Industry News
FTC Backorder Regulations
By
Nov 8, 2005, 21:22

Effective inventory management means finding the balance between backorders and overstocks. If you prefer to use a Just-in-Time inventory, you need to be aware of the consequences of backorders and the FTC's Mail or Telephone Order Merchandise Trade Regulation Rule.

This rule requires that when you advertise mail or telephone order merchandise, you must have a reasonable basis for stating or implying that you can ship within a certain time. If you make no shipment statement, you must have a reasonable basis for believing that you can ship within 30 days, called the "30-day Rule."

When you offer to sell mail or telephone order merchandise, you imply that you can ship within 30 days of receipt of an order. If, after taking the customer's order, you learn that you cannot ship within the time you stated or within 30 days, you must get consent to the delayed shipment. If you cannot obtain the customer's consent to the delay, you must promptly refund all the money the customer paid you for the unshipped merchandise, even if the customer didn’t request it.

You can change the shipment date by providing a delay notice, by providing a new shipment date
When you take orders by telephone, you can advise of updated shipment information, which can differ from what you advertised.

It is irrelevant when you post or deposit payment, when checks clear, or when your bank credits your account. The clock begins to run when you receive a properly completed order. However, if a customer's check is returned or a customer is refused credit, the Rule stops the clock. If the customer makes good on payment, then the clock starts again.

If you cannot ship the order in a reasonable time, then you must cancel the order and make a full refund.

During this process, you must keep the customer informed, either by phone or by mail. The customer should always have the option of waiting for the backorder to be filled or to cancel the order.


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