We Offer to Ship Merchandise Ordered by Mail or Telephone and to Bill the Customer Later. Are we Covered by the Rule?
According to the Mail, Internet, or Telephone Order Merchandise Rule, whether the transaction is covered by the Rule depends on whether you bill as part of a credit arrangement made with the customer. For example, suppose you ship the merchandise under an arrangement where the customer has an open account or a charge account you have provided, and the customer authorizes you to charge the account. This is a credit sale and is covered by the Rule. The customer’s authorization to place a charge on the customer’s account meets the Rule’s test for coverage that the order is prepaid and thus properly completed when received by the merchant.
On the other hand, suppose you ship the merchandise along with an invoice payable upon receipt. This is not a credit or prepaid sale and is not covered by the Rule. Of course, if you are unreasonably slow in shipping the merchandise or do not ship in the time you promised, you could violate the FTC Act’s general prohibition against unfair or deceptive practices. In addition, in some instances, the customer may have the right under state law to refuse to accept the merchandise.
For more information, see here: http://business.ftc.gov/documents/bus02-business-guide-mail-and-telephone-order-merchandise-rule
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