On December 2, 2024, the Federal Trade Commission (FTC) announced it had filed a complaint against GOAT, an online retailer of sneakers, apparel, and accessories. In the complaint, the FTC alleged, among other things, that GOAT failed to honor its “Buyer Protection” policy for consumers who received deficient products. The FTC also alleged that GOAT failed to offer consumers whose products were delayed beyond the promised delivery period a clear and conspicuous way to consent to the delay or cancel the order in exchange for a refund. Furthermore, the FTC alleged that consumers were forced to repeatedly contact customer service for relief, and often received inadequate refunds.

As part of the proposed settlement, GOAT is required to, among other things, pay $2,013,527 to refund consumers, implement more consumer-friendly customer service practices, and implement more transparent and fair refund policies.

The FTC’s Complaint

The complaint alleged that GOAT violated Section 5(a) of the FTC Act as well as the FTC’s Trade Regulation Rule Concerning the Sale of Mail, Internet, or Telephone Order Merchandise by failing to deliver merchandise on time, failing to offer consumers a clear and conspicuous option to consent to shipment delay or order cancellation and subsequent refund, and misrepresenting purchase protection policies.

In describing GOAT’s consumer practices, the FTC claimed that:

• GOAT offered “Buyer Protection” for consumers but failed to establish an effective program to identify requests for the return of deficient products covered by the “Buyer Protection" policy, resulting in numerous improper refund denials.
• GOAT made it difficult for consumers to seek relief for deficient products or to obtain refunds. Consumers were forced to contact customer service repeatedly, and often did not receive full refunds or shipping costs.
• Despite consumers paying an extra $14.50 to $25 to expedite shipping, GOAT shipped 37 percent of all “Instant” orders later than promised and shipped more than 16 percent of all “Next Day” orders on day two or later. In these instances, GOAT failed to offer buyers the option to agree to the delay or cancel the order and receive a prompt refund, as mandated by the FTC’s Mail, Internet, or Telephone Order Merchandise Rule.
• GOAT’s “Assurance of Authenticity” and “Buyer Protection Policy” misrepresented consumer eligibility for full refunds in the event that buyers received a product that was deficient, inauthentic, incorrect, or otherwise not as described. In reality, GOAT rejected many of these return requests outright and gave only partial refunds or in-store credit as a remedy.

The Proposed Settlement

Under the proposed settlement, GOAT will be required to pay $2,013,527 to refund consumers harmed by their shipping practices. Additionally, GOAT will be prohibited from misrepresenting the relief available to consumers who receive a deficient product. The proposed settlement will also require GOAT to implement enhanced customer service practices to be used when it says it will provide “special protection” for certain products.

In terms of refund requests, GOAT will be prohibited from denying refund requests or credit for specially protected products unless the company clearly discloses its denial policies in advance. Finally, the order will prohibit GOAT from misrepresenting material aspects of its return policies and practices.

Commissioner Statements

The FTC vote authorizing the complaint filing and stipulated final order was 5-0, with separate concurring statements from Commissioner Melissa Holyoak and Commissioner Andrew Ferguson. Both commissioners emphasized concerns about “Big Tech” and platforms.

In her statement, Commissioner Holyoak stresses the importance of the FTC exercising its existing legal authority to prosecute how platforms enforce their terms of service. Notably, Commissioner Holyoak asserts that, “[it] is critical to do more to understand the role that platforms play in controlling access to the digital commons,” explaining that, “… a comprehensive approach to behavioral remedies—using our consumer protection and antitrust authorities—can reduce big tech’s ability to unlawfully remove Americans off their platforms.”

While Commissioner Ferguson’s statement echoes the sentiment of his colleague, he is more direct in championing the revival of President Trump’s Executive Order 13925, which aimed to prevent online censorship and protect federal taxpayer dollars from financing online platforms that restrict free speech. Commissioner Ferguson explains that reviving this executive order, “… could promote transparency and honesty in how Big Tech treats its consumers.” He states that “[the] Commission must use the full extent of its authority to protect the free speech of all Americans. That authority includes the power to investigate collusion that may suppress competition and, in doing so, suppress free speech online … [and] if our investigation reveals anti-competitive cartels that facilitate or promote censorship, we ought to bust them up.”

Key Takeaways

As demonstrated by the concurring statements from Commissioner Holyoak and Commissioner Ferguson, we expect the FTC to aggressively use its consumer protection and antitrust authorities where appropriate to address consumer protection and free speech concerns.

How can you ensure FTC compliance?

• Establish measures to ensure compliance with the Mail and Telephone Order Rule. The Rule requires online and other sellers to have a reasonable basis to expect that the sellers can ship within the advertised time frame, or, if no time frame is specified, within 30 days. The Rule also requires that, when a seller cannot ship within the promised time, the seller must obtain the buyer’s consent to a delay in shipping or refund payment for the unshipped merchandise.
• Ensure that your public refund policies and advertised shipment guarantees reflect your company’s actual practices. GOAT got into trouble for failing to honor their expedited shipping promises and return policies. To avoid making the same mistake, be sure to establish a transparent and efficient system for on-time delivery and a consumer-friendly returns process.
• Ensure that you have adequate resources and internal processes to meet the commitments you make to consumers and in your policies regarding product delivery, returns, and refunds. For example, the FTC took issue with the fact that GOAT did not establish internal mechanisms to identify requests for returns, resulting in unreasonably long customer service response times.

Wilson Sonsini Goodrich & Rosati routinely helps companies navigate complex privacy and data security issues, including assisting numerous clients with developing information security programs, responding to security incidents and data breaches, and responding to FTC and other regulatory investigations. For more information, please contact Maneesha Mithal, Chris Olsen, Kristen Abram, or another member of the firm's data, privacy, and cybersecurity practice.