IN THE UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE

UNITED STATES OF AMERICA, Plaintiff

v.

FEDERATED DEPARTMENT STORES, INC., and
MACYS.COM, INC., Defendants.

Civil Action No.

COMPLAINT FOR CIVIL PENALTIES, INJUNCTIVE AND OTHER RELIEF

Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission ("Commission"), for its Complaint alleges that:

1. Plaintiff brings this action under Sections 5(a)(1), 5(m)(1)(A), 13(b), and 16(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 45(a)(1), 45(m)(1)(A), 53(b), and 56(a), to obtain monetary civil penalties and injunctive and other relief for defendants' violations of the Commission's Trade Regulation Rule Concerning the Sale of Mail or Telephone Order Merchandise (the "Mail Order Rule" or "Rule"), 16 C.F.R. Part 435.

JURISDICTION AND VENUE

2. This Court has jurisdiction over this matter under 28 U.S.C. 1331, 1337(a), 1345, and 1355 and under 15 U.S.C. 45(m)(1)(A), 53(b), and 56(a). This action arises under 15 U.S.C. 45(a)(1).

3. Venue in the District of Delaware is proper under 15 U.S.C. 53(b) and under 28 U.S.C. 1391(b-c) and 1395(a).

DEFENDANTS

4. Defendant Federated Department Stores, Inc. is a Delaware corporation with its office and principal place of business located at 7 W. Seventh Street, Cincinnati, Ohio 45202. Jurisdiction and venue over defendant Federated Department Stores, Inc. in the District of Delaware is proper.

5. Defendant Macys.com, Inc. is a New York corporation with its office and principal place of business located within the Northern District of California at 170 O'Farrell Street, San Francisco, California 94102. Defendant Macys.com, Inc. is a wholly-owned subsidiary of Federated Department Stores, Inc., and transacts business in the District of Delaware.

DEFENDANTS' COURSE OF CONDUCT

6. Federated Department Stores, Inc. sells clothing and other merchandise through its retail establishments. In 1998, Federated Department Stores, Inc., through its subsidiary Macys.com, Inc., began offering and selling merchandise via an Internet website found at www.macys.com. (Hereinafter the defendants shall collectively be referred to as "Macys.com"). Customers who access the website are able to, inter alia, search and browse for products by departments such as "at home," "men's," "women's," "children's," and "bridal registry." Customers who want to place orders select a particular product and place it into a "shopping bag."

7. During October, November and December 1999, Macys.com posted various shipping representations on its website that were tied to the method of delivery (ground, second day or overnight). In connection with its shipping representations, the company also posted the following information on its website: "Please note: Shipping options do not include order processing time. Please allow 48 hours for order processing."

8. In numerous instances during October through December 1999, Macys.com failed to ship merchandise within the stated 48 hour processing time period, and either failed to send customers notifications about delays at all or in a timely fashion. When defendants sent notices, they did not explicitly offer customers an option either to consent to a delay in shipping or to cancel their orders.

9. After circumstances impacting Macys.com's fulfillment capabilities eliminated their reasonable basis for the 48 hour shipping representation, defendants continued to make these shipping claims.

THE MAIL ORDER RULE

10. The Mail Order Rule was promulgated by the Commission on October 22, 1975, under the FTC Act, 15 U.S.C. 41 et seq., and became effective February 2, 1976. The Commission amended the Rule on September 21, 1993, under Section 18 of the FTC Act, 15 U.S.C. 57a, and these amendments became effective on March 1, 1994. The Rule applies to orders placed by telephone, facsimile transmission, or on the Internet.

VIOLATIONS OF THE MAIL ORDER RULE

11. Beginning in 1998, defendants have engaged in the mail order sale and telephone order sale of merchandise in commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

12. In numerous instances during the period October 1, 1999 through December 31, 1999, after having solicited mail orders and telephone orders for merchandise and received "properly completed orders," as that term is defined in Section 435.2(d) of the Mail Order Rule, 16 C.F.R. 435.2(d), and having been unable to ship some or all of the ordered merchandise to the buyer within the Mail Order Rule's applicable time, as set forth in Section 435.1(a)(1) of the Mail Order Rule, 16 C.F.R.  435.1(a)(1) (the "applicable time"), defendants have:

a. Violated Section 435.1(b)(1) of the Rule by failing to offer to the buyer, clearly and conspicuously and without prior demand and in a timely fashion, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund;
 
b. Violated Section 435.1(b)(2) of the Rule by failing to offer to the buyer, clearly and conspicuously and without prior demand, a renewed option either to consent to a delay in shipping or to cancel the order and receive a prompt refund;
 
c. Violated Section 435.1(c) of the Rule by failing to deem an order canceled and by failing to notify the buyer that the buyer's account will not be charged.

13. Defendants have violated Section 435.1(a)(1) of the Rule by soliciting orders for the sale of telephone or mail order merchandise when they had no reasonable basis to expect that they would be able to ship some or all of such merchandise within the time stated in their solicitations.

14. Section 5(a) of the FTC Act, 15 U.S.C. 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful."

15. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C.  57a(d)(3), a violation of the Mail Order Rule constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C.  45(a)(1).

CIVIL PENALTIES AND INJUNCTION

16. Defendants have violated the Mail Order Rule as described above with knowledge as set forth in Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A).

17. Each sale or attempted sale, during the period October 1, 1999 through

December 31, 1999, in which defendants have violated the Mail Order Rule in one or more of the ways described above constitutes a separate violation for which plaintiff seeks monetary civil penalties.

18. Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A), as modified by Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C.  2461, and Section 1.98(d) of the FTC's Rules of Practice, 16 C.F.R.  1.98(d), authorizes this Court to award monetary civil penalties of not more than $11,000 for each such violation of the Mail Order Rule.

19. Under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), this Court is authorized to issue a permanent injunction against defendants' violating the FTC Act.

PRAYER

WHEREFORE, plaintiff requests this Court, pursuant to 15 U.S.C. 45(a)(1), 45(m)(1)(A), and 53(b), and to the Court's own equity powers to:

(1) Enter judgment against defendants and in favor of plaintiff for each violation alleged in this Complaint;
 
(2) Award plaintiff monetary civil penalties from defendants for each violation of the Mail Order Rule;
 
(3) Enjoin defendants from violating the Mail Order Rule;
 
(4) Award plaintiff such additional relief as the Court may deem just and proper.

DATED:

FOR THE UNITED STATES OF AMERICA:

DAVID W. OGDEN
Acting Assistant Attorney General
Civil Division
U.S. Department of Justice

CARL SCHNEE
United States Attorney
District of Delaware

By:

Assistant U.S. Attorney
Post Office Box 2046
Wilmington, Delaware 19899-2046
(302) 573-6277

EUGENE M. THIROLF
Director
Office of Consumer Litigation

By: _________________________

Attorney
Office of Consumer Litigation
Civil Division
U.S. Department of Justice
Washington, D.C. 20530

OF COUNSEL:

ELAINE D. KOLISH
Associate Director
Division of Enforcement
Federal Trade Commission

HEATHER A. HIPPSLEY
Assistant Director
Division of Enforcement
Federal Trade Commission

JANICE PODOLL FRANKLE
Attorney
Division of Enforcement
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
202) 326-3022