The Federal Trade Commission (FTC) recently announced a penalty against online sneaker retailer GOAT for failing to honor its “Instant” and “Next Day” shipping guarantees. According to the FTC’s complaint, GOAT also violated its “Assurance of Authenticity” and “Buyer Protection” promises, rejecting or only partially crediting customers for defective products.
The FTC’s case was built around two key legal theories: one, that GOAT violated the specific requirement of the federal Mail, Internet or Telephone Order Merchandise Rule (often colloquially shortened to the “Mail Order Rule”) and, two, that GOAT misrepresented its product guarantees and customer service experience.
First, a quick primer on the Mail Order Rule. The Rule, first enacted in 1975 and updated several times since, requires sellers, at the time they solicit an order, to have a reasonable basis they will be able to ship the product: (1) within the stated time or (2) if no time is stated, within 30 days. If the shipment is delayed, the Rule lays out a series of “if-then” steps sellers must take to ensure buyers can control how they want to handle the order. For example, if sellers are unable to ship the product within the required time, they must send a shipping delay notice that offers the buyer a choice either to consent to wait or to cancel the order and receive a prompt refund.
Related story: The FTC Increases Scrutiny of Made in USA Claims
GOAT, a secondary online marketplace selling sneakers, streetwear, luxury apparel and accessories, apparently caught the FTC’s attention for its definitive product guarantees and its multitiered shipping options. GOAT advertised that the products sold on its marketplace are company-verified, using automated and human review before being shipped to buyers. GOAT offered a “Buyer Protection Policy” for products that do not meet its standards and claimed it would follow up with consumers within one to two business days after a complaint about product quality. According to the FTC, however, GOAT had no system in place to identify or prioritize customer service requests related to deficient products, and GOAT rejected return requests when they were not made in a timely fashion or because the items were “used.”
The FTC’s complaint alleges a laundry list of problems relating to GOAT’s order processing and shipping practices. GOAT offered three forms of shipment speed: Ship to Verify, Instant (Standard), and Instant (Next Day). According to the FTC, GOAT shipped 37 percent of all “Instant” orders later than it promised and shipped more than 16 percent of all “Next Day” orders on the second day or later after the order, “despite the buyers paying $14.50 to $25 in shipping upgrade charges.” Such delays are alleged to violate the Mail Order Rule, which requires a reasonable basis for shipping promises and a means to consent to delays or cancel orders for a prompt refund.
The FTC also found fault with GOAT’s return policies. GOAT is stated to have taken an “unreasonable” amount of time — days or weeks — to address return requests. It also claims GOAT held back shipping costs, charged customers to ship back their items, and then offered only store credit for returns. And apparently GOAT’s automated assist function was incomplete and couldn't offer seamless customer relief, nor did the company have a telephone line or a live chat function for customer service inquiries and requests.
Under the settlement agreement, GOAT will pay $2,013,527 to refund consumers. GOAT also is prohibited from misrepresenting the relief it will provide to consumers who receive deficient products and must implement certain easy-to-use customer service practices and easy-to-obtain refunds. GOAT must also comply with the Mail Order Rule going forward.
Phyllis H. Marcus is head of Hunton Andrews Kurth's advertising compliance team and a partner in the firm’s Antitrust and Consumer Protection group in the firm’s Washington, D.C. office.
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Phyllis H. Marcus is head of the firm’s advertising compliance team and a partner in the firm’s Antitrust and Consumer Protection group in the firm’s Washington, D.C. office. A leader in the advertising bar with decades of experience both working at and practicing before the Federal Trade Commission (FTC), she brings a unique advertising and children’s privacy vantage point to her clients. She can be reached at +1 (202) 955-1810 or pmarcus@HuntonAK.com.