The Federal Trade Commission (FTC) is proposing amendments to its Mail or Telephone Order Merchandise Rule (“Rule”) to include all sales made over the Internet. The FTC recently proposed an amendment to the Rule, which would serve to clarify that it covers all orders placed over the Internet, regardless of how buyers access it. The effect would be to encompass all present and future Internet-access technology under the umbrella of the Rule’s requirements.

The Rule, which was issued in 1975 and updated in 1993, requires marketers to have a reasonable basis for stating (or implying) that they can ship merchandise within a certain time frame. A "reasonable basis" means that the merchant has information that would indicate that, at the time of the sale, the time frame is an accurate representation of when the marketer will deliver the product. In addition, the Rule requires marketers who do not provide a time frame for delivery to have a reasonable basis for believing that the product will ship within 30 days. Simply put, the Rule was developed by the FTC to force marketers to consider and state the time frame for delivery, or to deliver the order within 30 days. This is why it has been called the “30-Day Rule.”

The Rule also provides guidance to marketers who believe that they may not meet the time frame that they propose at the time of the sale. In such an instance, the marketer must notify the customer before the originally promised shipment date (or, if no time was specified, before the expiration of 30 days) and give the customer the option of either consenting to the delay or canceling the order and receiving a full and timely refund.

The Rule originally covered sales made via mail or telephone. Although Internet sales were at one time considered telephone sales because most consumers used dial-up telephone modems to access the Internet, the rise of high-speed, broadband connections has led the FTC to fear that the majority of Internet sales no longer fall under the regulations. Indeed, the agency has voiced concerns that “unfair or deceptive acts or practices involving Internet sales are prevalent notwithstanding the number of reliable Internet retailers.” Thus, there was likely a concern that an argument would be made that sales made on the Internet were not covered by the Rule.

Accordingly, on September 20, 2011, the FTC proposed an amendment to the Rule to ensure the Internet was covered. The FTC’s proposal would also revise the Rule to shorten the maximum allowable refund time from one billing cycle to seven days and to expand the list of covered payment methods from cash, check, money order, and credit cards to include debit cards, prepaid gift cards, and online payment services like PayPal. The FTC has urged that its “proposed amendments are necessary to remedying unfair and deceptive acts or practices and ensuring that buyers receive timely delivery or timely refunds.” The FTC is taking comments on the proposal through December 14, 2011. Any business involved in sales over the Internet may be affected by changes to the Mail or Telephone Order Merchandise Rule. For this reason, operators of websites that solicit sales should consider submitting comments to the FTC.

Arent Fox will continue to monitor these developments. For more information, please contact:

Sarah L. Bruno
bruno.sarah@arentfox.com
202.775.5760

Matthew R. Mills
mills.matthew@arentfox.com
202.715.8582