December 10, 2001
A business that marketed pet food on the Internet has agreed to settle Federal Trade Commission charges that it violated the FTC's Mail or Telephone Order Merchandise Rule and the FTC Act by failing to give consumers the right to cancel their orders when it was unable to ship in time, and by failing to provide consumer refunds when it failed to ship at all. Under the terms of the settlement, defendants Jonathan Kroeger and his company, Pet Express, will be barred from soliciting orders unless they have a reasonable basis to expect that they can ship within the time advertised. If shipment is delayed, they must offer consumers the right either to consent to a delay or to cancel and receive a prompt refund. They will also have to pay redress to consumers who paid for orders that were only partially filled or that were not filled at all.
The FTC's complaint alleged that, since 1997, Pet Express's Web site, www.PetXpress.com (later changed to www.ePet.net), offered premium brands of pet food with the "guarantee" that the defendants would ship in time to reach consumers within two business days of the date chosen by the customer. Most of their sales were to customers ordering six- or twelve-month supplies of pet food for delivery in installments. When the defendants experienced processing delays, computer failures and supplier problems, they started shipping orders late. Throughout 1999 and thereafter, when merchandise was not shipped in time, they noted the delays only on the customers' order status pages of their Web site instead of contacting the customers directly and giving them the option to consent to a delay or cancel the order and receive a prompt refund, as required by the FTC's Mail or Telephone Order Merchandise Rule. Some consumers paid for merchandise they never received, or paid for and received only the initial installments of merchandise they ordered for serial delivery. Many consumers never received refunds for the merchandise they didn't receive, the FTC complaint alleged.
The settlement bars the defendants from making claims about the shipment dates of installments of merchandise without a reasonable basis for the claims. It also bars them from soliciting orders for merchandise by mail or telephone unless they have a reasonable basis to expect that they can ship it within the time stated, or if no time is stated, within 30 days. It requires that if they cannot ship merchandise in time they must, within that time, give consumers the option to consent to a delay or to cancel the order and receive a prompt refund. Additionally, the settlement requires them to provide refunds to consumers who paid for merchandise they failed to ship. Based on the defendants' financial statements, a $100,000 civil penalty has been suspended because of their inability to pay. If the court later determines that the defendants misrepresented their financial situation, the entire $100,000 would become payable. The settlement contains record keeping requirements to assist the FTC in monitoring compliance.
The Commission vote to refer the complaint and consent decree to the Department of Justice for filing was 5-0. They were filed in the U.S. District Court for the District of Virginia, Alexandria Division, on December 6 by the Department of Justice. The consent decree is subject to court approval
United States of America v. Pet Express, Inc. et al. (Eastern District of Virginia, Alexandria Division) Complaint for Civil Penalties, Injunctive and other Relief [PDF 1.2MB]
The above article was reprinted from an announcement on the Federal Trade Commission web site dated December 10, 2001. Check the FTC web site for any changes to the article.