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Mail or Telephone Order Merchandise Rule
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Mail or Telephone Order Merchandise Rule |
| By: admin, November 25, 2004 |
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| Views: 255 |
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Q: We offer to ship merchandise ordered by mail or telephone and to bill
the customer later. Are we covered by the Rule?
A: Whether the transaction is covered by the Rule depends on whether you
bill as part of a credit arrangement made with the customer. For example,
suppose you ship the merchandise under an arrangement where the customer
has an open account or a charge account you have provided, and the customer
authorizes you to charge the account. This is a credit sale and is covered
by the Rule. The customer's authorization to place a charge on the customer's
account meets the Rule's test for coverage that the order is prepaid and
thus properly completed when received by the merchant.
On the other hand, suppose you ship the merchandise along with an invoice
payable upon receipt. This is not a credit or prepaid sale and is not
covered by the Rule. Of course, if you are unreasonably slow in shipping
the merchandise or do not ship in the time you promised, you could violate
the FTC Act's general prohibition against unfair or deceptive practices.
In addition, in some instances, the customer may have the right under
state law to refuse to accept the merchandise.
Q: Does the Rule cover sales on approval?
A: No. Sales on approval permit the prospective customer to return merchandise,
usually after a "no obligation" or "free trial" period, even though it
is exactly as represented in the merchant's advertising. These sales do
not require the customer to pay for the order until the merchandise is
received and approved. Because the order is not prepaid with cash, check,
money order, or charge, it cannot be treated as the "receipt of a properly
completed order" -- which would trigger the Rule's requirements..
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