Retailers Ask FTC to Include Internet in Mail-Order Rules

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The National Retail Federation and NRF's Shop.org online division today urged the Federal Trade Commission (FTC) to update 14-year-old rules governing mail-order and telephone sales to specifically include sales made over the Internet.

"Whether orders come in the mail, by telephone or over the Internet is secondary to the point that customers should receive the products they ordered, at the price they agreed to pay, and within the time that was promised," NRF SVP and General Counsel Mallory Duncan said. "The Internet has gone from dial-up modems to DSL to cable to fiber optic in a just a decade, not to mention from desktops to laptops to handheld devices. With today's rapidly changing technologies, it is important that FTC regulations focus on customer service rather than technical distinctions that could quickly become obsolete."

NRF and Shop.org today filed comments on the FTC's proposal to update its Mail or Telephone Order Merchandise Rule, a set of regulations that govern mail-order sales in areas such as accurate descriptions of products, prompt shipping, notification of delays, and refunds. The rules were first adopted in 1975 in response to consumer complaints that merchants had failed to ship merchandise on time, failed to ship at all or failed to provide prompt refunds for unshipped items.

The regulations were updated in 1993 to include telephone sales but Internet sales — which were in their infancy — were considered telephone sales on the grounds that most consumers used dial-up telephone modems to connect their computers to the Internet.

After the 2000 holiday retail season, the FTC fined seven major retailers for failing to meet their delivery dates for online orders or notify consumers that their orders would be late.

The FTC is seeking input on a variety of possible updates, including whether regulations should cover "all Internet ordering, regardless of the consumer's means of access."

NRF and Shop.org agreed that the regulations should include all forms of the Internet available to the public, although they asked that a distinction be made that orders handled through a retailer's internal computer systems — such as a salesperson using an in-store computer to find an item or place an order — not be considered Internet orders even if those systems happen to operate over the Internet.

The FTC is also considering a change that would update the regulations' list of payment methods — cash, check, money order and credit cards — to include new forms of payment such as debit cards, gift cards and services such as PayPal. NRF and Shop.org supported the proposal but said refunds for debit cards should be handled the same as those for credit cards because retailers frequently cannot distinguish between the two types of cards.

Another change would repeal a requirement that refunds be made by first-class mail and instead allow them to be made by a means "at least as fast and reliable as first-class mail," such as private couriers or electronic transfers.

NRF and Shop.org proposed that retailers be allowed to substitute merchandise of equal or greater value when an out-of-stock situation would prevent an item from being shipped on time, provided that the customer agrees. They also proposed that merchants not be required to promise a definite delivery date on some custom-made or handcrafted products provided that customers are given the option to cancel the order.