Associated Dry Goods Corporation

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IN THE MATTER OF ASSOCIATED DRY GOODS CORPORATION, ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMSSION ACT Docket C-267.4. Complaint, June 1.?75-Decision, J"Urw, 197.5 Consent order requiring a New York City parent and its department store operation Lord & Taylor, among other things to provide charge customers having credit balances with periodic statements setting forth credit balances, no less than three times in a six-month period following creation of the balance; to notify charg account customers with credit- ha.lances of their right to a ca.',h refund of the balance; to stop deleting credit balances of $1.00 or more from a customer account before making a cash refund or an offsetting purchase has been made; to automatically refund amounts of unclaimed credit balances after a period of account inactivity; and to refund all unclaimed credit balances more than $1.00 created since June 30, 1972.

Appeam'1,ces For the Commission: Alan D. Uefflcin, J1J;;tin Dingfelder and Howard F. Daniel.

For the respondents: M. Wad Kirr","y, Gould Wilkie! New York, COMPLAINT Pursuant to the provisions of the Federal Trade Commssion Act and by viue of the authority vested in it by said Act, the Federa Trade Commission, having reason to believe that Associated Dry Goods Corpration, a corporation, and its division Lord & Taylor, hereinafter sometimes referred to as re pondents, have violated the provisions of said Act, and it appearing to the Commssion that a procecding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: 1096 Complaint PARAGRAPH 1. Respondent Associated Dry Goods Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the Commonwealtb of Virginia with its principal office and place of business located at 417 Fifth Ave., New York, N. Respondent Associated Dry Goods Corporation formulates, controls and directs tbe policies, acts and practices, including those hereinafter set forth, of its division, Lord & Taylor.

Respondent Lord & Taylor is a division of Associated Dry Goods Corporation. Its principal offce and place of business is located at 124 Fifth Ave., New York, N.

P AR- 2. Respondent Associated Dry Goods Corporation, through its operating division Lord & Taylor operates and controls a number of retail specialty clothing stores in nine States and tbe District of Columbia.

PAR. 8. Respondents sell and distribute merchandise in commerce by operating and controlling retail specialty clothing stores in a number of States and by causing merchandise to be shipped from their warehouses and from the places of business of their various suppliers to their warehouses and retail specialty clothing stores for distribution to and purchase by the general public located in States other than those from which such shipments originate. By these and other acts and practices respondents maintain, and at all times mentioned herein have maintained, a substantial coure of trade in merchandise and services in commerce, as "commerce" is defineeJ in the Federa Trade Commission PAR. 4- In the ordinary coure and conduct of their aforesaidAct.business, respondents permt customers of Lord & Taylor, who qualy for credit to charge purchases in accordance with the terms of charge account agreements executed between said customers and respondents. On occasion a customer's charge account balance represents an amount of money owed to the customer by respondents, rather than an amount of money owed to respondents by the customer. This credit balance is the result of, among other things, overpayments by tbe customer or crcdits for returned merchandise.

PAR. 5. Respondents customaly provide each customer having a charge account credit balance a monthly statement setting forth the amount of the credit balance, at the end of the billng cycle during which the crcdit balance is created and at the end of each subsequent biling cycle during which the credit balance has not been cleared from the customer s account and a transaction on the customer s account occurs. No such statements are furshed for any biling cycle durng which the customer transacts no business on his account. If a customer with a credit balance on his charge account does not SI!Q-7')Q()- 76- 7IJ 10gB FEDERAL TRAD~; COMMISSION DECISIONS Dceision and Order 85 F.

specifcally request that respondents pay him the amount of his credit balance but purchases merchandise or servces on his charge account respondents for a limited time apply the amount of the credit balance to , reduce or eliminate the customer's obligation created by the purchase of merchandise or services.

Jf the customer does not request a refund in cash of the amount of the credit balance or make a purchase within a period of time allowed by respondents for activity to occur on the customer s account respondents, through bookkeeping entries, clear the amount of the credit balance from the customer's charge account. No cash payment to the customer is made at the time of the clearing of his credit balance from his charge account. Subsequent periodic statements are not mailed until a later purchase is made. The outstanding credit balance that was previously reflected on a periodic biling statement is not applied to any purchase occurrng after the credit balance has been cleared from the customer s account.

