The FTC settled with online shoe retailer, Hey Dude, Inc., stating that Hey Dude deceptively suppressed negative consumer reviews of products available on its platform in violation of Section 5 of the FTC Act. The draft complaint also alleges Hey Dude contravened the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (“The Mail Order Rule”) – a relatively prescriptive delivery-related consumer protection rule – that addresses situations where timely delivery will not occur. Under the Mail Order Rule, a retailer must offer consumers the option to agree to a delay in shipping or cancel non-conforming orders. Additionally, the Mail Order Rule requires that consumers receive a prompt refund if the goods will not ship within the time stated at purchase or within 30 days if no time was given.
Here, the FTC focuses on the following three allegations:
- Suppression of Negative Customer Reviews – The FTC contends that Hey Dude violated Section 5 of the FTC Act by deliberately suppressing negative consumer reviews. The FTC claims that Hey Dude issued written instructions to its employees to post only positive consumer reviews. More specifically, Hey Dude allegedly posted five-star reviews “with little scrutiny” while either rejecting or not publishing 80% of one, two, and three-star reviews. The FTC notes that Hey Dude’s practice of suppressing negative consumer reviews is particularly deceptive as the online retailer reportedly labeled consumer reviews of each product as “real” and “unedited.”
- Failure to Offer Buyer Options for Non-Conforming Orders – The Commission claims that Hey Dude violated the Mail Order Rule by failing to offer customers the option to either consent to a delay in shipment or cancel a non-conforming order.
- Failure to Provide a Prompt Refund for Non-Conforming Orders – Under the Mail Order Rule, companies must offer consumers a full, prompt refund. The FTC alleges that Hey Dude violated this requirement in numerous instances by either failing to provide customers with a full refund or sending customers refunds in improper forms, such as Hey Dude gift cards.
Under this proposed order, Hey Dude must (1) post unedited consumer reviews from all purchasers who submit a review unless a review contains inappropriate or unlawful content; (2) offer consumers the option to cancel non-conforming orders; and (3) send consumers who do not receive a conforming shipment prompt refunds in a format authorized by the Mail Order Rule. The proposed order also includes a monetary judgment of $1.95 million.
