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Internet Retailers Settle FTC Charges Over Holiday Shipping Delays

Seven Internet retailers yesterday settled Federal Trade Commission charges that they violated the Mail and Telephone Order Rule during the 1999 holiday shopping season. The FTC had alleged the e-tailers provided buyers with inadequate notice of shipping delays or continued to promise specific delivery dates when timely fulfillment was impossible.

CDNow Inc., KBkids.com LLC, Macys.com Inc., Franklin W. Bishop dba Minidiscnow.com, The Original Honey Baked Ham Company of Georgia Inc., Patriot Computer Corp. and Toysrus.com Inc. have agreed to change their procedures to ensure that such violations will not recur this year and to pay civil penalties totaling $1.5 million.

The settlements are the culmination of Project TooLate.com, an FTC investigation of whether major online retailers delivered goods when promised during the 1999 holiday season.

“Although there are still 151 shopping days until Christmas, today's announcement is an early gift for Internet shoppers,” Jodie Bernstein, director at the FTC's Bureau of Consumer Protection, said yesterday. “Last December, a large number of e-commerce buyers didn't get the type of notice of late shipment which the law requires and were misled about delivery dates.”

Bernstein added yesterday that “the requirements of the rule apply to online and offline commerce equally; today's settlement shows the FTC takes violations of the rule by e-tailers seriously, and will expect e-tailers either to comply with the law or face stiff penalties.”

Last December, the FTC received complaints from sources indicating that prominent e-tailers repeatedly failed to meet their express shipping and delivery representations.

Based on this information, FTC staff began an investigation of e-tailers, focusing on major online companies that were making express delivery claims, to examine whether these failures were violations of the rule.

The rule requires that retailers ship goods within the date promised, or if no date is promised, within 30 days of the order's receipt. If the company cannot ship as promised, it is required to provide notice to the buyer with a revised shipping date, giving the buyer the opportunity to agree to the delay or to cancel the order.

The investigation revealed that some e-tailers violated the rule by failing to send the required Delay Option Notice, sending notices that were deficient and, in some cases, making shipping representations without a reasonable basis.

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