Advertising Law Blog

While the FTC’s Mail Order Sales Rule pre-dates the Internet by decades, the Rule remains relevant with today’s online marketing practices. The Rule requires that fulfillment must be made within the stated time, or if no time is stated, then within 30 days. The Rule has a complex notification and refunding framework in the event a merchant cannot meet these deadlines.

These fulfillment deadlines have taken on an increased sense of importance in the light of COVID-19. According to the FTC, the companies promised to quickly ship products related to COVID-19, including masks, sanitizer, and other personal protective equipment. By repeatedly failing to make good on these promises, the FTC alleged that the companies have acted in violation of the Mail Order Rule. The FTC has said these suits “are part of the FTC’s ongoing enforcement actions against companies who are taking advantage of consumers during the global pandemic.”

The first complaint has been filed against QYK Brands LLC d/b/a Glowwy, Dr. J’s Natural, LLC, Rakesh Tammabattula, and Jacqueline Thao Nguyen in the Central District of California. According to the complaint, starting in March 2020, the defendants advertised that they had hand sanitizer “In Stock” and that it “Ships Today.” The FTC alleges that these claims were false. From April to May 2020, the defendant’s website stated that hand sanitizer orders would ship within seven (7) days. The FTC alleges that these claims were also false. The FTC asserts that it several cases, the defendants “generated a United States Postal Services (“USPS”) shipping label and tracking number within one day, but waited weeks or months to deliver the ordered products to the post office for shipping.” The FTC further alleges that the defendants failed to issue prompt refunds and cancellations when customers complained of the delayed shipping times.

In addition to violations of the Mail Order Rule, the FTC alleges that the defendants have made deceptive COVID-19 prevention claims in connection with the “Basic Immune IGG” product that is marketed as part of their “COVID Essentials” line. The most aggressive claims appear in videos where the defendants represent that Basic Immune IGG is FDA approved and claim that ingesting the product can prevent transmission of COVID-19. The FTC asserts that the product is not in fact FDA-approved, and that “there are no published adequate and well controlled clinical studies of Basic Immune IGG, Immunolin, or a serum-derived bovine immunoglobulin for use to effectively treat, prevent, or reduce the risk of contracting COVID-19.”

The FTC has filed a similar complaint against American Screening, LLC, Ron Kilgarlin Jr., and Shawn Kilgarlin in the Eastern District of Missouri. The FTC alleges that prior to the COVID-19 pandemic, the defendants primarily sold drug test and professional medical equipment. According to the complaint, following the spread of COVID-19 in the United States, the defendants “sought to capitalize on the high demand for personal protective equipment (“PPE”) by marketing and selling masks, gloves, hand sanitizer, and other PPE through their website.” The FTC claims that the defendants continue to represent that they would ship these products “24-48 hours after processing, pending product availability.” Moreover, the FTC states that that the defendants have continued to claim that that such PPE was “in stock” and/or “available to ship.” According to the FTC’s complaint, the defendants have in many cases failed fulfill these shipping promises and some consumers have still not received items that ordered months previously. Further, the defendants have failed to adequately address these shortcomings by repeatedly “ignor[ing] persistent consumer questions and refund requests.” Prior to the FTC initiating this action, the Better Business Bureau rescinded American Screening, LLC’s accreditation.

Finally, the FTC filed a complaint against Zaappaaz, Inc, also doing business as wrist-band.com, WBpromotion.com, Custom Lanyard.net and WB Promotions, and Azim Makanojiya, filed in the Southern District of Texas. Similar to the two previously discussed cases, the FTC alleges that the defendants in this case started to market facemasks, face shields, gloves, and other PPE through their website in March 2020 in direct response to the COVID-19 pandemic. According to the complaint, the defendants advertised these products as being “in stock” with same day shipping available. The FTC alleges that in actuality the shipping of products was delayed by weeks and the defendants “ignored persistent consumer questions and refund demands.”

Takeaway: Because of delays that may have arisen due to unexpected demand or supply-chain challenges, merchants may find themselves in a challenging position with respect to fulfillment representations. It is important to stay on top of these representations on a going-forward basis, coupled with the obligation to provide timely notices and, if appropriate, the option to cancel and obtain a refund, particularly as regulators remain focused on targeting companies perceived of taking advantage of the COVID-19 pandemic.