Consumers and small businesses want personal protective equipment now. So when companies advertise those items online with promises of in-stock merchandise and fast shipping, those claims may be the difference between a big sale and no sale. The FTC just filed three cases alleging that marketers violated the Mail, Internet, and Telephone Order Rule and the FTC Act by – among other things – failing to have a reasonable basis to support their promises to ship masks, sanitizer, and other PPE within a specified timeframe. The FTC alleges one company also has made deceptive COVID-19 prevention or treatment claims.
Old schoolers call it the Mail Order Rule, but the newer nickname – MITOR – reflects that the Rule covers orders placed by mail, internet, or telephone. Under MITOR, companies must have a reasonable basis to support their shipment representations. Acknowledging the reality of occasional supply chain interruptions, MITOR lays out specific steps companies must take if they experience a shipment delay. You’ll want to read the pleadings for the FTC’s allegations of how each defendant violated the Rule, but let’s be clear: Under MITOR, leaving consumers hanging isn’t an option.
In response to the COVID-19 pandemic, Texas-based Zaappaaz, Inc. (which does business as wrist-band.com and other names) and president Azim Makanojiya began to market hand sanitizer, shields, thermometers, and other PPE with express representations like “IN STOCK – SHIPS SAME DAY.” For example, in advertising facemasks and vinyl gloves, the company claimed on its website to have “20,000+ in Stock” that were “GUARANTEED TO SHIP TODAY.” For consumers willing to pay extra for faster delivery, the defendants gave them the option to “Select Delivery Date” and then stated “Guaranteed Products Delivered on [date].” But according to the FTC, in many cases, the defendants failed to live up to their shipment promises and guaranteed delivery dates. What’s more, the defendants prominently advertised a “100% Money Back Guaranteed” on their website and “Satisfaction Guaranteed” on the mobile version, but made contradictory statements elsewhere on their site that PPE orders were non-returnable and non-refundable.
With distribution facilities in St. Louis, American Screening, LLC, and corporate officers Ron Kilgarlin, Jr., and Shawn Kilgarlin sell masks, gloves, hand sanitizer, etc. On their website, the defendants claimed they would ship all products “24-48 hours after processing, pending product availability,” and that the advertised PPE was “in stock” or “available to ship.” They also offered “Overnight/Expedited shipping” to “ensure we meet your deadlines.” However, many consumers – including small businesses, medical practitioners, and nursing homes – have complained they still haven’t received protective items they ordered weeks or even months ago. According to the FTC, the defendants didn’t inform people of the delay, and have ignored consumer questions and refund demands.
California-based QYK Brands LLC, Dr. J’s Natural, and corporate officers Rakesh Tammabattula and Jacqueline Thao Nguyen (who uses the name Dr. J) have advertised a variety of hand sanitizers, face masks, shields, wipes, and disinfectants on multiple websites, including glowwy.com. For example, in mid-March, the defendants promised that Dr. J’s Natural Hand Sanitizer was “In Stock & Ships Today.” Later, “due to the overwhelming demand because of the outbreak,” they modified their claims for PPE, instead telling consumers to “please expect 5 to 7 days for the order to be processed.” (At other times, they promised “3 to 7 days.”) But according to the complaint, the promised shipment times of seven days or less were often false. The FTC says in many cases, the defendants generated a U.S. Postal Services label and tracking number within a day, but waited weeks or months to bring the ordered products to the post office for shipping.
Furthermore, as part of their “COVID Essentials” line, defendants Dr. J’s Natural and Ms. Nguyen market a product called Basic Immune IGG. On their English language website, the defendants described it as a “protein powder” that can maintain “healthy immune function.” But on a U.S. station that broadcasts in Vietnamese, Ms. Nguyen represented that using the product would increase and strengthen existing antibodies: “Let’s say if one coronavirus happens to infiltrate my body, I already have about five hundred thousand antibodies, thanks to this powder. They would cling to and bite that coronavirus, push it out and kill it. . . .” Claiming that the product is guaranteed safe “because there is FDA’s verification and approval,” she also stated: “We have conducted clinical studies, involving the extraction and cultivation of antibodies taken from cow blood, which is then made into this antibody powder."
The FTC has charged that the defendants in all three cases have violated MITOR and the FTC Act. The complaint against Dr. J’s Natural and Ms. Nguyen also challenges their COVID-19 prevention claims and their representation that Basic Immune IGG has been clinically proven and FDA-approved to prevent or treat COVID-19.
The cases are pending in federal court, but even at this early stage, they offer reminders about complying with the Mail, Internet, and Telephone Order Rule.
Shipping claims must be grounded in fact, not hope. MITOR requires that companies must have a “reasonable basis to expect that it will be able to ship any ordered merchandise to the buyer within that time clearly and conspicuously stated in any such solicitation.” (If the company doesn’t specify a time, they must ship within 30 days of receiving a buyer’s completed order.) A “reasonable basis” requires more than optimistic wishes and a four-leaf clover. According to the Business Guide to the FTC’s Mail, Internet, or Telephone Order Merchandise Rule, what constitutes a “reasonable basis” depends on the circumstances, but it include a realistic evaluation of:
- Anticipated demand. Have you reasonably anticipated the demand for each advertised item?
- Supply. Do you have sufficient inventory on hand or adequate supply sources to meet the anticipated demand?
- Fulfillment system. Can the fulfillment system handle the anticipated demand for your products?
Especially during times of supply chain disruptions, review your shipping promises regularly to make sure you can substantiate what you say.
If you experience a delay, follow the procedures set out in MITOR. The Rule lives in the real world and recognizes that unexpected delays sometimes happen. According to MITOR, when you learn that you can’t ship on time, you must decide if you’ll ever be able to ship the order. If it looks like you can’t, cancel the order promptly and make a full refund. If you have a reasonable basis to conclude you’ll be able to ship the order later, you must seek the customer’s consent to the delay. The Business Guide to the FTC’s Mail, Internet, or Telephone Order Merchandise Rule offers step-by-step guidance on how to comply.
Live up to your guarantees. Some companies lure consumers in with “money-back guarantees,” but then hide material limitations in fine print or behind vague hyperlinks. The wiser course is to explain your policies up front, bearing in mind that your webpage and your purported disclosures may appear different depending on whether a customer views your site on a computer, tablet, phone, or something else. Looking for practical guidance? Read .com Disclosures: How to Make Effective Disclosures in Digital Advertising.
Don’t diss already disappointed customers. Advertisers up the ante when they make specific shipping claims for items known to be in short supply. When a company ignores its representations, it isn’t fair to consumers – and it isn’t fair to businesses that lost sales due to a competitor’s hollow promises. What’s more, the FTC says some defendants in the just-filed cases compounded the problem by ignoring consumers’ questions and complaints. The wiser approach is to communicate clearly with your customers and honor the provisions of MITOR.