Dorm2Dorm is a moving and storage company that targets college students. The company offers a service where it will pick up a student's microwave, coffee maker, and other belongings at the end of the semester, store them over a break, and then return them when the student starts school again.
The company offers two levels of service. When a student selects "economy" service, the student gets a three hour delivery window. And when a student pays extra for "elite" service, the student gets a ninety minute delivery window, along with some other benefits. The pricing comes with a "25% off instant rebate."
The New York City Department of Consumer and Worker Protection recently announced that it sued Dorm2Dorm, alleging that the company "preys on college students and their parents/guardians, regularly failing to provide the services that consumers paid for and that Dorm2Dorm advertised, including consistently late pickups and deliveries, misplacing possessions, returning them damaged or broken, and deceiving consumers with false promises of a 25% 'instant rebate.'"
In announcing the lawsuit, DCWP Commissioner Vilda Vera Mayuga said, "DCWP will not hesitate to hold predatory businesses like Dorm2Dorm accountable for their actions."
Although, on one level, this is just a case about a local moving company that failed to deliver on its promises, there are actually a lot of important take-aways from this enforcement action for all advertisers.
If you're advertising in New York City -- even if you're a national advertiser or retailer -- you shouldn't ignore the fact that the City has its own consumer protection rules which are enforced by the New York City Department of Consumer and Worker Protection, which I believe is the nation's largest municipal consumer protection agency. Not only does the City have general rules prohibiting "any deceptive or unconscionable trade practice," and requiring the clear and conspicuous disclosure of material limitations, there are many specific City advertising requirements as well. One rule that many advertisers are not aware of is that NYC says that, if you want to be sure your disclaimers are big enough, they have to be "at least one-third as large as the largest print used in the advertisement." (Advertisers can always argue that a smaller disclaimer is sufficient, but the one-third standard operates as a safe harbor.) Violations of New York City's false advertising standards carry stiff penalties as well -- up to $3,500 per violation.
Do consumer complaints matter? They do, and this enforcement action is great evidence of that. Apparently, the DCWP took action after reviewing only nineteen complaints that it and the Better Business Bureau received. Don't think that a regulator will look the other way until it receives thousands of complaints. Even a handful of complaints could lead to a regulator beginning an investigation. What's the lesson here? Pay attention to the false advertising complaints you receive. If you're getting them, this is your early warning system that you may need to update your advertising claims and disclosures. It's also an early warning that you've got dissatisfied consumers who may be sending complaints to regulators as well. Regulators don't usually look for perfection; they look for advertisers who are acting reasonably. If you learn that you've got a problem or made some mistakes, and you can show that you promptly addressed it on your own, regulators are a lot less likely to be interested in taking enforcement action.
Here, Dorm2Dorm charged more for premium service -- essentially upgraded delivery -- but the DCWP alleged that the company failed to perform as promised. Many companies, including online retailers, charge more for upgraded delivery, such as faster service. If you're charging more for faster service or other upgraded delivery, you'd better make sure you can deliver (no pun intended). And, many advertisers are also subject to the FTC's Mail Order Rule, which subject them to very severe penalties if they fail to have a reasonable basis for their shipping claims or if they fail to take specific steps when they learn that they can't ship when promised.
And what about the instant rebates? There appear to be a whole host of problems with the way that Dorm2Dorm advertised its instant rebate. First, it doesn't seem that it was an instant rebate at all. In other words, the rebate wasn't applied at checkout. Consumers were required to pay the full price, then take steps after checkout in order to obtain the rebate. Second, Dorm2Dorm advertised its prices after applying the instant rebate, but then charged people the full price. As DCWP explained, the company, "fails to display the actual prices of its services on its website, leading students who purchase Defendant's services paying a higher price upon checkout than what Defendant advertised." Third, DCWP alleged that Dorm2Dorm failed to clearly and conspicuously disclose what consumers needed to do to obtain the rebate. What were the requirements? In order to be eligible to take advantage of the offer, consumers had to pay for at least three months of storage. Then, apparently consumers had to request and submit a rebate form or write a "five-star online review." (In case you're thinking of requiring consumers to write a "five-star" review in order to obtain a discount or other benefit from you, check out the FTC's proposed revisions to the Endorsement Guides, which make the FTC's position very clear on this point. You can never pay a consumer to write what is required to be a positive review.) So, if you're going to advertise an instant rebate, you should make sure that the rebate is given at check-out. And, if it's not an instant rebate, it's critical that you clearly disclose the out-of-pocket cost to consumers and disclose all material terms and conditions that must be satisfied for consumers to obtain the rebate. Be careful as well that the requirements aren't so onerous or unnecessary that it looks like you're putting up unfair barriers to consumers actually getting their money back. And, pay attention to specific state law on this issue as well, since some states have additional requirements (for example, some states don't allow you to advertise the after rebate price).
Finally, customer service matters. Here, the DCWP highlighted the fact that Dorm2Dorm didn't provide a phone number to call for customer service. So, if a customer's delivery was late, or if a customer had a complaint, consumers were required to text the company and wait for a text back. As DCWP explained, "To add insult to injury, Defendant is largely unresponsive to consumer grievances." When deciding how you're going to communicate with consumers, consider what consumers' needs are in light of the type of product or service you are providing. It's also important to consider whether you've set up channels that will allow consumers to effectively communicate with you and whether you've got the technology and staff in place to promptly and efficiently respond to them. Expectations about what is reasonable and appropriate customer service are likely to be very different when the consumer has been promised something for a particular time, or when the consumer is standing out on the sidewalk waiting for a moving truck to arrive. It's also worth considering whether your customer service practices are making it difficult enough to engage with you that they could be a considered a "dark pattern."
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