Company Agrees to Pay $216,000 Civil Penalty for Violating FTC Mail Order Rule
Cyrk, Inc., the Gloucester, Massachusetts company that markets the Beanie Babies Official Club™ ("BBOC") and related products, has agreed to pay $216,000 in civil penalties for failure to make timely deliveries or prompt refunds in the sale of its "Clubby" Beanie Baby®. The agreement is part of a settlement resolving Federal Trade Commission charges that the company violated the FTC's Mail or Telephone Order Rule ("Mail Order Rule"). According to the FTC, after soliciting mail orders for "Clubby" from hundreds of thousands of Beanie Babies enthusiasts and then not being able to ship some or all of the orders by the time promised, Cyrk failed to tell buyers of the delay or offer them the option to agree to the late shipment or cancel the order and get a refund. The settlement also prohibits Cyrk from violating the Mail Order Rule in the future.
The Beanie Babies Official Club™ was designed by Cyrk and Ty, Inc., the manufacturer of Beanie Babies®. "Clubby," a royal blue bear with a tye-dyed ribbon and a BBOC button, was offered exclusively to members of the BBOC, which Cyrk claimed on its website was the "largest and fastest selling 'club' in the history of the industry."
"This is a case of over-promising and under-delivering," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "When a company says it'll ship by a certain date, it's obligated to do just that. If it can't, it has got to let the customer know. Then, it's the customer's choice whether to wait for the item or cancel the sale. In any case, following through with the customer isn't just good business, it's the law."
The Mail Order Rule requires a merchant to ship ordered merchandise within the time stated in its solicitation. If a merchant is unable to ship an order within the time represented, then it must send customers an option notice giving them the choice of agreeing to a delay or canceling their orders and receiving prompt refunds. The Mail Order Rule also requires the seller to provide a prepaid means of exercising that option. The requirements of the Mail Order Rule also apply to telephone orders, including sales where a computer, fax machine or similar means is used to transmit an order over a telephone line.
According to the FTC, in Cyrk's solicitation, the company stated that orders would be delivered within four to six weeks of Clubby's "birthdate" in July of 1998. When Cyrk was unable to ship orders to buyers within that time, it allegedly failed to comply with the Rule's requirements. The FTC's complaint detailing the allegations states that Cyrk violated the Mail Order Rule by:
- failing to offer consumers the option to consent to a delay or to cancel and receive a refund; and
- failing to offer buyers a prepaid means of exercising the option.
In addition to paying the $216,000 civil penalty, the proposed consent decree would prohibit Cyrk from future violations of the Mail Order Rule and the FTC Act. The proposed settlement also contains various recordkeeping requirements to assist the FTC in monitoring Cyrk's compliance.
The FTC offers consumers the following advice on making mail/telephone/Internet purchases: If you are concerned about receiving your order by a certain date, verify the product's availability, ask about the promised shipment date and shipment options, and educate yourself concerning the company's refund policy. Try to allow enough time for shipment and delivery. To protect your right to cancel an overdue order you should know the company's name, address, phone number, the promised shipment date, and the date of your order. Also, keep a copy of the ad or catalog from which you ordered, the order form you sent to the company, and a canceled check or charge account record.
The FTC has a free brochure called "Shopping by Phone or Mail," which describes consumers' rights under the Mail or Telephone Order Rule and offers tips for resolving problems that may arise when ordering merchandise by phone or mail.
The complaint and the proposed consent decree were filed by the Department of Justice on behalf of the FTC, in the U.S. District Court, District of Massachusetts, in Boston, today. The proposed settlement is subject to court approval.
The Commission vote to refer the complaint and proposed settlement to DOJ for filing was 5-0.
NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.
Copies of the news release are available from the FTC's web site at http://www.ftc.gov and copies of the complaint and proposed consent decree are also available from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 1-877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 992 3030)
(Civil Action No. 00 CV 10306 JLT)
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