The Best Things in Life Are Free – Just Pay Separate Shipping & Handling4 Jun, 2013 By: Gregory J. Sater
They say the best things in life are free, but are they free if you have to pay separate shipping and handling (S&H) to get them?
We are all familiar now with buy-one, get-one (BOGO) offers: “Buy one, and get a second one free. Just pay separate S&H.” But what if the seller is making a profit on the S&H? Does that make the second unit not free?
And, regardless of the answer to that question, does it even matter? Who cares, realistically, as long as the consumer is told, prior to the purchase, what they will need to pay for the S&H charge so that, if they don’t like it, they can say no?
The answer could depend on who you ask.
Have there been class action cases on this? Yes, over the years, there have been a few cases here and there that alleged that second units that were being offered as “free” as part of BOGO offers, in fact, weren’t free because, the lawsuits alleged, the second units added little actual additional shipping and handling expense and so, they alleged, the S&H charge constituted a de facto payment for the second units.
What about the Federal Trade Commission (FTC)? You might be surprised to learn that, thus far, there actually has been relatively little FTC attention paid to this. As an attorney for marketers, I would argue that the reason why is that, realistically, there is no consumer harm as long as the dollar amount of the S&H has been clearly disclosed to the consumer prior to purchase. That way, consumers are free to walk away if they don’t like the dollar amount that they will need to pay for S&H. Indeed, that was the very reasoning of a state court judge in a New York state case, Zuckerman, where the judge said that the real question is not whether the amount charged is unreasonable but whether it has been fully disclosed to the consumer.
That said, other courts could well reach a different conclusion depending on the facts of each case. If you are litigation-averse, the most conservative route is for you to not only clearly disclose the amount of your additional S&H charge but to keep it reasonable.
Also, watch out for California (as usual, right?). In California, there is a relatively little-known statute, Section 17537 of the Business and Professions Code, providing that it is unlawful to use the term “prize” or “gift” or “any similar term” in a manner that is “untrue or misleading.” The statute provides, as an example, telling someone they'll receive a gift if, as a condition, they need to pay an unreasonable S&H charge. The statute defines that as follows:
- The shipping charge, depending on the method of shipping used, exceeds (A) the average cost of postage or the average charge of a delivery service in the business of delivering goods of like size, weight, and kind for shippers other than the offeror of the gift for the geographic area in which the gift is being distributed, or (B) the exact amount for shipping paid to an independent fulfillment house or an independent supplier, either of which is in the business of shipping goods for shippers other than the offeror of the gift.
- The handling charge (A) is not reasonable, or (B) exceeds the actual cost of handling, or (C) exceeds the greater of three dollars ($3) in any transaction or 80 percent of the actual cost of the gift item to the offeror or its agent.
There has been very little reported litigation under that statute thus far, but it is something to keep in mind.
If you are running a BOGO offer and you are uncertain about your separate S&H charge, it’s a good idea to consult with legal counsel regarding same. Also, it’s a good idea to read the Direct Marketing Association's guidance on the subject at: www.dmaresponsibility.org/sh/
Gregory J. Sater is a partner in Venable LLP‘s Advertising, Marketing and New Media Group. He can be reached via E-mail at firstname.lastname@example.org.