Staples Inc. has agreed to the second-largest civil penalty in relation to charges by the Federal Trade Commission that it violated the FTC’s Mail or Telephone Order Merchandise Rule. The FTC charged Staples with misleading customers on its web site about the real-time availability of products and its ability to deliver purchases in the time promised.
Under the terms of a consent order reached with the FTC settling the charges, Staples will pay $850,000 and is prohibited from making real-time inventory claims that are not accurate and promising customers a delivery date if it does not have a reasonable basis to expect it can meet its deadlines. The consent order also requires Staples to tell customers if their orders will be late and offer them the chance to cancel the order if they do not agree to the delay.
The FTC reports that the $850,000 civil penalty is second only to a $900,000 Mail Order Rule penalty paid by Iomega Corp., manufacturer of portable data and storage products, in 1999.
"All sellers are obligated to keep their promises to consumers about when their products will be delivered," said Howard Beales, director of the FTC`s Bureau of Consumer Protection. "Real-time promises demand real-time performance."
According to the FTC, until May 2002, Staples told customers they were viewing real-time inventory, when, in fact, Staples` web site was not updated in real time. In addition, the FTC says Staples made claims about one-day delivery that it could not meet and misled customers into believing that orders could be delivered on Saturdays and Sundays, which the FTC says was not the case. Further, the FTC alleges that Staples did not always notify customers that their orders were delayed and when it did, the company failed to offer customers the right to cancel orders rather than accept the delay.
Staples says the issues involved a “small percentage” of shipments that did not arrive as scheduled. “Staples` previous procedure for delayed deliveries was to give customers an option to substitute items; decline an order and have Staples take it back; or ship it back to Staples at no cost to the customer,” Staples said in a statement announcing the settlement. “The decree requires Staples to proactively give customers, when possible, the option to cancel these orders before they are shipped, just as the Mail Order Rule requires of merchants who have longer shipping times. Staples implemented this process in late Spring 2002.”
"Staples is the best in the industry at getting our customers what they need, when they need it--and communicating at the time of order when their shipment will arrive," said Brian Light, executive vice president of Staples Business Delivery. "Our customers appreciate that we deliver the overwhelming majority of orders the next business day. Staples shares the FTC`s goal of wanting to serve the customer and agreed to this resolution once we were satisfied that we could maintain our high level of customer service, while satisfying FTC guidelines."
The proposed consent order requires court approval.