Staples Case Highlights Delivery Problems

An $850,000 payment by Staples to settle a Mail Order Rule complaint illustrates that online retailers still have trouble keeping product delivery promises, a Federal Trade Commission attorney said yesterday.

The FTC accused Staples of putting misleading information on its Web site about product availability and of making promises of timely delivery it did not honor. Such violations of the Mail Order Rule, which requires companies to alert customers to shipment delays and offer the chance to cancel orders, still occur in online commerce despite years of enforcement by the FTC, said Laura Fremont, an attorney with the FTC's Western division office in San Francisco.

The FTC warned online retailers about observing the rule in January 2000 following consumer complaints of problems with delivery during the 1999 holiday season. In November 2001, the agency sent reminder letters to more than 50 retailers about the rule in advance of the holiday season.

The FTC hears of complaints year-round, though Fremont said she lacked specifics on the number. However, holiday delivery problems seemed to have declined since 2001, she said.

“There has been a reduction in holiday problems, which is really gratifying,” Fremont said. “Some of it is probably because they got the message that there's not just a law, it's also not a very good business practice to promise something you can't live up to.”

According to the FTC complaint, Staples had claimed on its Web site that consumers viewing products had access to real-time availability information, but the site actually was not updated in real time. Furthermore, Staples once claimed it could deliver products in one day, when this offer applied only to customers living within 20 miles of a Staples retail store, and only Monday through Friday.

Staples changed the Web site in May 2002 to correct the problems, the FTC said. Staples did not admit wrongdoing as part of the settlement.

Along with the monetary payment, Staples promised to avoid such statements in the future if they are inaccurate and also agreed to inform customers of shipment delays and offer them the chance to cancel.

In a statement, Staples said its previous policy for delayed deliveries was to give customers the option of substituting the item for another, declining the order when it arrives or sending it back to the company at no charge. The company said that since spring 2002 it has “proactively” given customers the chance to cancel prior to shipping a delayed item.

In the statement, Brian Light, the company's executive vice president of business delivery, said Staples was “the best in the industry at getting our customers what they need, when they need it — and communicating at the time of order when their shipment will arrive.” The statement further claimed that the Mail Order Rule “has not been updated to specifically address delivery in the Internet context or today's expectations for quick delivery.”

The Mail Order Rule has not been changed since it was adopted in the mid-1980s and probably should be revisited to reflect the change in technology since then, said Michael D. Scott, a partner in the law firm Perkins Coie and an e-commerce law specialist. However, the issue is low priority for the online retailing industry, if only because the current rule is so diluted that compliance isn't a problem, he said.

“The standard is at quite a low level,” Scott said. “It's not a sophisticated standard the online world can't deal with.”

Fremont said that companies could comply with the rule simply by ensuring their delivery-time claims are accurate. Today's database technology, which allows inventory information available in real time, should make that mission easier and let online retailers give item availability information to consumers at the time of purchase.

“There is really stiff competition in this industry,” Fremont said. “A lot of people make one-day-delivery promises. You had better be sure that you can live up to this.”

Consumers depend on delivery promises made by retailers, Fremont said. Staples' claim that it allowed people to return delayed items after they arrived is “small consolation to the person who takes a day off to receive something that was promised to arrive that day,” she said.

In December 1998, computer disk manufacturer Iomega paid $900,000 to settle an FTC complaint that it violated the rule by failing to fulfill premium and rebate requests for its products. The Staples settlement is second in terms of monetary value only to the Iomega case among Mail Order Rule violation complaints filed by the FTC.

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