Violation of recent new laws regulating the flow of e-commerce and online business practices can seriously jeopardize the growth of any unwary company with an online presence. Our law firm represents numerous clients selling online goods and services and understands how to protect your business’s online streams of revenue.
Deceptive Online Sales & Pricing Practices
Pricing and sales practices that are likely to mislead consumers are deceptive under Section 5 of the FTC Act. They are also a violation of state deceptive practices statutes and other state laws, including the Uniform Commercial Code. As an e-commerce lawyer, I can help your business avoid deceptive sales practices and avoid the wrath of the FTC. In the context of Internet sales, there are some basic rules/guidelines common under both FTC and state consumer protection laws that Internet businesses and marketers need to follow. I can help you or your business understand the potential liability associated with certain online business practices and help you avoid online deception.
Making Guarantees & Providing Express Product Warranties
We help our Internet business clients pay special attention to any guarantees or any product warranties you may decide to make on your website. Many Internet businesses like to offer some type of satisfaction guarantee, free trial or even a money back guarantee. The law does not require that a business provide any type of guarantees. But, if you do make any guarantees or warranties, the basic tenets of FTC advertising law need to be followed. Making guarantees or warranties are just like any other advertisement or claim. Do what you say you will on your website without limitations. Also, when a product is sold, there are certain implied warranties that occur by law automatically (unless any implied warranties are waived). You must follow the FTC laws, state laws, the Uniform Commercial Code and the Magnuson-Moss Warranty Act. Generally, express warranties should be in writing and made before the purchase and should be clearly stated in your product purchase agreement.
Online Billing & Shipping Practices Liability
Whatever your terms of billing or payment, including credit card payment, those details should be in writing. When it comes to your online billing and shipping practices, the bottom line is you need to avoid deceptive practices. Liability can be triggered for deception under both FTC and state consumer protection statutes. Some states have specific statutes dealing with deceptive online billing practices, as will be discussed. Of course, you need to figure out what activities are considered deceptive if the first place to avoid liability.
Most deceptive billing practices are seen with hidden continuity plans and automatic renewals, back-end sales without disclosure and deception with free trial offers. This means that any extra charges for shipping or return shipping should be clearly indicated during the ordering process. (Return shipping instructions should be set forth in the terms of sale). If there are any costs or fees associated with the purchase, no matter how minor, these must be disclosed prominently before purchase. That is probably the most basic and common sense rule you can follow. The other is to ship when you say you will, or within 30 days in most cases.
Negative Option Billing
If you plan on engaging in negative option marketing plans, you will need to comply with the FTC’s Negative Option Rule and comply with state laws governing these practices. The term “negative option feature” is defined by the FTC broadly and refers to a category of transactions in which a customer’s failure to take an affirmative action, either to reject an offer or cancel an agreement, is considered by the seller as assent to be charged for some goods or services. If you engage in these practices, FTC laws require that ads for subscriptions clearly and conspicuously disclose material information about the terms of the offer. (Failing to disclose important information is always considered a deceptive practice under the FTC Act and/or state consumer protection statutes).
We can help you or your business understand FTC and various state laws governing negative option plans and draft necessary disclosures for your website.
Back-End Third Party Sales & ROSCA
Under the Restore Online Shopper’s Confidence Act, any initial merchant that directly obtains customer billing information cannot disclose this to a third party “post-transaction seller” where it is to be used in the sale of any goods or services by that seller. This practice by the initial merchant is also known as a “data pass.” It typically occurs when the post-transaction seller offers a negative option type plan (i.e. membership clubs) to consumers as they are in the process of completing their transaction with the initial merchant. ROSCA makes it unlawful for any post-transaction seller to charge or attempt to charge a consumer’s credit card, debit card, bank account or other financial accounts for any good or service unless the seller has clearly and conspicuously disclosed to the consumer all material terms of the transaction. The post-transaction seller must also have received the express informed consent for the charges by the consumer (by obtaining from the consumer the full account number to be charged and the consumer’s name, address, and contact information). Some states, such as California, have enacted its own version of ROSCA.
Online Refund and Return Liability
There is no federal or state law that absolutely requires you to accept returns, make exchanges or provide refunds without legal justification. Outside of general principles of contract law (i.e. fraud, material misrepresentation, mistake, unconscionable contracts, breach of warranty, etc.), your Internet sales can be made final. You are basically free to design your own refund and exchange policies and provide a “no return” or “all sales are final” type of policy. But, you are required by law to post the details of these policies conspicuously, so that consumers can read them before making a purchase. If a company does not properly post the specifics of its refund policy, the policy may not be able to be enforced. Worse, in some cases, an unclear policy can be grounds for deception under both the FTC Act and state deception laws.