FTC Can Nail Sellers for Not Issuing Shipping Delay Notices and over Refund Practices

An online seller settled with the FTC over its product review practices – and also because it allegedly failed to issue shipping delay notices when it could not fulfill consumers’ orders in a timely manner.

Hey Dude, Inc. will pay $1.95 million in a settlement with the Federal Trade Commission (FTC), which alleged the company misled shoppers by holding back negative reviews.

The shoe seller used a third-party online management review interface, and the FTC charged it with only posting all five-star reviews (the best rating) on its website, but “in many instances,” rejecting and not publishing less-favorable reviews.

The FTC’s complaint also charged that Hey Dude, formerly known as Happy One, LLC and acquired by Crocs, Inc. last year, violated the FTC’s Mail Order Rule in several ways, including the following:

1) failing to issue shipping delay notices when it could not timely fulfill consumers’ orders;

2) failing to cancel consumers’ orders and issue prompt refunds after failing to issue such notices; and

3) issuing consumers gift cards instead of sending prompt refunds of the original payment for merchandise ordered but not shipped, as required by the rule.

“As this case makes clear, when retailers publish consumer reviews online, they cannot suppress negative reviews to paint a deceptive picture of the consumer experience,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.

“And when retailers don’t ship merchandise on time, they must give buyers the option to cancel their orders and promptly get their money back,” Levine said. “We will continue to hold online retailers accountable for violations of the FTC Act and other laws we enforce.”

FTC expects to use the settlement funds to provide refunds to consumers “harmed by Hey Dude’s unlawful conduct.” The announcement is available on the FTC website.

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.