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To clarify about the pre-order issue: There's nothing inherently wrong with asking for funds to push the development of a product forward. Kickstarter has done a great job of promoting that model, and the world has seen a lot of good come out of it.

However, Kickstarter has also done a lot of work to educate the public about the risk of this type of funding (certainly to their own legal benefit or otherwise), and thus the public can better understand that they are dontating money toward a dream, versus buying the next generation video game console a few weeks before it comes out.

Coin is taking your money to bring a product to market, while acting like that product already exists. Answers in the FAQ like "we don't take your shipping address because you might move" are a willfully ignorant slap in the face, because they are far more likely the ones at risk of going out of business than me moving houses.

If they said very clearly that you were funding a new product with all the inherent risks, like Lockitron did, this would be a different story. But not educating the consumer about what's actually going on is exactly what the FTC is trying to protect against.

Actually this is very much illegal. You cannot charge someone for a product and then not deliver it. Kickstarter doesn't charge you for a product, you pledge or donate to a project on Kickstarter and if it's successful, you get the item(s) for the level you pledged to for free.

Well, of course if you charge someone for a product and don't ship it, then you owe them their money back.

I'm not sure there's anything illegal about it if you give them their money back -- I'm pretty sure I've tried to buy something from a seller on Amazon, been charged, it turned out they were unable to fulfill, they refunded. It happens.

Now, if you run out of money and go out of business without giving everyone their money back -- that's still not exactly 'illegal', it's not in and of itself fraud. Companies go out of business with creditors all the time, almost any time anyone does go out of business they owe someone something (I mean, in a sense, that's what makes you go out of business!)

Most credit card processors will have problems with you if you don't ship a product within a certain time frame (3-4 days) within charging a credit card. I believe its part of the TOS.

And consumers are different than creditors. There are different laws that protect each.

So there is a part where the US has stronger consumer protection laws than Germany? Interesting.

Besides that, why are digital goods pre-orders seemingly allowed?

If something has a well-defined shipping date then pre-orders are allowed. This is one reason why you can buy tickets to events well in advance.

Ah, thanks that explains it. Different in Europe though.

If you're referring to stuff like iTunes then pre-orders, you aren't actually charged until the day it releases

Steam pre-orders was mainly what I was referring to. I've seen a lot of other pre-orders but I'm not sure they were U.S. based.

Wrong. Per the FTC, all you need is a "reasonable basis" for an express or implied shipping date.


It's not illegal but it might run afoul of your merchant account terms.

I wonder if they get round that law because they don't ask for your shipping address until they ship the product meaning it's never a "properly completed order"

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