Secretary, Federal Trade Commission
Dear Mr. Secretary:
These comments are submitted by the National Retail Federation ("NRF") in response to the Notice/Request for Comments published by the Federal Trade Commission ("FTC" or "Commission") in the May 6, 1998 Federal Register at page 24996.
By way of background, the NRF is the world's largest retail trade association with membership that includes the leading department, specialty, discount, mass merchandise and independent stores, as well as 32 national and 50 state associations. NRF members represent an industry that encompasses over 1.4 million U.S. retail establishments, employs more than 20 million people -- about 1 in 5 American workers -- and registered 1997 sales of more than $2.5 trillion. Serving as a focal point for the industry, NRF provides leadership, representation, information and services which unify the industry and ultimately help retail businesses succeed. Since many of NRF's members are beginning to sell products over the Internet, our industry is particularly interested in the application of the FTC Guides to electronic media.
Many retailers have developed or plan to develop Internet web sites to advertise and/or sell their products or perform other functions (e.g., to provide customer service or to address questions related to credit) and may use e-mail to communicate with their customers or vendors. NRF therefore appreciates the opportunity to provide input into the policy statement that the FTC intends to issue with respect to the application of the FTC Guides to electronic media, which include the Internet and e-mail.
Given the constantly evolving nature of the Internet and e-mail communications and the anticipated growth and importance of electronic commerce, the following three issues are of particular interest to the NRF: (1) the imposition of specific restrictions on the form in which disclosures may be made; (2) clarifying that e-mail may be used to satisfy FTC requirements for written communications with customers; and (3) achieving comparability between the advertising rules as they apply to print media and the advertising rules as they apply to electronic media. (For example, we would like the Commission to foster the growth of electronic commerce by maintaining the same level of flexibility for disclosure standards for electronic media as apply to disclosures made in print advertising and other media).
(1) Defining "Clear and Conspicuous" Disclosures
The FTC seeks comments regarding the issuance of proposed guidance regarding what constitutes a "clear and conspicuous disclosure" for purposes of the Internet. Specifically, the FTC asks whether the policy statement should specify that disclosures must be made "unavoidable" by requiring them to appear on the same screen as the item advertised, by disallowing the use of hyperlinks and by specifying that a user not be required to scroll down to a lower portion of the screen before seeing the disclosure.
Placing such specific and stringent restrictions on how disclosures are made is not appropriate to the Internet medium. "Unavoidability" and proximity should be viewed in terms of ensuring that the notice would be as clear and conspicuous to consumers within the electronic context as it would be in another media, rather than in terms of ensuring all information is immediately presented. Moreover, the Internet and e-mail are relatively new and evolving media with different protocols than those commonly employed in other types of advertising. To encourage the new media's growth and adaptation to meet consumer expectations, flexibility in regulation should be emphasized.
For example, users are accustomed to using hyperlinks to access more detailed information through a web site (e.g., to obtain additional detail in a press release). This allows a web page to present basic information in a user-friendly, uncluttered format and gives the consumer control over the level of detail desired. Moreover, hyperlinks allow the user to easily move back and forth between web pages and generally are highlighted or presented in the form of a symbol, which, in fact, may place more emphasis on an item than mere text.
In addition, allowing for hyperlinks provides the advertiser with the opportunity to provide more information in a centralized place. Just as floor lines or cross-references in print ads may be used to provide more detailed information to cover a number of items on a page, hyperlinked web pages provide an opportunity to provide additional helpful and detailed information in a single place that is both easy to reach and easy to read.
Restricting the placement of a disclosure to the same frame as the advertised item, with a prohibition against requiring a user to scroll down, likewise would place an artificial and unwarranted restriction on Internet advertisements. This is especially true given the current screen size limitations on most personal computers. In fact, users are accustomed to scrolling down (e.g., to complete the order form for an item or even to view the entire item).
So long as the disclosure, or prominent link to the disclosure, is placed in close proximity to the item or the triggering representation, that should satisfy the "clear and conspicuous" requirements, as it generally does in print advertising and other media. For example, it may well be appropriate in certain circumstances to use a symbol, such as a prominent asterisk or "Important Notice" link, in close proximity to the item or triggering representation to let the consumer know that there is a readily discoverable disclosure further down on the screen for the item. This achieves the necessary notice to the consumer while also accommodating restrictions based on screen size.
Another means to make disclosures may include a screen that automatically appears when a customer indicates that he or she wishes to place an order and that allows the user to cancel the order after they have reviewed the screen. This ensures that all pertinent information is provided at the point in time when the critical purchasing decision is made and that the user actually views the information.
Such a mechanism may be particularly appropriate when a site takes a multi-media approach that uses video, audio and/or text to communicate a message. Unlike a TV or radio broadcast, the Internet provides the user with the option and discretion to interact with the advertising message by means of a hyperlink to another page for additional important information. This fact could be emphasized by a prominent hyperlink or by establishing a required hyperlink to disclosures before an item is purchased. This achieves the goal of ensuring that a user is aware the information is available without hampering the creativity on a site (e.g., by requiring that disclosure be made in audio if portions of the advertisement are made in audio, as suggested in the notice).
Given the many different ways to make "clear and conspicuous" disclosures on the Internet, the policy statement should allow for flexibility that enables advertisers to make disclosures in a number of alternative ways that will ensure that the disclosures are readily noticeable to the user while also retaining the ability to make their advertisements as effective as possible. With that purpose in mind, a list of illustrative examples of means to make such disclosures, such as those outlined above, would be more effective than a series of overly stringent prohibitions, which would have a chilling effect on creativity. That list further should be coupled with general standards (such as the "close proximity" and "clear and conspicuous" standards) that allow web sites to continue to creatively develop new, equally effective disclosure mechanisms.
(2) Using E-Mail for Required Communications
To the extent that transactions and other business will be conducted over the Internet, businesses and consumers should be allowed to decide to communicate by e-mail with the same effect as if they had communicated in writing. For example, if a customer initiates an electronic order by e-mail or provides an e-mail address as a permissible mode of communication in connection with a phone or mail order, a web site should be allowed to send any notice of a delivery delay by e-mail because the customer has selected e-mail as a preferred or permissible means for communication.
As with regular written mail, there is a potential that e-mail may not reach an intended recipient. However, protections already exist and are being developed to provide reasonable levels of assurance (perhaps better than that provided by regular mail) that an e-mail communication provides effective notice. For example, when an e-mail currently is sent, the sender will receive an error message if it cannot be delivered to the e-mail address indicated. This prompts the sender to check the address and, if necessary, change the address. In addition, it generally is possible to confirm receipt. Finally, the Commission should recognize that some customers prefer to communicate by e-mail.
As with disclosures, given the constantly changing nature of the Internet and the opportunities it provides, flexibility should be incorporated into the policy statement with respect to the use of e-mail. It should clarify that e-mail communications may be used to satisfy disclosure or notice requirements under the FTC Guides and then should describe alternative acceptable protocols that may be used when undertaking such communications. Some of those protocols may include: (1) allowing a web site to assume that e-mail is a valid means for communication where an order is initiated by e-mail or the consumer provides an e-mail address; (2) obtaining pre-authorization to communicate with a customer at a designated e-mail address; (3) obtaining confirmation from a customer that an e-mail has been received; (4) using an e-mail tool that allows the sender to confirm that delivery was made to the e-mail address designated by the customer; or (5) requiring a user to register at a web site so that the web site can "document" the fact that the user reviewed the information posted at the web site. The policy statement further should allow other protocols to be followed so long as they are reasonably designed to ensure that the e-mail communication is received.
(3) Achieving Comparability between Advertising Rules as they apply to Print Media and the advertising rules as they apply to Electronic Media.
In order to foster electronic commerce, the NRF believes that the FTC should maintain comparability between advertising rules as they apply to print and other media and the rules as they apply to electronic media. The Internet is rapidly becoming a tool for all aspects of commercial ventures, including advertising, and in order to encourage and nurture the growth of the utilization of the Internet, it is essential that the government maintain a delicate balance between protecting consumers from false and misleading online advertisements on the one hand, and not discouraging the development of commercial online transactions on the other. Moreover, since electronic commerce is essentially a global domain, the Commission should consider the competitive effects any rules it adopts will have on U.S. companies in international commerce.
Finally, retailers appreciate that developing comprehensive and non-restrictive online advertising rules is going to involve a very time-consuming and complex procedure. From a strategic standpoint, it may be much more beneficial for the FTC to initially focus its attention on a handful of key issues that can be resolved without significant risk of impeding the growth of electronic commerce, rather than trying to provide responses to all of the issues potentially raised by the new media in a relatively short period of time.
The NRF supports the development of electronic commerce and, to that end, commends the Commission for its support of industry self-regulation in the Internet context, which fosters the creativity necessary for continued growth, as well as the free flow of information. Consistent with this approach, our comments have emphasized the need to maintain flexibility in any policy statement that is issued.
Should you have any questions regarding these comments, please contact the undersigned or Michelle Fenty at 202-783-7971. In addition, the NRF would like to be kept informed of any public workshops that are held to address these issues so that it may participate.