Merchandiser Sales Rights, Obligations and Deceptive Sales Practices

Returns - When a customer wishes to return merchandise you need to do two things: have a policy and comply with the law.

Returns Policies

• Refunds
  • Cash Refund
  • Credit Card Refund
  • ATM Card Refund
  • Store Credit for Future Purchase
• Exchanges
  • Same Item
  • Better Item- exchange merchandise + collect additional Revenue
  • Lesser Item - exchange merchandise + Issue refund of Revenue
• Allowances
  • Issue a Partial Refund (Discount the Sales Price) and Customer Keeps the Damaged or Defective Item

Policy Guidelines

• Post the Policy Conspicuously
• Receipt includes printed policy
• Verbally Communicate the Policy
• Exceptions
  • Check - no refund until the check has cleared
  • Credit Card - void the sale and avoid fees (charge back) (note: a cash refund would pay back to the customer the full retail price including transaction fees you paid but didn't collect)
    

California Civil Code section 1792: New Merchandise and products sales laws.

1. A business can clearly state a policy on returns, exchanges or refunds:

• Post it conspicuously
• Print it on receipts
• Verbally communicate it

2. All new merchandise is covered by a 60-day "implied warranty" against defects, unless the item is sold as-is.

3. Excepted are clothing, food and other perishables.

4. Customers are not legally entitled to refunds or exchanges.

5. If a store does not give refunds or exchanges within seven days with a receipt, the state law requires the policy to be posted. Conversely, if no policy is posted you must give a refund or exchange with seven days.

6. Stores are prohibited from knowingly selling defective merchandise.

7. "As-is" and "all sales final" policies can mean just that!

8. Contact the Department of Consumer Affairs with questions or for requesting printed materials.

Gift certificates, aka gift cards, are regulated by state laws. California has passed several amendments to the California Civil Code in 2000's with the latest as recent as 2009. Here are some highlights of the law;

• Any gift certificate sold after January 1, 1997, is redeemable in cash for its cash value, or subject to replacement with a new gift certificate at no cost to the purchaser or holder.
• Effective January 1, 2008, any gift certificate with a cash value of less than $10 is redeemable in cash, which includes currency or check, for its cash value.
• A gift certificate or gift card can't contain an expiration date, with a few very limited exceptions.
• Usually, a gift certificate or gift card cannot contain a service fee, including a fee for dormancy (non-use).
• A gift certificate or gift card or the balance can be redeemed, at the option of the issuer, for cash, merchandise, a new gift card for the remaining balance (at no cost) or a combination. (see bullet 2 above)
• Covers gift cards at a single store or chain. Multiple-use gift cards are not covered. (i.e. a gift card with a Visa, Mastercard, American Express or Discover card logo on it.)

Calif. Department of Consumer Affairs FAQs | Consumer's Union state summaries |

The Prompt Delivery Rule spells out the ground rules for making promises about shipments, notifying consumers about unexpected delays, and refunding consumers' money. Enforced by the FTC, the Mail or Telephone Order Rule applies to orders placed by phone, fax or the Internet. Your compliance can have bottom line benefits for your company - that is, satisfied customers are repeat customers.

The Federal Trade Commission is advising online merchants to review their obligations under the Mail or Telephone Order Merchandise Rule to better serve their customers this holiday season.

The Rule spells out the ground rules for:

• making promises about shipments
• notifying consumers about unexpected delays
• refunding consumers' money.

Complying With The Rules
By law, you must have a reasonable basis for stating that a product can be shipped within a certain time. If your advertising doesn't clearly and prominently state the shipment period, you must have a reasonable basis for believing that you can ship within 30 days.

• State a policy based upon USPS, UPS or other delivery services
• Ship within 30 days

If you can't ship within the promised time (or within 30 days if you made no promise), you must notify the customer of the delay, provide a revised shipment date and explain his right to cancel and get a full and prompt refund.

• notify the customer of the delay
• explain his right to cancel
• within 30 days you may treat the customer's silence as agreeing to the delay
• issue full and prompt refund if customer wants it.

For definite delays of up to 30 days, you may treat the customer's silence as agreeing to the delay. But for longer or indefinite delays - and second and subsequent delays - you must get the customer's written, electronic or verbal consent to the delay. If the customer doesn't give you his okay, you must promptly refund all the money the customer paid you without being asked by the customer.

