FTC Warns Net Retailers to Fulfill Shipping

The U.S. Federal Trade Commission (FTC) is warning more than 100 online retailers that they had better not make holiday shipping promises they can’t keep.

To avoid the spate of consumer complaints it received about late deliveries during last year’s holiday season, the FTC is sending letters to the electronic retailers telling them that they shouldn’t make “quick-ship claims” they can’t fill just to entice consumers to their sites.

The letters will also explain that merchants could be fined US$11,000 for each violation of the rule, said Heather Hippsley, a spokeswoman for the FTC’s Bureau of Consumer Protection.

Earlier this year, the FTC sued seven companies for such violations, citing a regulation called the Mail or Telephone Order Merchandise Rule. That rule spells out the requirements for making delivery promises and refunds. The seven companies agreed to pay a total of $1.5 million in fines.

Of those retailers – CDNow Inc., KBkids.com Inc., Macys.com Inc., The Original Honey Baked Ham Company of Georgia Inc., Patriot Computer Corp. and Toysrus.com Inc., as well as the now-defunct Minidiscnow.com – some received many more orders than they anticipated and had problems processing them, despite having enough inventory on hand, according to the FTC. None sent out notices informing customers that shipments wouldn’t arrive as promised.

Surfing, Searching

More recently, FTC spokesman Eric London said, the agency conducted a “surf” of more than 200 Web sites, looking at the shipping promises the sites were making as the holiday shopping season gets under way. The FTC found that more than 100 of the sites made quick-ship claims, assuring consumers that in-stock items usually ship within 24 to 48 hours after an order has been placed. The FTC declined to name the companies on the list.

London said the FTC will be monitoring certain Web sites to see if they’re complying with the rule.

Harry Wolhandler, an analyst at ActivMedia Research LLC in Peterborough, N.H., said there’s no reason why online retailers should have shipping problems this year, particularly if they pay close attention to their inventories.

“They should know by now what they have coming from their vendors,” Wolhandler said. “And they should have the ability to project that information to their Web site in real time to comply with [order] requests.”

Richard Sherman, vice president of visioneering at Dallas-based EXE Technologies Inc. and a former analyst at AMR Research Inc. in Boston, said online retailers should have been focused on setting up systems to ensure speedy deliveries – or to alert customers when their orders are going to be delayed – for the past six months to a year.

CDNow, Patriot Computer and Toysrus.com – which formed a partnership with Seattle-based Amazon.com Inc. in August – are among those that fall into that camp, according to executives at those companies.

“[But the smartest thing] an e-tailer can do is not make any [shipping and delivery] promises he can’t keep,” Sherman said.