From time to time, we here in the class action department of Dworken & Bernstein will ask the fundamental questions: What does unfair mean? What is deceptive? Where is the line? What conduct crosses it? A recent string of cases about shipping and handling fees examines these big picture issues head on.
We’ve all seen them – the late night infomercials advertising ridiculous (ly comfortable!) wearable blankets or the sharpest knives ever, or cleaning products that get those impossible stains out! A clumsy man hilariously fumbles a loaf of bread to show why a consumer needs this new state-of theart breadbasket. Personally, I love them. But, campiness aside, the fun hits reality when the special offer pops up with hidden fees or a false discount offer.
Well what if there are fees that are fully disclosed? Could they still be unfair? We tend to think of hidden fees as being the line not to cross. We can all agree that deception and lying are wrong. But could the unfairness of the fees themselves be actionable even if they are disclosed? What is unfair? That is the big question in a new string of cases out of California.
The cases are simple and basically the same. The consumer purchased products online, was charged shipping and handling, and argues that the shipping and handling costs are “not reasonably related to the companies’ costs of delivering or shipping the items to consumers but instead greatly exceed those costs.” The consumer claims that the shipping charges for his order were more than double what the USPS would have charged him directly.
The complainant goes on to invoke the Direct Marketing Association standards. The DMA is an industry group that outlines best practices and ethical standards for companies directly marketing and selling to consumers. Their relevant guideline states: “postage, shipping, or handling charges, if any, should bear a reasonable relationship to actual costs incurred. … When figuring shipping and handling fees, it is important to reflect costs as accurately as possible so that your customers or prospects are not likely to view these fees as a company’s ’profit center.’”
The questions then becomes: Does violating your industry’s ethical standard rise to the level of illegally unfair? These industry guidelines are not statutory law, but do they inform statutes that outlaw unfair or deceptive practices? Possibly. If you voluntarily hold yourself to those standards in order to market your company as ethical, but then argue they are toothless standards that you don’t have to follow and shouldn’t inform what is unfair or deceptive under the law, that hypocrisy won’t sit well with a jury. And it could potentially be found to be “unfair.”
But, while the California cases focus on the ethical standards at issue, I think the even better argument is that this conduct is deceptive, even though the fees are disclosed. If these companies are treating shipping and handling costs as a “profit center,” and are disguising part of the higher price of the product in these fees, you are withholding the truth from consumers. By telling consumers the price is $9.99 but then building an additional $3.00 of profit into what the company falsely calls fees, that is much closer to the lying that consumers want reigned in and punished. Of course, the company will argue that handling and overhead are more expensive than people realize, and so these fees are not a “profit center,” but reasonably related to their actual costs.
Like a tennis match, these are the arguments being volleyed back and forth on the issues of fairness and deception. Unfair fees because DMA guidelines. Yes, but clearly disclosed. Yes, but deceptive. No, because handling/overhead.
But, I offer no answers. These are questions only answered through the slow trudge of developing common law. Consumer protection statutes are intentionally broad, left open for the courts (and in some instances attorneys general) to define specific instances of unfairness and deception. All we can do is pay attention to the development of the case law and creatively argue on behalf of our clients. And the best way to do that is to ask the big questions. Patrick J. Brickman