For longer or indefinite delays - and second and subsequent delays

• must get the customer's written, electronic or verbal consent to the delay
• If the customer doesn't give you his okay, you must promptly refund all the money the customer paid you without being asked by the customer

Finally, you have the right to cancel orders that you can't fill in a timely manner, but you must promptly notify the customer of your decision and make a prompt refund.

For orders you can't fill:

• you have the right to cancel orders that you can't fill in a timely manner
• you must promptly notify the customer of your decision
• you must make a prompt refund

Running Late? Overwhelmed with Orders?
The Rule gives you several ways to deal with an unexpected demand.

• You can change your shipment promises up to the point the consumer places the order, if you reasonably believe that you can ship by the new date.
• The updated information overrides previous promises and reduces your need to send delay notices.
• Be sure to tell your customer the new shipment date before you take the order.
• You must provide a delay option notice if you can't ship within the originally promised time.

The Rule lets you use a variety of ways to provide the notice, including e-mail, fax or phone. It's a good idea to keep a record of what your notice states, when you provide it, and the customer's response.

For More Information
The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Selling on the Internet: Prompt Delivery Rules

You may offer sales prices, specials, good customer discounts, free delivery, quantity discounts that are cumulative or non-cumulative and other price deals as you would in any selling situation.

Legally, you can change price at any time  with proper notice under the Uniform commercial Code.

U.C.C. - ARTICLES 1-9 http://www.law.cornell.edu/ucc/ucc.table.html

1. What will the credit card companies do to protect the seller and buyer from fraud and to facilitate chargebacks?
2. What rules of behavior have evolved over the "Internet years" regarding refund policies, pricing, customer expectations, etc., when shopping online?

What can the merchant do to fight fraud and chargebacks? Some solutions are elaborate, some burden the customer, some are thin threats, some are technological.

• Have a clear refund, guarantee and return policy
• Match customer's shipping address to the billing address
• Require "acceptance" of terms & conditions of the sale
• verify the card isn't lost or stolen
• check for any unusual activity on the card
• Use a full service Gateway company (digital certificates, etc.)
• technology to fight fraud before it happens
• payer-verification (authentification) services (Visa uses Verified, Master Card uses SecureCode) where a cardholder registers with the program and Internet retailers can ask for password registered wit the cardholders bank as giving the retailer evidence of a purchase and stronger leverage over disputes (10% of Visa users have registered)
  • Some merchants fear this extra step will drive off customers in the check out process
• Credit card companies streamline their chargeback dispute mediation procedures
• Call the customer before shipping
• Threaten to notify authorities and verify or investigate (Mike Aquilana of Fujitsu Computer Systems, Corp. says a customer claimed to not receive a computer and he called the customer promising that an FBI agent would be at his house to investigate. The customer purportedly received delivery within the hour)

The following apply for the purchase or lease of goods or services for personal consumption, not business to business transaction or real property.

Prohibited Acts

• Adverting goods with the intent not to sell them as advertised (Bait & Switch) or with the intent not to supply reasonably expected demand
• Falsely representing that a part, replacement or repair service is needed
• Misrepresenting the source, sponsorship, approval or certification of goods and services
• Representing that goods or services have characteristics, approval, ingredients, uses, benefits or quantities which they do not have, or that a person has a sponsorship, approval, status, affiliation or connection which he or she does not have.
• Falsely representing that goods or services are of a certain standard, quality, or grade or that goods are of a particular style or model.
• Making false or misleading statements of fact concerning the reasons for, existence of, or amounts of, price reductions.
• Falsely representing that a transaction involves rights, remedies or obligations which do not exist or are against the law.
• Falsely representing that goods or services have been supplied as per prior arrangement.
• Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction.
• Inserting an unconscionable provision in a contract (oppressive to consumer).
• Making an unsolicited, prerecorded message by telephone unless an unrecorded, natural voice introduces the call, and other requirements are met.

General Consumer Remedies

• The consumer has three (3) years from the time the prohibits act occurred to file a suit.
• The consumer must first send a demand letter, via certified mail, asking for rectification, repair or replacement.
• Honest mistakes are not actionable.
• Cause of action under $5,000 may be brought to small claims court. (No attorneys allowed)
• California law recognizes that Senior Citizens (65 years and older) and Disabled Persons (has a substantial physical or mental impairment which substantially limits one or more major life activities) may be particularly vulnerable to deceptive acts of the type described above. Therefore the law allows for an additional $5,000 penalty in addition to other damages and penalties.