At no time is the customer informed of his right to receive a cash refund nor do respondents voluntarly refund cash representing outstanding credit balances without a specifc customer request. Respondents have through such acts and practices eliminated substantial dollar amounts of credit balances "" aforesaid from customer accounts in a substantial number of instaces. PAR. 6. By failing to notify customers with charge account credit balances that they have the right to request and receive cash payment of the amounts of their credit balances; by failig to fursh customers at the end of each and every billing cycle durng which credit balances remain outstanding, monthly statements reflecting the amount of their credit balances; by deleting outstading credit balances from accounts without refunding such amounts and by providing biling statements for subsequent purchases which do not reflect such outstading credit balances, respondents have caused a substantial number of their customers to be deprived of substantial sums of money rightfully theirs. Therefore, the acts and practices described in Parph Five above were and are unfair.

PAR. 7. The acts and practices of respondents set forth in Paragraphs Five and Six above were and are to the prejudice and injur of the public and constitute unfair acts and prdCtices and unai methods of competition in commerce in violation of Section 5 of the Federal Trde Commssion Act.

DECISION AND ORDER The Commission having heretofore detcnnincd to issue its complaint charging the respondents named in the caption hereto with violation of .

1096 Decision and Order the Federal Trade Commission Act, and the respondents having been served with notice of said determnation and with a copy of tbe complaint the Commission intended to issue, together with a proposed form of order; and The respondents and counsel for the Commission having thereafter executed, an agreement containing a 'consent order, and admission by the respondents of all the jursdictional facts set forth in the complaint to issue herein, a statement that the signng of said agreement is for settement purpses only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint and waivers and other provisions as required by the Commission rules; and The Commission having considered the agreement and having provisionally accepted same, and the agreement containing consent order having thereupon been placed on the public record for a period of sixty (60) days, and having duly considered the comments fied thereafter pursuant to Section 2.84(b) of its rules, now in further conformty with the procedures prescribed in Section 2.84(b) of its rules, the Commission hereby issues its complaint in the form contemplated by said agreement, makes the following jurisdictional findings, and enters the following order:

1. Respondent, Associated Dry Goods Corporation, is a corporation organized, existing and doing business under and by virtue of thc laws of Commonwealth of Virginia, with its offces and principal place of business located at 417 Fifth Ave., New York, N. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER II is ordered That respondent, Associated Dry Goods Corpration, a corporation, and its division Lord & Taylor (hereinafter collectively referred to as respondent), their successors and signs and their rcpresentatives, agcnts and employees, directly or through any corporation, subsidiary, division or other device, in connection with the handling of credit balances on retail consumer open end credit accounts or other retail consumer charge accounts (including but not necessary limited to thirty (80) day charge accounts) created incident to the business of sellng consumer merchandise and services at retail, in commerce, as "commerce" is defined in the Federal Trde Commission Act, do forthwith cease and desist from:

1. Failing to provide each charge account customer having a credit balance created after the date of entry of this order with a periodic Decision and Order H5 F.

statement setting forth such credit balance, no fewer than three times during the six month period following creation of the credit balance. . :failing to notify each charge account customer having a credit balance created after the date of entry of this order of the right to request and receive a cash refund in the amount of such credit balance. Such notice shall accompany, or be made on, the periodic statement required by Paragraph One hereof and shall contain a clear and conspicuous disclosure of the following facts, to the extent applicable: the amount of the credit balance (unless shown on the accompanying periodic statement); the credit balance represents money owed to the customer; the customer s right to make purchases against such balance or to obtain a cash refund of such balance by presenting uch periodic statement at respondent's store or by returnng the statement to respondent in an envelope which respondent shall enclose with the statement for that purpose; a check will be mailed automatically after six months if no charge is made against the credit or a refund is not requested. Jn addition to the above requirements each periodic statement required by Paragraph One shall state clearly and conspicuously: "a credit balance of one dollar ($1.00) or less will not be refunded unless specifically requested, and it wil not be credited against future purchases after this period." Such statement need not be made in the event that is the store s policy to refund without request all amounts of less than one dollar.

