The Federal Trade Commission today announced a court order requiring GOAT, a leading online marketplace for sneakers, apparel, and accessories, to pay more than $2 million for violating an agency rule requiring companies to have reasonable shipping practices.
The FTC’s complaint also alleges GOAT offered “Buyer Protection” for consumers that received deficient products but did not put a system in place to honor its policy. GOAT did not establish a customer service program to effectively identify requests for the return of deficient products covered by the policy and many consumers were denied refunds. The FTC alleges consumers were forced to complain to customer service to get relief, which often excluded shipping costs and only included store credit, not full monetary refunds.
Sneaker sold on GOAT website. Pictured is the 2021 Dunk Low Pandas.
“When an online business promises to protect consumers’ purchases, it must have the appropriate systems in place to make sure those protections can be implemented,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Forcing consumers to jump through hoops or keep complaining in order to get a promised refund is also unacceptable under the law.”
Los Angeles-based ecommerce marketplace 1661, Inc., doing business as GOAT, advertises, markets, and sells sneakers and other apparel to consumers throughout the United States through its website and mobile app.
According to the FTC’s complaint, GOAT advertises that the products it sells are put through the company’s verification process before they are shipped to buyers. GOAT has offered priority processing for its “Instant” orders and advertised specific shipping times based on whether the customer paid for “Standard” or “Next Day” shipping. GOAT made promises of same-day shipping for certain orders, advertising that “Standard” orders would typically arrive within three to six business days, and that “Next Day” orders usually arrive within one to two days after an order is placed.
Despite these claims, the FTC alleges that GOAT shipped 37% of all “Instant” orders later than it promised and shipped more than 16% of all “Next Day” orders on the second day or later after the order, despite the buyers paying $14.50 to $25 in shipping upgrade charges. In such cases, the FTC alleges, GOAT failed to offer buyers the option of agreeing to the delay or cancelling the order and receiving a prompt refund, as required by the FTC’s Mail, Internet, or Telephone Order Merchandise Rule.
In addition, the FTC alleges that, despite GOAT’s “Assurance of Authenticity” and “Buyer Protection Policy,” the company misrepresented that it would provide full refunds to buyers who request to return deficient products that are inauthentic, incorrect, or otherwise not as described. Instead, GOAT rejected many of these return requests outright and gave only partial refunds or only provided in-store credits.
Finally, the FTC says GOAT made it difficult for consumers to complain about deficient products and that its customer service practices were designed to provide full refunds only to consumers who continued to complain and escalate their return requests.
Under the proposed court order settling the FTC’s complaint, GOAT will be required to pay $2,013,527 to provide refunds to consumers harmed by the company’s illegal shipping practices. In addition, the company will be prohibited from the illegal practices detailed in the complaint, including misrepresenting the relief it will provide to consumers who receive a deficient product or the special treatment it will provide with respect to those products. It also will require GOAT to implement certain customer service practices to be used when it says it will provide special protection for certain products.
The order also will prohibit GOAT from denying refund requests or credit for specially protected products, including when they are purchased as used or final sale items, or due to the timing of the consumers’ refund requests, unless the company clearly discloses its denial policies. In addition, the order will also prohibit GOAT from misrepresenting material aspects of its return policies and practices.
The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0, with Commissioner Melissa Holyoak issuing a separate concurring statement and Commissioner Andrew Ferguson issuing a separate concurring statement. The FTC filed the complaint and final order in the U.S. District Court for the Central District of California.
NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge.
The lead staff attorneys on this matter are Delilah Vinzon and Matthew Fine of the FTC’s Western Region, Los Angeles.