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Fashion Nova Reaches $9.3 million Settlement with the FTC Over Charges of Violating Shipping and Returns Rules

Online fast fashion retailer, Fashion Nova, has agreed to pay $9.3 million to settle FTC charges that it failed to properly notify consumers and give them a chance to cancel their orders that were not shipped in a timely manner. The FTC also alleged that Fashion Nova used gift cards to compensate consumers for unshipped merchandise instead of providing refunds, as required. 

In its complaint, the FTC alleged that Fashion Nova made various representations about the speed of its shipping in its solicitations, including on the Fashion Nova website. For example, the complaint alleged that the home page of the Fashion Nova website displayed shipping related claims such as “Free 2 Day Shipping on all U.S. Orders $75 and Up,” “Fast Canada Shipping Only $10,” and “Fast International 6-10 Shipping Only $15.” Further, the FTC asserted that Fashion Nova made statements related to the speed of its shipping on other pages of the Fashion Nova website, including on the Shipping and FAQ pages where it stated that it could take up to 24 hours (excluding weekends and holidays) to process an order.

According to the FTC, in numerous instances after consumers submitted an order, Fashion Nova failed to ship one or more of the items ordered by the consumer, or Fashion Nova shipped merchandise that was materially different to the items that the customer ordered. For example, in some cases, Fashion Nova shipped merchandise in a different size or the merchandise was damaged or used.

In addition to failing to meet its shipping obligations, the FTC alleged that in numerous instances in which Fashion Nova did not ship one or more ordered items, it failed to cancel the order and provide a prompt refund. Instead, the retailer issued affected consumers a gift card for the amount of the unshipped merchandise that could only be redeemed on the Fashion Nova website.

Based on these business practices, the FTC alleged that Fashion Nova acted in violation of the Mail, Internet, or Telephone Order Merchandise Rule (the “Rule”). As outlined in the complaint, the Rule prohibits solicitations of “any order for the sale of merchandise ordered through the mail, via the Internet, or by telephone or facsimile transmission ‘unless, at the time of the solicitation, the seller has a reasonable basis to expect that it will be able to ship any ordered merchandise to the buyer’ either ‘[w]ithin that time clearly and conspicuously stated in any such solicitation; or [i]f no time is clearly and conspicuously stated, within thirty (30) days after receipt of a properly completed order from the buyer.’” The Rule does have some flexibility in that it lays out sequential “if-then” steps sellers must take to ensure consumer interests are considered if shipping is delayed.

Under the terms of the Stipulated Order, Fashion Nova is required to pay a total of $9.3 million to be used to refund harmed consumers. In addition, the Stipulated Order prohibits Fashion Nova from any further violations of the Rule and requires the retailer to ship ordered merchandise within one (1) day of receipt of an order when a shipping date is not specified.

Takeaway: This settlement serves as a reminder to sellers that the Mail, Internet, or Telephone Order Merchandise Rule remains in effect. Retailers are reminded that they must have a reasonable basis for shipping representations, a gift card is not considered a refund, and if a company is unable to ship on time, it should advise consumers of the delay and other options available to consumers.

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