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Quick Guide to FT's Mail or Telephone Order Merchandise Rule

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Quick Guide to FT's Mail or Telephone Order Merchandise Rule

By JamieD
Published: March 23, 2010 Updated: February 17, 2011

If your business sells merchandise over the phone, through the mail, or on the web, you will likely need to comply with the Mail or Telephone Order Merchandise Trade Regulation Rule. Enacted by the Federal Trade Commission, the "Rule" was established to protect both the seller and consumer when it comes to selling goods remotely. 

What is the Mail or Telephone Order Merchandise Trade Regulation Rule?
The Rule states that businesses must have a reasonable basis for advertising their ability to ship products within a certain time frame. If they choose not to advertise a shipment statement, businesses must have a reasonable basis for believing that they can and will ship their products within 30 days. For this reason, the Rule is also often called the "30-day rule". 

Does my business have to comply with the Rule?
The Rule applies to most goods sold to customers by mail, telephone, fax, or on the internet regardless of how the merchandise was advertised, how the customer pays, or who initiates contact. The Rule has several exceptions and does not apply to magazine subscriptions, sales of seeds and growing plants, orders made on a collect-on-delivery basis, or transactions covered by the FTC's Prenotification Negative Option Rule (ex. book club).

My business is covered by the Rule. How should I determine an appropriate shipment schedule?
To comply with the Rule, your business must fit into one of two categories: either have "reasonable basis" to ship within an expressed or implied date or have "reasonable basis" to believe you can ship within 30 days of an order's completion. For purposes of this Rule, "reasonable basis" means that at the time of making the representation, the merchant's judgment would be considered that of a reasonable and prudent businessperson, acting in good faith, and representing the truth. Consider your products' anticipated supply and demand, your fulfillment system, and your recordkeeping skills when making an appropriate shipment representation. It's always best to give yourself the benefit or the doubt and don't commit yourself to more than you can handle. 
TIP- When taking orders over the phone, you can provide updated shipping information that will supersede any previously stated dates. This gives you the opportunity to be up-front with your customer and gives them the opportunity to either agree or disagree to the transaction. Check out Business.gov's guide to Truth in Advertising for more assistance.

When do my fulfillment obligations begin for each order?
As soon as you receive a properly completed order the clock on your obligation to ship or take other action under the Rule begins. An order is considered properly completed when you receive the full or partial payment accompanied by all the information you require to fill the order. 

What should I do if I cannot ship an order on time?
You must determine whether or not you will be able to ship the order at all. If you are able to ship the order after the intended date, you must get the customers consent to delay the shipment. Telephone, fax, mail, or email are all appropriate contact methods as long as the customer is quickly notified of the change, and a revised date is provided. If you are unable provide a revised date, you must tell them that and provide a reason for the delay. At that point it is the customer's discretion to consent to the delay or cancel their order. If you know that you will not ever be able to ship the order, you must immediately cancel the order and provide a full refund.

Are there any circumstances under which I have to cancel an order?
Yes, merchants are required to cancel orders and issue full refunds under several circumstances. If the customer exercises an option to cancel an order before you ship their merchandise, does not respond to any notice of a revised shipment date and you have not shipped the merchandise within that time, or has agreed to a delay but you have failed to ship within that time frame, then you must cancel their order and send a full refund. In addition to these circumstances, if you have not shipped nor provided the required delay notices or realized that you will never be able to ship the merchandise, you must cancel their order and send a full refund.  In these cases, refunds must be issued quickly. Cash, check, or money order refunds should be sent by first class mail within seven working days. Credit payments must be credited to the customer's account or you are required to notify the customer that the account will not be charged within one billing cycle.
TIP- You always have the option to cancel an order and send a full refund. If you choose to do this rather than seeking the customer's consent to delay, you must notify them and send their full refund within the time you would have send a delay notice required by the Rule.

Should I keep records of my orders and transactions?
Records are not required for compliance with the Rule. However, accurate and up-to-date record keeping can help prove your compliance with the Rule if any action is ever taken to enforce the Rule. The burden of proof is on the business and the statue of limitations on actions to enforce the Rule range from three to five years.  State statutes of limitations can sometimes be longer and can be checked on an individual basis on state government websites. For these purposes, keeping good records can be very beneficial for businesses.

What are the consequences if I do not comply with the Rule?
Businesses that do not comply can be sued by the FTC for injunctive relief and face monetary penalties of up to $16,000 per violation. Violators can also have actions taken against them from the Postal Service (when the mail is involved) and state law enforcement agencies.

Can I contact someone for more help understanding my obligations?
Yes. You can call the Federal Trade Commission for toll-free at 1-877-FTC-HELP for additional information.

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