The Federal Trade Commission (FTC) released a new rule, 16 C.F.R. § 435, covering Internet purchases. It became effective December 8—just in time for holiday shopping. The new rule expanded the FTC’s previously issued rule regarding phone and mail orders to include all Internet orders, even those made through a mobile device.
In particular, the new rule “prohibits sellers from soliciting mail, Internet, or telephone order sales unless they have a reasonable basis to expect that they can ship the ordered merchandise within the time stated on the solicitation or, if no time is stated, within 30 days.” Further, the rule requires buyer consent for delayed shipments and, if the buyer does not consent, the seller must promptly issue a refund. Specifically, sellers now have seven working days after a buyer’s right to a refund vests to process refunds for payments made through third party credit cards. The period for refunding purchases made by first party cards (e.g. where a seller itself issues the credit card) remains one billing cycle.
Online merchants must follow this new rule or risk severe penalties. Indeed, the rule gives the FTC the power to sue a seller for injunctive relief and civil penalties of up to $16,000 per violation. Additionally, the seller may be required to redress consumers. Sellers have the burden of proving compliance, and failure to provide the FTC with records or documentary proof establishing the use of procedures assuring shipment of merchandise within the applicable time creates a rebuttable presumption that the seller lacked a reasonable basis for expecting it would be able to timely ship orders. Thus, sellers should verify that they are retaining documentary proof of the procedures used to assure that merchandise was shipped within the timeframe the rule requires to help refute any claim of noncompliance by the FTC or buyers.