United States: Mailin’ It In: The FTC Gives The Mail Order Rule A Makeover

Last Updated: October 1 2014
Article by Anthony V. Lupo, Sarah Bruno, Matthew Mills and Daniel B. Jasnow

The News

The Federal Trade Commission (FTC) recently announced changes to the "Mail or Telephone Order Merchandise" Rule (a.k.a., the Mail Order Rule) aimed at updating the Rule for the 21st century and easing the costs of compliance. The Rule also got a new name and will now be known as the "Mail, Internet, or Telephone Order Merchandise" Rule. The changes will take effect on December 8, 2014.

Background

The Mail Order Rule prohibits sellers from soliciting mail, Internet, or telephone order sales unless they have a reasonable basis to expect that they can ship the ordered merchandise within the time stated on the solicitation or, if no time is stated, within 30 days. If shipments are going to be delayed, the Rule also requires sellers to seek the buyer's consent to the delayed shipment. If the buyer does not consent to the delay, the seller must offer a prompt refund. The Mail Order Rule requires consumer notifications of shipping delays and can, in some instances, require refunds to be given.

When it was initially enacted in 1975, the Rule only applied to shippers of mail-ordered merchandise and was known as the "Mail Order Merchandise Rule." As consumers' purchasing habits have evolved, however, the FTC has broadened the Rule to cover telephone orders and the Internet. Although the Rule has applied to merchandise ordered through the Internet using telephone Internet access since 1993, the Rule did not explicitly cover all Internet merchandise orders until now.

The Changes to the Rule

The FTC has made four changes to the Rule:

  1. The Rule now explicitly covers all Internet merchandise orders regardless of the method used to access the Internet.

By explicitly expanding the scope of the Rule to cover all Internet merchandise orders, the FTC hopes to eliminate the Rule's previous ambiguity. The Rule will now apply to all Internet orders, including orders placed using mobile shopping applications (apps). Notably, the Rule does not cover face-to-face transactions in which a seller's representative merely receives product or inventory information through the Internet.

  1. The Rule now allows sellers to use methods other than first class mail to deliver refunds and refund notices so long as the method chosen is at least as fast and reliable as first class mail.

This change is intended to provide sellers with the authority to deliver refunds by cheaper and more convenient methods, if available, which will hopefully allow buyers to receive their refunds more quickly.

  1. The Rule now requires sellers to process any third party credit card refunds within seven working days after a buyer's right to a refund vests.

The Rule sets specific requirements depending on whether buyers pay by cash, check, money order, or credit, such as the amount of time in which a seller must issue a refund. Under the old Rule, if a buyer purchased the merchandise through a third party credit card transaction (meaning that they used a Visa or MasterCard, for example), then sellers had one billing cycle in which to issue a refund. Under the revised Rule, a seller must refund such transactions within seven working days. The FTC notes that other federal regulations already require third party credit card transactions to be refunded within seven days, and therefore the change to the Mail Order Rule should not impose any additional burdens.

  1. The revised Rule clarifies sellers' refund obligations for orders using payment methods not specifically enumerated in the Rule (non-enumerated payments).

Even though the Rule only sets explicit requirements when buyers pay by cash, check, money order, or credit (enumerated payments), the Rule actually applies regardless of the method of payment. Under the revised Rule, when a buyer pays using non-enumerated means, the seller now has the right to issue refunds using cash, check, or money order. Alternately, the seller can decide to issue a refund using the same method that was used by the buyer to purchase the merchandise. In addition, the revised Rule clarifies that sellers must provide refunds within seven working days.

Significance

Any retailers that sell merchandise by mail order, the telephone, or over the Internet should be familiar with the Mail Order Rule and should mark the date the revised Rule goes into effect (December 8, 2014) on their calendar. These revisions should ease the burdens of compliance, particularly with respect to issuing refunds. However, retailers should also note that the Mail Order Rule now explicitly covers all Internet merchandise orders, including orders made via mobile apps. This change is likely to bring a larger swath of transactions under the purview of the Mail Order Rule and could expose businesses to greater liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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