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The Mail/Telephone Order Merchandise Rule – Sometimes Called the “30 Day Rule”This rule is enforced by the Federal Trade Commission, and covers merchandise ordered by mail, telephone, computer and fax machine. The rule is of utmost importance to the Direct Marketing Industry, but is applicable to everyone. As more and more Direct Sellers “direct fulfill” – careful attention should be paid to this rule. The rule requires companies to have a reasonable basis for claiming they can ship an order within a certain period of time. The first version of the rule was enacted in October 1975 and the rule was later amended in March, 1994.How much time do you have to ship? The rule states a company must ship the order within the time stated in its ads. If no time is promised, the company should ship the order within 30 days. (The source of the nickname of the rule.) The 30-day time period begins to run when the company receives a "properly completed order" which includes the name, address and payment (check, money order or authorization to charge an existing credit account — whether or not the account is debited at that time). There is an extra 20 days added to orders accompanied with a credit application. This provision generally does not apply to Direct Selling Companies, most of whom operate on a cash basis. What about delays? If the company is unable to ship within the promised time, it must notify the purchaser by mail or telephone, give a revised shipping date and give the purchaser the option to cancel for a full refund. The company also must give the purchaser a method to exercise the cancellation option, for example, a prepaid reply card or a toll-free 800 telephone number to call. The Federal Trade Commission has advised that notification can be by e-mail if the order was placed online and the company has the e-mail address of the purchaser. If the purchaser ignores the option notice, and the delay is 30 days or less, it is assumed that the purchaser accepts the delay and is willing to wait for the merchandise. If there is a failure to respond, and the delay exceeds 30 days, the order must be canceled by the 30th day of the delay period and a refund issued. If the company finds it cannot meet the revised shipping date, it must then again notify the purchaser give a new shipping date or cancel the order and issue a refund. The order will be canceled and a refund issued promptly unless the purchaser indicates by the revised shipping date a willingness to wait. If the purchaser does not respond at all to the second notice, it is assumed the purchaser is not willing to wait, and a refund should be issued immediately. What about refunds? If payment is made by check or money order, the company must issue the purchaser a refund within seven business days. If the purchaser authorized a charge to a credit card account, the company must credit the account within one billing cycle; giving credit toward a future purchase is not permitted. This article contains only a brief summary. The Federal Trade Commission website www.ftc.gov contains many pages of explanations, a question and answer section, and the complete law. When in doubt, go to the source, or consult the attorney advising the company on such matters. Gerald P. Nehra is a private practice Attorney at Law. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing legal issues. He began his legal career in 1970, and from 1982 to 1991 he was the Director of the Amway Corporation Legal Division. He can be reached at Nehra & Waak, Attorneys at Law, 1710 Beach Street, Muskegon, Michigan 49441, 231-755-3800. His e-mail address is GNehra@mlmatty.com. You are invited to visit his web site at www.mlmatty.com. Permission to reproduce, with this attribution included, is granted. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. |
