File this one under “What every e-commerce business owner needs to know”.
Thanks to the Federal Trade Commission’s (FTC’s) recent focus on enforcing its Mail Order Rule.
For small e-commerce business owners, particularly creatives who pour their hearts into their handmade products, the FTC’s latest actions serve as an important reminder to be transparent with your customers about how shipping will work.
The FTC recently settled with online retailer GOAT over allegations of Mail Order Rule violations. It’s a big deal—and if you run a small creative business, you need to take note. The Mail Order Rule governs how businesses handle product shipping timelines, notify customers of delays, and issue refunds.
In the case of GOAT, failure to comply resulted in a $2 million settlement. Ouch.
If you’re selling products you design, make, or curate on platforms like Shopify, you might be thinking, “This sounds scary. Does this apply to me?” The short answer: Yes. But don’t panic—I’ve got the low-down on what this rule means and some simple, actionable steps you can take to stay compliant.
What is the Mail Order Rule?
At its core, the FTC’s Mail Order Rule (officially called the “Mail, Internet, or Telephone Order Merchandise Rule”) ensures that businesses deliver products to customers when promised. If no shipping timeline is specified, the default is they must ship within 30 days. Here are the major requirements of this rule:
- Delivery Commitments: If you say something will ship within a certain timeframe, you need to have a reasonable basis to believe you can meet that timeline. For instance, if you dye items when they are ordered and the dye takes two days to dry, don’t promise that it will ship in two days.
- Notifying Customers of Delays: If you can’t ship an order within the time you promised, you need to notify your customers promptly and give them the option to cancel and receive a full refund.
- Refunds: If a customer cancels due to a shipping delay, you must provide a full refund promptly. Store credit isn’t an acceptable substitute.
Failing to meet these requirements can result in hefty fines. Penalties for violations are currently set at $53,088 per violation (and increasing annually). For small businesses shipping hundreds or thousands of orders, even one mishap could be costly.
What went wrong with GOAT?
To understand how the Mail Order Rule applies in real life, let’s take a closer look at the GOAT case. GOAT is an online marketplace that sells sneakers and clothing. They marketed various shipping speeds, including options for “Instant” next-day delivery. However, the FTC alleged that GOAT:
- Failed to Meet Promised Shipping Timelines: GOAT shipped only 63% of “Instant” orders placed before 11 a.m. on time. For next-day deliveries, over 16% were delayed.
- Didn’t Notify Customers of Delays: When shipments were late, customers weren’t informed or given the option to cancel their orders.
- Made Returns Difficult: GOAT allegedly created obstacles for consumers seeking refunds, such as long wait times and offering store credit instead of refunds.
For small creative business owners, the takeaways are clear: If you promise certain shipping timelines or satisfaction guarantees, you need systems in place to back them up.
Why this matters for your e-commerce business
If you’re designing, handmaking, or curating products, you’ve probably worked hard to create a loyal customer base. But customers’ trust in your brand is fragile—and not complying with the Mail Order Rule could not only lead to legal trouble but also damage your reputation. Here’s how the rule may apply to you:
- Shipping Timelines: Do you promote expedited shipping options or estimated delivery windows? If so, you need to ensure these promises are achievable. Creative businesses often have variable production timelines due to the handmade nature of their goods, so it’s especially important to set realistic expectations.
- Clear Communication: If delays occur (and let’s face it, they sometimes do), notifying customers right away can go a long way in maintaining trust—and staying compliant.
- Refund Processes: Make sure your policies are fair, transparent, and easy for customers to navigate. Refunds should be straightforward if a delay leads to cancellation.
4 steps to compliance with the Mail Order Rule
Here’s the good news: Staying on the right side of the FTC doesn’t have to be complicated. Start by implementing these four steps:
Step #1: Set realistic shipping expectations
- Be honest with yourself—and your customers—about how quickly you can fulfill orders. Consider things like production time, supply chain issues, and postal carrier delays when estimating your timelines.
- Instead of promising exact delivery dates, offer ranges (e.g., “Ships in 7–10 business days”) to build flexibility.
Step #2: Create a delay notification process
- If you realize you can’t meet a promised shipping timeline, reach out to your customers immediately.
- Use email templates to streamline communication and include the option to cancel or request a refund.
Step #3: Audit your refund policies
- Ensure your refund policy is in line with the Mail Order Rule. Customers who cancel because of delays are entitled to their money back, not store credit or exchanges (unless they prefer those options).
- Provide refunds promptly to avoid complaints or additional scrutiny.
Step #4: Invest in reliable systems
- Use tools like order management software to track fulfillment and flag potential delays. Many Shopify apps can automate this process and alert you to potential bottlenecks.
- Consider hiring help during peak seasons or when launching new product lines to keep up with demand.
The silver lining? Your business stands out when you do this well
Customers notice when brands go the extra mile. Clear, consistent communication about shipping and refunds can set you apart from competitors who overpromise and underdeliver. And in the long run, happy, informed customers are more likely to become repeat buyers.
As Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said about the GOAT settlement, “When an online business promises to protect consumers’ purchases, it must have the appropriate systems in place to make sure those protections can be implemented.”
This sentiment is especially true for small creative businesses. When you’re the face behind your brand, your reputation is one of your most valuable assets—protect it by setting your business up for compliance and success.
Your Mail Order Rule checklist
Things are always evolving in the world of e-commerce, and legal compliance is no exception. The Mail Order Rule is just one more area where we can protect both ourselves and our customers.
Here are your action items to make sure you comply with the Mail Order Rule:
- Evaluate Your Current Shipping Timelines: Are your estimates realistic?
- Review Your Customer Communication Processes: Are you set up to notify customers if there are delays?
- Audit Your Refund Policy: Is it simple, fair, and easy to understand (and do you offer the ability to get a cash refund)?
- Check Your Capacity: Can your fulfillment systems handle demand during busy times?
- Document Your Processes: Have clear policies for team members (or yourself) to follow, especially during peak sales seasons.
If you follow these steps, you’ll not only stay compliant but also ensure your customers feel valued and protected. And that’s a win-win for any creative business owner.
Hi! I’m Kiff! I’m your friendly legal eagle (and licensed attorney).
My goal is to add ease to the legalese. And because I think basic legal resources should be available to every creative, I create a lot of free content.
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