Keep Uncle Sam at Bay

As a cataloger, you must comply with several regulations. Yet I often encounter catalogers who unknowingly do not comply with Federal Trade Commission (FTC) and other regulatory agencies’ rules.

The following is an overview of the major regulations to follow when developing your merchandising, creative and operational guidelines. Remember, all of these rules apply to both your print and online catalog operations.

FTC’s Mail Order Merchandise Rule

This law covers the representation you make regarding merchandise and when customers will get the products. And it covers appropriate remedies when those expressed representations aren’t met.

Substitutions. This is an area in which I often see catalogers not complying. The law states: No substitutions that are “materially different” are allowed without customers expressly agreeing to the substitution beforehand. You can’t get around this by stating somewhere in your catalog or order form that you may make substitutions. Again, substitutions are not allowed.

“Materially different” means the merchandise differs in some way that’s likely to affect customers’ choice of, or conduct regarding, the merchandise. Any product feature would be deemed “material” if it is expressly mentioned or depicted in advertising. Differences in design, style, color, fabric, brand, country of origin (where legally required to denote), etc., would be deemed material. A substitution is permitted only if you haven’t shown the item in a picture and haven’t expressly described it.

Shipping Dates/Backorders. You must have a reasonable basis for any expressed or implied shipment date or, if you express no date, believe that you can ship within 30 days of receiving the order. This is called the 30-day rule.

If you change the shipment date by providing a delay notice, you must have a reasonable basis for the new ship date. Or you must state you don’t know when you expect to ship.

When you take an order by phone, any shipment information you say or imply supercedes the representation made in printed advertising material or your catalog. Caution: If an item is on backorder, and you don’t know exactly when it’ll arrive—but you tell customers it will arrive and be shipped to them in two weeks—this is now your expressed representation about the ship date to your customer. If you can’t meet this two-week representation, and you don’t notify the customer, you’re in violation of the mail order merchandise rule.

Likewise, if you have a firm date for replenishment and you tell a customer the item will ship on that day, you must ship on that day or notify the customer otherwise. The 30-day rule is in effect only when you do not make a specific representation on the ship date.

Therefore, your phone reps should tell customers the item is on backorder, and you expect to get more product by a certain date. However, state that you will contact customers again only if the items have not shipped within 30 days. Then you haven’t promised anything that requires additional notification beyond the 30-day rule.

If you can’t ship within the 30-day period or on the date you represented (on the phone or in your marketing materials), you must notify customers. You can do this by phone or mail, but you must do it within a few days of learning that you won’t meet the commitment. In your first delay-option notice, give a definite revised ship date, or state that you’re unable to give a definite date. The notice also must include a statement noting that if the customer does not want to wait, he or she can cancel the order and get a full and prompt refund. The customer must be able to notify you of this at your expense (e.g., postage-paid card, toll-free number).

If you provide a definite revised date of 30 days or less beyond the original promised time, you may give customers a negative option, but you must inform them of this.

However, if the definite revised date is more than 30 days beyond the original promised time or if you simply can’t provide a definite date, you must give the reason for the delay and tell customers they can cancel at any time before the shipment is made. In this case, you also must tell them their orders will be canceled automatically if you don’t hear from them and you haven’t shipped by the new promised date (or within the next 30 days if you did not give a new promise date).

Finally, if you can’t ship the merchandise by the definite revised date included in your most recent delay notice (and that definite date was less than 30 days from the originally promised date), you must seek the consent of your customers to any further delay. However in this notice, you must tell customers that if you don’t hear from them, their orders automatically will be canceled if they don’t ship on the promised date.

FTC’s Telemarketing Rules

When making outbound telemarketing calls, you must communicate the following to customers before any selling can take place: your identity; that the purpose of the call is to sell; the nature of the goods or services offered; and that no payment or purchase is necessary to win if a prize promotion is offered.

For all transactions—whether they involve inbound or outbound calls—the following must be clear and conspicuous in written or oral disclosures: the cost and quantity of the goods or services offered; any material restrictions, limitations or conditions; and if you have any “no-refund” policies in effect (if a refund policy is mentioned, the material terms and conditions of the policy must be disclosed).

Also, you can’t call customers before 8 a.m. or after 9 p.m. in their time zones. You also must maintain a do-not-call (DNC) file, and you can’t call that number again once customers have made such a request. The DNC rules don’t apply to calls placed to business phone numbers.

Textile and Wool Acts

The Textile and Wool Acts require that certain disclosures be made in copy, such as fabric content or country of origin. If you’re up-selling/cross-selling an item that’s covered by the acts, the required data must be made to customers or be available in printed or electronic media so they have access to it before making their purchase decision. The acts cover the following two marketing components:

• Labeling. Because the FTC has no jurisdiction over foreign manufacturers, importers are responsible for mislabeling, together with anyone else who markets or handles the products. In some cases you, as the cataloger, may be the importer, so you may be held responsible for selling items that are incorrectly labeled.

Require your foreign suppliers to give you a continuing guarantee that states their products are not mislabeled, nor falsely or deceptively advertised or invoiced. This may protect you with a valid defense against violation charges and fines that could result from incorrectly labeled products.

The following items are covered under the act: any yarn or fabric; apparel; bedding; curtains, casements and draperies; floor coverings; towels, wash cloths, dish cloths; furniture slip covers; and dresser and other furniture scarves.

The following items are exempt: shoes and outer footwear; textile headwear (except for woolen products); outer coverings of furniture (upholstery); furnishings/accessories (e.g., belts, suspenders, handbags, permanently knotted ties, luggage); and non-woven, one-time use garments.

All covered products must identify on the label and on most packaging where the product was processed or manufactured, its fiber content and the name of the manufacturer (or R/N number). Origin labels must be placed on the garment’s neck. All other textile or wool products must have the label affixed to a conspicuous spot on the inside or outside of the product.

• Advertising. Each textile or wool product description must contain a clear and conspicuous statement about where it was processed or manufactured. The origin statement must be consistent with the manufacturer’s or importer’s origin labeling. You don’t have to state the foreign country of origin, but you must state Imported, Made in U.S.A. or both. You can’t put in your catalog a blanket statement such as “All items imported unless otherwise noted.” The origin must be in each individual copyblock of all covered textile or wool products.

When making a required fiber disclosure, generic names must appear by order of weight. It’s unnecessary to include the percentage of each fiber. Fibers present in amounts of less than 5 percent must be listed as “other fiber(s).” If you use a fiber trademark, you still must include the generic fiber name at least once in the copyblock.

FTC’s Pricing Guidelines

Sale Prices. If you show a sale price for an item (which includes showing a price, slashing it and showing another price—even if you don’t use the word “sale”), you must have previously sold the item at the original price. You can’t offer something “on sale” that you’ve never actually sold at a higher price. Although not spelled out in the guideline, the rule of thumb is that the product should be offered for sale at the regular price for 30 days before it can be marked down.

Price Comparisons. If you make claims that compare your prices to other marketers’ prices or manufacturers’ suggested prices, you must know that substantial sales have indeed been made at those prices in the same trade area.

Words to Avoid. “Free,” “bonus” or similar words for something that’s always included when you sell that product. For example, if you offer a free item with the purchase of another item, but you never intend to offer either item for sale without the other, then you can’t represent this as a free offer.

This article is not intended to constitute legal advice. Should you require such advice, consult with your attorney.

Phil Minix is the managing director of catalogs for Reiman Publications. You can reach him by e-mail at pminix@reimanpub.com.