Hunton Retail Law Resource

On April 21, the FTC announced a record-setting $9.3 million settlement with online retailer Fashion Nova for violating the decades-old Mail Order Rule by failing to meet advertised shipping times and failing to adequately compensate consumers affected by the delays.

In its complaint, the FTC alleged that Fashion Nova often failed to deliver on its “2-Day shipping,” “Fast Shipping” and “Expect Your Items Quick!” promises. The complaint also alleges that Fashion Nova did not take appropriate action when shipments were delayed, issuing gift cards rather than Rule-required refunds to unhappy customers.

The FTC’s Mail Order Rule requires sellers to have a reasonable basis for any shipping time advertisements. Recognizing that there are sometimes delays, the Rule requires a seller to promptly notify customers when the seller will not meet its shipping estimate and to provide the option of a refund. The FTC’s settlement will provide money to aggrieved consumers who received gift cards instead of refunds.

The FTC advises that sellers keep in mind the following: First, have a reasonable basis for shipping representations. Retailers do not have to be perfect, but they must have objective reasons for believing that products will arrive as advertised. Second, if a product will not arrive on time, retailers must give customers the option between consenting to the delay or receiving a refund. And third, in the context of the Mail Order Rule, neither gift cards nor store credits are “refunds.”

In light of this substantial settlement, retailers should evaluate their advertising claims and shipping programs to ensure that they do not incur unnecessary liability by failing to comply with the Mail Order Rule.