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FTC Concludes Annual Holiday Web Surf

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Posted December 2, 2002 By Roy Mark     Feedback

Agency review of 63 Internet retailers results in 51 advisory and warning letters about quick ship claims, rebate offers and other required disclosures.

The Federal Trade Commission (FTC) has concluded its holiday surf of Internet sites with advisory and warning letters to a number of Web retailers. The purpose of the campaign was to find out whether e-tailers were making "quick ship" claims, rebate offers, and certain disclosures for popular holiday items.

As a result of the surf, the FTC staff sent letters to 51 e-tailers stating, "We want to make certain that you know that online sales are governed by many of the FTC-enforced statutes and regulations that apply to other forms of marketing and advertising."

The FTC staff found that 51 of the 63 sites made "quick ship" claims. Those sites assured consumers that in-stock items usually ship within 24-to-48 hours after an order is placed, or stated that orders received before a certain time of day would be shipped that night. Such online shipment claims are governed by the FTC's Mail or Telephone Order Rule, which requires that sellers ship orders to buyers within the time stated in the ad, or, if no time is stated, within 30 days after receiving the order.

If the seller is unable to ship within the applicable time, the seller must notify the customer of the delay within the original shipment time and give the buyer a revised shipping date. The FTC staff letters to e-tailers remind recipients that if they are unable to ship, for example, within a promised "48 hour" period, they must notify their customers within that period and give them the option to cancel.

During the 1999 holiday season, many Internet sellers claimed they could ship extremely quickly, from "overnight" to 48 hours to 72 hours. Some of the sites were unable to ship when they said they would, and the FTC brought civil penalty actions against seven well-known e-tailers for allegedly violating the Mail or Telephone Order Rule. The companies paid more than $1.5 million to total penalties. The FTC staff found fewer problems during the 2000 and 2001 holiday seasons.

This year's FTC holiday surf also found that 14 of the 23 sites selling warranted products failed to provide adequate information about these warranties. The FTC's Pre-Sale Availability Rule requires that written warranties on consumer products costing more than $15 be made available to consumers before they buy, and specifies what retailers, including mail order and catalog sellers, must do to accomplish this. The FTC staff sent letters to these sites advising them to include on their Websites either the full text of written warranties or a general statement that warranties could be obtained free upon request and an address where the warranty can be acquired.

In addition, the letters advised how clearly and properly labeled hyperlinks can be used to provide warranty information. Warranty information must be placed near the product description, or be located clearly and conspicuously in a separate information section on the website. It is not sufficient for sites to summarize simply the terms of a manufacturer's warranty.

Two sites also failed to make FTC-required country-of-origin disclosures for retailers selling apparel. The FTC's Rules and Regulations Under the Textile Fiber Products Identification Act (Textile Act) require that most textile products to consumers through print or online catalogs have an origin disclosure in the product information as to whether each item was "Made in USA," "imported," or both.

Another 19 sites making rebate claims were sent a letter advising them on how the FTC has constructed truth-in-advertising principles for rebate offers and redemption practices. Recently, the Commission has obtained consent agreements to resolve allegations that companies offering mail-in rebates violated the FTC Act.

Some of these cases involved allegations that computer retailers deceptively advertised the total costs of computer systems by failing to inform consumers adequately of the before-rebate price and that consumers had to sign a contract for three years of Internet service to qualify for the rebate. Other cases involved alleged misrepresentations of the time in which cash rebates would be mailed and/or unilateral modification of the terms of rebate programs after they had already begun (e.g., by rejecting rebate coupons that did not include the consumer's phone number, fax number, or email address).

The FTC staff letters advised the sites offering rebated that they should disclose: (1.) the type of rebate offered (in-store or mail-in); (2.) the material terms of the rebate offer; and (3.) the total price consumers must pay at the time of purchase to receive the rebate. Also, the letters advised that these disclosures should be clear and prominent and appear in close proximity to the rebate offer.

The letter also advised the companies that the rebates should be sent out within the time promised or within 30 days if no time-frame is mentioned.

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