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e-tailers settle FTC charges
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July 27, 2000: 12:18 p.m. ET
Merchants to pay $1.5M, change procedures, after delayed holiday shipping
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NEW YORK (CNNfn) - Seven Internet retailers have agreed to settle Federal Trade Commission charges that they violated a federal statute by not providing customers adequate notice of shipping delays during the 1999 holiday season.
The retailers, accused of violating the Mail and Telephone Order Rule, agreed Wednesday to pay $1.5 million in civil penalties in addition to changing their procedures to prevent a repeat of those problems this year.
The retailers include CDnow Inc. (CDNW: Research, Estimates), Kbkids.com LLC, Macys.com Inc., Minidiscnow.com, The Original Honey Baked Ham Company of Georgia Inc., Patriot Computer Corp. and Toysrus.com Inc.
"Last December, a large number of e-commerce buyers didn't get the type of notice of late shipment which the law requires and were misled about delivery dates," Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, said. "The requirement of the rule apply to online and offline commerce equally; today's settlement shows the FTC takes violations of the rule by e-tailers seriously."
Last December, overwhelmed by a crush of last-minute orders in the days before Christmas, several dot.com retailers suddenly found themselves unequipped to handle the traffic and orders either were shipped late or not delivered at all.
Toysrus.com, the online arm of the top U.S. toy retailer, experienced the most publicized delays as angry consumers barraged the company with complaints.
Complaints about several retailers prompted the FTC investigation, which focused on two dozen major online companies that made express delivery claims to examine whether those companies violated the Mail and Telephone Order Rule.
Under the rule, retailers are required to ship good by the date promised, or if no date is promised, within 30 days of the order's receipt. If the company cannot ship as promised, it is required to provide notice to the buyer with a revised shipping date and give customers the choice to delay or cancel the order.
Since then, however, Toysrus.com and dozens of other dot.com retailers have spent months building up their so-called "back-end" systems, building new warehouses, hiring more staff and installing better software, to prevent a recurrence of those problems. 
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