Hey Dude shoes, an online shoe retailer, has agreed to pay $1.95 million and to make changes to certain of its practices to settle an action with the FTC. The practices at issue? The company's shipping representations and follow-through, and its handling of customer reviews. The Complaint and Proposed Order are good reminders of the Do's and Don'ts for these common e-tailer activities.
With respect to shipping issues, the FTC alleged that Hey Dudes violating the Mail, Internet, or Telephone Order Merchandise Rule ("MITOR"). MITOR prohibits sellers from soliciting any order for the sale of merchandise unless it reasonably believes it can ship by the date it advertises or within 30 days (if no date given). It also requires sellers to offer buyers an option to consent to a delay or get a prompt refund if it is unable to ship on time. The rule also includes requirements for the timing of shipping delay notices and form of refunds.
Hey Dude didn't follow these rules. Rather, according to the Complaint, Hey Dudes engaged in a myriad of violations of the Rule, including by touting its shipping speed and then not shipping on time. Other alleged violations included shipping merchandise that was different from what consumers ordered, not offering prompt refunds when it failed to ship on time, not making complete refunds, providing refunds in the form of gift cards usable only on the website, not providing consumers with an option to cancel or consent to a delay for late shipments and making it very difficult for consumers to reach the company to check on the status of their order. Apparently the BB received a number of complaints prior to the FTC taking action here. So, LESSON 1: Don't ignore complaints from the BBB! If there are enough of them and they're bad enough, you may get a knock on the door from a regulator next.
LESSON 2: Read the FTC's straightforward Business Guidance on MITOR compliance and implement it.
But Hey Dudes didn't just have a shipping problem. The FTC also alleged that the company violated the FTC Act by misrepresenting that the product reviews on its website accurately reflected the views of all purchasers who submitted reviews of the products when, in fact, it was suppressing negative reviews. How did it do that? According to the FTC's complaint, the company used a third-party online product review management interface that allows website operators to choose to have certain reviews automatically posted based upon their star ratings and to hold lower-starred reviews for approval prior to posting.
Hey Dude Shoes apparently chose to have five-star reviews posted with little scrutiny, but held the lower-starred reviews for more individualized review. Ultimately, FTC alleged, the company failed to actually publish more than 80% of their one-, two-, and three- star reviews. Plus, prior to June 2022, it allegedly had written policies and procedures instructing its staff to publish certain reviews only if they were positive. Big no-no. Especially if you're going to actually represent (explicitly or implicitly) that the reviews on your site fairly represent the reviews you're getting from customers. This settlement is only the most recent example in what is now a long line of enforcement actions showing the FTC's interest in, and willingness to take action against, misleading and deceptive review practices.
So, LESSON 3: Take a look at your policies and procedures for vetting product reviews and make sure you have good review hygiene. That means being even-handed in how you deal with reviews, positive and negative. If you're going to take down a negative review, there should be a good reason to do so (like, it includes obscenity) other than that it is negative. If you're out-sourcing review management to a vendor, make sure their policies and practices comply with the same principle. And don't make a review page appear to be complete if it's not. For a good refresher, see the FTC's Guide to Platforms on Featuring Online Customer Reviews.
Final lesson? The one constant since Kindergarten: keep your promises.
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
