You better not lie

About shipping times

I’m telling you whyBuyer lawsuits are coming to town 🎶

The holidays are upon us, and Black Friday sales have already kicked off as companies anticipate shipping delays due to current supply chain issues.  As such, some companies, such as Disney, will not be offering rush shipping at all this holiday season.  Walmart has gone so far as to charter its own cargo ships to various ports throughout the country to ensure goods make it to consumers on time.  Product distributors may want to implement similar policies and tactics through year-end to avoid be gifted lawsuits in their stockings for failure to timely ship to consumers pursuant to state and federal laws.

Case in point, Kanye West (or “Ye” as the billionaire is going by these days) recently saw his companies Yeezy Apparel LLC and Yeezy LLC slapped with a lawsuit in California alleging “unlawful business practices and false advertising by failing to ship items in a timely manner.”  According to the complaint, Yeezy “repeatedly violated” state law by (1) failing to ship items within thirty days; (2) failing to provide adequate notice of shipping delays to California consumers; and (3) failing to offer and provide refunds to those consumers whose goods were not shipped within the requisite 30-day time frame. Moreover, the complaint goes on to contend that Yeezy made misleading statements by posting two-to-seven-day shipping estimates on its websites; and, most egregiously, charged consumers additional fees for expedited shipping.  Yeezy will pay $950,000 to settle the claims which includes $50,000 in restitution, $100,0000 for investigative costs, and $800,000 in civil penalties.

The 30-day shipping requirement that Yeezy ran afoul of is not unique to California.  Many states have similar laws, and the Federal Trade Commission requires sellers who solicit buyers to order merchandise through the mail, via the Internet, or by phone to have a reasonable basis to expect that the sellers can ship within the advertised time frame, or, if no time frame is specified, within 30 days. The rule also requires that, when a seller cannot ship within the promised time, the seller must obtain the buyer’s consent to a delay in shipping or refund payment for the unshipped merchandise.

To ensure a happy holiday for all parties involved, product distributors must be transparent about shipping times (and delays) and offer consumers the right to cancel and receive a refund for product that does not ship within 30 days.  Contact and attorney familiar with FTC regulations if you need help drafting or reviewing consumer policies and website ordering terms. 

Due to China’s classification under the UPU, the U.S. is forced to subsidize shipping costs for Chinese imports – including counterfeit products – to the tune of approximately $300 million annually. As such, it oftentimes costs Chinese manufacturers and counterfeiters less to manufacture and ship products to the U.S. than it does for American companies to ship products within the U.S. This has become an increasingly troubling matter for American businesses over the past few years as consumer shopping has largely moved from brick and mortar stores to e-commerce platforms such as Amazon. Specifically, Chinese counterfeiters are able to severely undercut the price of authentic goods on Amazon (and eBay, etc.); making the counterfeit a significantly more appealing option to the unaware consumer.

This concern was echoed by President Trump’s trade advisor, Peter Navarro, who stated in a recent op-ed that this pricing “inequity puts American small businesses and manufacturers at a severe competitive disadvantage.” Navarro went on to detail how U.S. businesses and manufacturers pay between $19 and $23 to ship a 4.4lb package while China post only pays $5. It does not take an economist to see how such a disproportion is harming U.S. businesses.

As such, and in keeping with his America first policy, President Trump formally moved last week to withdraw from the UPU; an effort that is widely supported by U.S. shipping companies and manufacturers. Withdrawing from the UPU is a yearlong process, and if finalized in 2019, the U.S. will lose access to internationally recognized barcodes that allow parcels to be shipped throughout the UPU member countries. However, because it does take so long to formally withdraw, it gives the Trump administration ample time to renegotiate the rules and rates with the UPU and then rescind its notice of withdrawal. This is the most likely outcome, and one that will benefit U.S. product inventors, owners and distributors considerably.

Until this matter with the UPU is resolved, it is essential for product marketers to monitor third party sales of their products online to ensure counterfeits are not being offered at a lower price (and quality). Federally registering product trademarks and copyrights, as well as utilizing tools such as Amazon’s Brand Registry can help combat these counterfeiters and more effectively remove unauthorized product listings.

Although the use of these messages in infomercials has been standard industry practice for some time, many states’ Attorneys General are making moves to change the direct response industry. Maximizing consumer protection is the driving force behind these changes, and hefty penalties (up to $10,000 per violation) are being utilized to ensure compliance.

In addition to misleading limited time offer claims, there several other practices in infomercials and on product websites that are being scrutinized right now, including:

1. Inconspicuous shipping and handling charges
2. BOGO offers that do not clearly disclose additional P&H charges
3. Lack of return / refund policies
4. Pre-selected quantities on checkout pages
5. Lack of product order summary / confirmation

These are just a few examples of routine practices that many state AGs are going after right now. In order to avoid finding yourself on the expensive end of an investigation, be sure to seek the advice of a qualified attorney who has handled these matters and can help you minimize your risk of exposure.