Seven Internet Retailers Fined For Delays

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July 26, 2000 (1:37 PM EDT)

By L. Scott Tillett,

Seven Internet retailers agreed Wednesday to settle Federal Trade Commission charges that during the 1999 holiday shopping season they failed to give buyers adequate notice of shipping delays.

Some even continued to promise specific delivery dates -- even though timely delivery of orders was impossible, the FTC charged.

The retailers include Cdnow, KBkids.com, Macys.com, Minidiscnow.com, The Original Honey Baked Ham Company of Georgia, Patriot Computer, and Toysrus.com.

The retailers agreed to change their procedures to avoid shipping mishaps for the 2000 shopping season and to pay penalties totaling $1.5 million. The FTC waived $200,000 of CDnow's $300,000 penalty "due to its [CDnow's] poor financial condition," according to an agency statement.

Meanwhile, Macys.com, KBkids.com, and Toysrus.com will pay $350,000 each; Patriot Computers will pay $200,000; and The Original Honey Baked Ham Co. will pay $45,000.

Minidiscnow.com will be required to fully reimburse each consumer who has ordered but not received any of the company's products.

The FTC began investigating online retailers in December, following consumer complaints. The FTC had accused the retailers of violating the Mail and Telephone Order Rule. The Rule requires that retailers ship goods within the date promised, or if no date is promised, within 30 days of the order's receipt.

Under the rule, if the company cannot ship as promised, it is required to provide notice to the buyer with a revised shipping date, giving the opportunity for the buyer to agree to the delay or to cancel the order.

A spokeswoman for Toysrus.com said the company's "procedures and conduct within that period were within the law" but said the company plans to comply with the settlement.

She said Toysrus.com shipped 95 percent of its orders on time last holiday season and that the company continues to make strides to improve its shipping process.