Leading Online Marketplace to Pay $2 Million for Shipping Products Later Than Advertised

Read the FTC’s press release here and the court order here.

The FTC complaint, filed concurrently with the proposed order, alleges the retailer engaged in deceptive and unfair practices related to shipping timeframes and product guarantees, violating Section 5 of the FTC Act and the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (Mail Order Rule).

According to the filings, GOAT offered priority processing for what it called “Instant” orders and advertised specific shipping times based on what shipping tier the customer was willing to pay for. GOAT promised same-day shipping for certain orders, advertising that “Standard” orders would typically arrive within three to six business days and that “Next Day” orders would usually arrive within one to two days after an order is placed. Shipping upgrade charges ranged from $14.50 to $25 per order.

The FTC alleges the company failed to keep these promises, shipping 37% of all “Instant” orders later than promised and shipping more than 16% of all “Next Day” orders on the second day or later after the order, despite the buyers paying the shipping upgrade charges. When GOAT shipped the product late, the FTC alleges GOAT failed to offer buyers the option of agreeing to the delay or canceling the order and receiving a prompt refund, as required by the FTC’s Mail Order Rule.

GOAT also offered “Buyer Protection” for consumers who received deficient products, but the company never put a system in place to honor this policy. The company never established a customer service program to identify requests for the return of deficient products, and many customers were denied the refunds promised to them.

The FTC’s Mail Order Rule

The Mail Order Rule, issued in 1975, requires sellers who solicit buyers to order merchandise through the mail, via the Internet, or by phone to have a reasonable basis to expect that they can ship within the advertised time frame, or, if no time frame is specified, within 30 days. The Rule also requires that, when a seller cannot ship within the promised time, the seller must obtain the buyer’s consent to a delay in shipping or refund payment for the unshipped merchandise.

The FTC’s court order includes actions GOAT must take to remedy the Rule violations, including notifying and reimbursing the full amount of any eligible shipping claim to each customer harmed by the company’s failure to honor the promised shipping times. The company is also required to report on its notification and redress program under penalty of perjury to the FTC. In addition, the order prohibits GOAT from misrepresenting material aspects of its return policies and practices.

What Businesses Should Do Now

Retailers making promises to consumers — especially related to refunds and shipping — should review their policies and procedures to ensure they can operationalize the policies as advertised. For assistance, reach out to your ArentFox Schiff contact or a member of the Consumer Products team.