May 22, 2003
Office supply giant Staples has agreed to pay an $850,000 penalty for misleading customers on its Web site about the "real time" availability of its products and making delivery promises it did not keep.
It is the second-largest civil penalty ever for alleged violations of the Federal Trade Commission's (FTC) Mail Order Rule, which requires that companies notify customers and offer to cancel their order if it cannot be delivered on time.
"All sellers are obligated to keep their promises to consumers about when their products will be delivered," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "Real-time promises demand real-time performance."
Under the terms of a consent order reached with the FTC settling the charges, Staples will pay $850,000 and is prohibited from: 1) making "real time" inventory claims that are not accurate; and 2) promising customers they will receive their shipments in one day, or any other specified amount of time, if it does not have a reasonable basis to expect it can meet these deadlines. The consent order also requires Staples to tell customers if their orders will be late and offer them the chance to cancel the order if they do not agree to the delay.
The $850,000 civil penalty is second only to a $900,000 Mail Order Rule penalty paid by Iomega Corporation, the world's largest manufacturer of portable data and storage products, in 1999.
According to the Commission, before Staples corrected its Web site in response to the FTC's investigation, the site contained misleading information regarding the availability of its office supply products, as well as the company's ability to ship ordered products to its customers in the time promised.
According to the FTC, up until May 2002, Staples told customers that they were viewing "real time" inventory, when, in fact, Staples' Web site was not updated in real time. In addition, Staples allegedly made false delivery claims to certain customers on the Web site regarding the company's ability to deliver products in one day.
In fact, according to the Commission, the company's policy was to deliver merchandise in one day only to customers who lived within "local trading areas," no farther than 20 miles from a Staples store.
Moreover, according to the FTC, Staples misled customers to believe that the company's one-day delivery promise meant that Staples would deliver products on Saturday or Sunday, when that was not the case. The alleged misrepresentations, the Commission's complaint stated, were made in violation of the FTC Act and the Mail Order Rule.
Further, according to the complaint, Staples also violated the Mail Order Rule by failing to send adequate delay option notices to customers who purchased products from Staples via its Web site and catalog. Staples allegedly did not always notify customers that their orders were delayed. In addition, even when Staples did notify customers of delays, the company allegedly did not offer customers the right to cancel their orders rather than accept the delay.