3. Writing off or deleting any credit balance of more than one dollar ($1.00) created after the date of entry of this order from a customer's account before respondent has made a cash refund or the customer has made a fully offsetting purchase, unless such credit balance is not in fact owed to the customer, or unless respondent has complied with the requirements of Paragraph B below.

4. Failing to refund to each charge account customer with a credit balance of more than one dollar ($1.00) created after the date of entry of this order the full amount of said credit balance no later than thirtyone (81) days from the end of the sixth consecutive billng cycle during which the credit balance exists and the customer neither transacts any business on his account nor requests a refund, unless such credit balance is not in fact owed to the customer. A. It is That with respect to each credit balance further ordered owed a custoroer in the amount of more than one dollar ($1.00) which was created at any time since ,June 30, 1!J72, and which has not been refunded to the customer as of the date of entry of this order respondent shall refund to each such customer the full amount of such credit balance, unless such credit balance is not owed to the customer or the customer makes a fully offsetting purchase within the period for U""'-'J '''- "-H ,-,-',,.aU '. U '- 1096 Decision and Order compliance herewith; Provided, however That nothing contained herein shall prevent respondent from making such refund by giving a credit certificate(s) in the full amount of the credit balance which shall be redeemable, at the customers option, in merchandise or cash. Such a certifcate(s), or an accompanying notice attached to the certifcate snall.cleafly and conspicuousli disclose that it is redeemable for cash if the customer so requests in person or if the customer returns the certificate(s) by mail with a request for cash redemption. Respondent shall comply with the provisions of this paragraph no later than three (:J) months after the date of entry of this order, and the report required by Paragraph F of this order shall address itself specifcally to the steps taken to comply with this paragraph.

B. It is further ordered That each refund shall be given to the customer either in person or by mailing a check (or a credit certificate(s) in the case of credit balances existing prior to the date of entry of this order) payable to the order of the customer at the last known address shown in respondent's records for said customer. Each periodic statement sent pursuant to the terms of this order shall be mailed to the customer at the last known address shown in respondent' s records. In the event that any such statement or check (or credit certificate(s) is returned to respondent with a notifcation to the effect that the addressee is not located at the address to which it was sent respondent shall remail the check or statement (or credit certificate(s)). If a check or statement (or credit certificate(s)) which has been mailed is returned to respondent, the full amount of the credit balance shall be reinstated on the customer s account to be retained for one year from the date on which the remailed check or statement (or credit certifcate(s)) was returned so that offsetting purchases can be made. Thereafter respondent shall be relieved of any further obligation to send any additional notice and/or any refund with respect to the credit balance in question; Provided, Iwever That in the everit said customer should subsequently request a refund of any such credit balance owed the customer, respondent shall promptly make such refund. C. II is furthe ordJ!red That if a customer requests, in person or by mail, a refund of a credit balance in any amount which had been reflected at any time on such customer's account, respondent shall within thirty (80) days of receipt of such request, either refund the entire amount requested, if owed, or fursh the customer with a written explanation, with supporting documentation when available, of the rea-,on(s) for refusing to refund the amount requested. D. It is filrther ordered That a credit balance shall be deemed to be created at the end of the billng cycle in which the credit balance is first recorded on a customer's account and at the end of the biling cycle in II02 FEDERAL TRADE COMMISSION DECISIONS Decision and Order 85 F.1'C. which the recorded amount of an existing credit balance is changed due to a custorner\, use of the account. Whenever the recorded among1t of , an exi ting credit balance is changed, respondent's obligations under this ' order with respect to the credit balance existing prior to such change shall automatically be replaced by its obligations under this order with respect to the new credit balance created by said change. E. It is jitrther ordered That, notwithstanding the foregoing, the provisions of this order shall not be applicable to credit balance on accounts administered by third parties.

F. It is further ordered That respondent shall, within sixty (60) days after the entry of this order, fie with the Commssion a report in wrting setting forth in detail the manner and form in which it has complied with this order.

G. It is further ordered That respondent notify the Commission at least thirty (aD) days prior to any proposed change in the corporatc respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect