Contradictory policy aside, it appears that the merchant has agreed to accept the return. The issue is with who pays for the return shipping. Unfortunately, the Uniform Commercial Code makes the buyer responsible for return shipping costs, without regard to the reason for return, provided that the sale was not on an approval basis.

From all indiactions, the merchant has breached the implied warranty for fitness for a particular purpose, entitling the buyer to a refund of his purchase price.