On December 2, 2024, a court ordered 1661, Inc., the Los Angeles-based online retailer operating as GOAT, to pay over $2 million for violations of Section 5(a) of the FTC Act and the FTC’s Mail Order Rule. This case serves as a critical reminder that the FTC’s Mail Order Rule extends far beyond traditional retailers of goods and applies to a wide range of businesses, including service providers, subscription-based companies, and online marketplaces. Any business making delivery, shipment, or fulfillment promises—regardless of industry—must ensure compliance with the rule to avoid significant penalties and reputational damage.
Violations of the Mail Order Rule
GOAT, a popular online marketplace for sneakers, apparel, and accessories, advertised specific shipping timelines for its products, including “Instant” orders with delivery windows of as little as 1-2 business days. However, GOAT failed to meet these timelines consistently, with 16% of Instant (Next Day) orders shipped later than promised.
The FTC alleged that GOAT:
- Lacked a reasonable basis for its shipping claims.
- Failed to notify customers of delays or provide them the option to consent to the delay or cancel the order for a full refund.
- Did not issue refunds within the required 7-day period when customers canceled delayed orders.
These actions violated the FTC’s Mail Order Rule, which requires businesses to substantiate their delivery promises, communicate delays promptly, and handle cancellations and refunds in a timely manner.
Deceptive “Buyer Protection Guarantee” Practices
The FTC also found GOAT’s “Buyer Protection Guarantee” misleading. The company advertised guarantees to protect buyers against inauthentic, incorrect, or misrepresented products but failed to deliver on these promises. Key violations included:
- Imposing restrictive return windows and offering limited refund options.
- Denying valid refund claims and frequently issuing store credit instead of refunds.
- Operating a deficient customer service infrastructure, relying solely on email with delayed and often automated responses.
These practices contradicted GOAT’s assurances to consumers, resulting in unmet expectations and unaddressed grievances.
Settlement Terms
As part of the settlement, GOAT agreed to:
- Pay $2 million plus interest to fund refunds for affected consumers.
- Reimburse consumers for claims related to shipping delays.
- Implement compliance measures, including submitting regular reports to the FTC and retaining detailed records for up to 10 years.
Lessons for Businesses Across Industries
This case offers important insights for businesses, particularly during high-demand seasons:
- Ensure accuracy in advertised shipping times and maintain a reasonable basis for claims.
- Communicate delays promptly and provide consumers with clear options for consent or cancellation with a full refund.
- Align refund and return policies with actual practices and promptly address customer concerns.
- Invest in customer service infrastructure to provide accessible and timely support.
- Maintain detailed compliance records of shipping data, delay notices, and refund transactions.
- Train employees on compliance with FTC consumer protection rules to minimize risk.
The FTC’s Mail Order Rule applies to any business promising delivery or fulfillment timelines, making proactive compliance critical to avoid regulatory scrutiny and protect your brand.
Need Guidance? Our Firm Is Here to Help!
Marashlian & Donahue, PLLC’s Marketing & Consumer Protection Law practice, led by Partner Susan Duarte, is uniquely positioned to assist businesses in navigating the complexities of FTC regulations. Whether you need a compliance review, policy refinement, or strategic advice to align your operations with legal requirements, our team is ready to help.
Contact Susan Duarte at sfd@commlawgroup.com to learn how we can support your compliance efforts and safeguard your business.
Don’t wait until your practices are under the FTC’s microscope—reach out today and ensure your business is on solid legal ground!
