March 17, 2005 11:14 AM PST

Overstock denies shipping problems

Online retailer Overstock.com said Thursday that a Federal Trade Commission inquiry into its shipping policies was triggered by an increase in the number of orders it is fulfilling, not by widespread customer dissatisfaction.

The Salt Lake City-based e-commerce company detailed the FTC investigation in a filing with the U.S. Securities and Exchange Commission on Wednesday. Overstock said that it received notice of the inquiry in January and that it is cooperating with the FTC on the matter.

An FTC spokesman confirmed that its regulators are investigating Overstock but declined to comment further.

According to Jonathan Johnson, vice president of corporate affairs for Overstock, the FTC automatically launches such an investigation when it has received a certain number of consumer complaints regarding a particular service. He said the increase in reports to the FTC was likely driven by the fact that Overstock has steadily increased the number of shipments it is making, not by fulfillment problems at the company.

"We don't think that the percentage of complaints has gone up, but as the denominator got bigger, the numerator got to a point where it crossed a line, and the FTC sent us an inquiry," Johnson said. "We don't believe that we have a problem here; there may be some minor things that we need to tweak or fix, but we don't believe that this is a material issue."

Johnson said that a vast majority of Overstock's orders ship within two days, as the company promises. He said the company handles 40 percent of its order fulfillment in-house and it works with some 300 shipment partners to deliver the remaining 60 percent. Overstock charges $2.95 for basic ground shipping, but also offers customers expedited services at an extra cost.

"We're always looking at policies and trying to make everything clear for the customer," Johnson said. "As a result of the inquiry, we're reviewing our policies, but we believe that we're largely compliant."

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