delay or to cancel and receive a refund; and failing to offer buyers a prepaid means of exercising the option.

The Mail Order Rule requires a merchant to ship ordered merchandise within the time stated in its solicitation. If a merchant is unable to ship an order within the time represented, then it must send customers an option notice giving them the choice of agreeing to a delay or canceling their orders and receiving prompt refunds. The Mail Order Rule also requires the seller to provide a prepaid means of exercising that option. The requirements of the Mail Order Rule also apply to telephone orders, including sales where a computer, fax machine or similar means is used to transmit an order over a telephone line.

In addition to paying the $216,000 civil penalty, the proposed consent decree would prohibit Cyrk from future violations of the Mail Order Rule and the FTC Act. The proposed settlement also contains various record keeping requirements to assist the FTC in monitoring Cyrk's compliance.

“This is a case of over-promising and under-delivering,” said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. “When a company says it'll ship by a certain date, it's obligated to do just that. If it can't, it has got to let the customer know. Then, it's the customer's choice whether to wait for the item or cancel the sale. In any case, following through with the customer isn't just good business, it's the law.”

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