July 15, 1998

Secretary
Federal Trade Commission
Room H-159
Sixth Street and Pennsylvania Ave NW
Washington, D.C. 20580

Re: Interpretation of Rules and Guides for Electronic Media Comment, FTC File No. P74102

Ladies and Gentlemen:

I am writing regarding the FTC proposal regarding electronic media ("Proposal"). I am a partner with Abrahams Kaslow & Cassman and have practiced law for over 13 years. I focus on the representation of information technology clients in the areas of Internet and electronic commerce, including Electronic Data Interchange, financial EDI, web-hosting agreements, web content agreements, web linking agreements and electronic sales of products and services. For four years, I chaired the Subcommittee on Electronic Commercial Practices of the Committee on the Law of Commerce in Cyberspace of the Section of Business Law of the American Bar Association. I have also been actively involved in the development of proposed Article 2B to the Uniform Commercial Code, which deals with software and informational licensing, which is a joint project by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute, as well as the draft Electronic Transactions Act, which is a drafting project of NCCUSL. The comments in this letter are personal, and should not be considered as formal comments of any of the foregoing organizations.

I am writing in opposition to the Proposal. I particular, I find many provisions of the proposal to be completely at odds with current commercial practices (electronic or otherwise). Further, it appears that the drafters of the Proposal are unfamiliar with the operations of the World Wide Web and electronic distribution practices in general, in that may aspects of the Proposal cannot be effectively complied with given the current limitations of the Internet. It is my opinion that implementation of the Proposal in the current form will cause commercial parties desiring to use electronic means to distribute their products (Sellers) to incur significant costs and assume significant new liabilities, while providing consumers with little or no corresponding benefits.

The most disturbing portion of the Proposal is set forth on page 25002, which provides in relevant part:

a. Unavoidability: The Commission believes that, to ensure effectiveness, disclosures ordinarily should be unavoidable . . . this means that consumers . . . should necessarily be exposed to the disclosure without having to take affirmative action, such as scrolling down a page, clicking on a link to other pages or activating a "pop up," or entering a search term to view the disclosure.

This rule will take all efficiency and practical use out of the Internet. It also bears no relationship to existing law. For example, in the area of advertising, the rules use a flexible approach, which take into consideration the nature of the media and at what point the proposed purchaser is in the purchase decision, to govern the level of required disclosure. For example, currently in print advertising, other than for pharmaceutical products (where you have those silly one page FDA supplemental disclosures which follow the advertisement), there is no requirement that all of the required disclosure items be contained in the advertisement itself. Only certain disclosures need to be included in the ad, and even those disclosures do not need to be at the top of the ad. Likewise, in radio and television advertising, there is no requirement that the "fast talking salesperson" give his or her disclosure speech at the beginning of the advertisement or that all terms of sale be disclosed as part of the ad. In each case, the rules only require that a minimal disclosure be included as a part of the advertisement (such as the annual fee/annual percentage rate box disclosures in print advertisements for credit cards), but if the consumer elects to undertake the transaction, additional materials may need to be disclosed in a certain format prior to completion of the transaction (such as providing the Truth in Lending and Federal Fair Credit disclosures in my credit card example). Even then, not every piece of paper which is used in the purchase and sale transaction needs to contain all of the required disclosures. The disclosures (if any) are usually contained in a separate document, which may run several pages.

Further, in the "paper" world, there are certain disclosures which the purchaser never sees until he or she opens the box, such as electric shock and other safety/safe use disclosures which may accompany an electronics product. If it is acceptable for such disclosures to be given post-purchase in the paper world, it makes no sense to require that an Internet seller include such disclosures in an "unavoidable" manner on its web site. Such a requirement will only frustrate and confuse consumers.

Certain facets of the Internet make it difficult, if not impossible, for the Seller to police at what "page" a potential customer accesses the Seller's information contained at the site. Third party search engines and third party page "links" allow a potential customer to enter a web site at any public page on the Seller's server, not only at the Seller's "home" page. For example, if you are interested in purchasing a computer printer, you may go to one of a dozen of the third party sites which provide reviews of hardware and software (such as CNET.com) or run a query using one of the web search engines (such as the search engines on Yahoo!). Invariably, these reviewer sites and results pages of the web search will contain URL links to additional product descriptions on the Seller's web site. If the potential purchaser clicks on a link at the third party site, they are taken directly to the pages on the Seller's server which describe the product which the potential purchaser is interested in. If the rule requires that disclosures be "unavoidable" as defined above, the only way the Seller can protect itself is to place the disclosures on each web page, which will (1) drive up Seller costs, (2) confuse the potential purchaser by making them think that the link was to an incorrect page, and (3) completely frustrate users who are only looking for technical information about the product and who have not yet made a decision to purchase. It is appropriate that the Seller give relevant disclosures once a purchaser has decided to make a purchase but prior to the time the purchaser commits to the purchase, not at the time the purchaser is simply "window-shopping."

Another technical problem with the foregoing rule is the "no-scroll" requirement. Once someone launches their Netscape or Microsoft Internet Explorer browser and all the normal navigation tool bars appear, on a standard thirteen inch monitor, you can only display approximately 15 lines of text in a normal 10 to 12 point font, and that is on a page which does not contain any logo or banner advertising. Given the number and length of required disclosures, the font size would have to be smaller than 5 point to get it on the screen. Further, as potential purchasers start using smaller access devices to query the Internet, such as Palm Pilots, the useable screen size is even smaller. It is technically impossible to comply with this aspect of the rule.

The economic impact of the rule will also drive many small Sellers off of the web. Only a small percentage of commercial web sites make any money. Even a smaller percentage make a profit from the revenue they derive from the sale of goods and services on their web sites. Most of these web sites only survive because of the advertising revenues the Seller makes from offering banner ad space for sale on their web site. This aspect of the rule would require that the Seller give up their most valuable "real estate" in an attempt to meet the requirements of the rule and only the large companies will be able to afford to run a web site.

The Internet is both an advertising tool and a sales tool, and the rules need to be flexible to recognize this fact. Requiring that disclosures be given in the foregoing fashion is wholly impractical.

Other aspects of the proposed rule which cause me concern include:

• Page 25003: Item (b) - Disclosures should remain accessible by consumers at all times during the communication. Therefore, after initially viewing a Web page that contains disclosures, a consumer who hyperlinks to another page should not be prevented from returning to the page containing the disclosures. Issue: Is it enough that a consumer can use the "Back" button to get back to any disclosure or does it require that a special link to the disclosure be placed on every page of the web site or the use of frames? If it requires a link, where does the link have to be placed to comply with the rule? Further, in the paper world, to comply with the rules, the paper based merchant must give the disclosure to the consumer in a form the consumer can keep, but it need not be available to the consumer throughout their visit at the store. Allowing a potential purchaser to print or "screen save" the disclosure pages to their computer systems should be sufficient.

• Page 25003: Item (c) -The proposal states that disclosures must appear by the "triggering" term so that consumers need not scroll down pages that are longer than print pages would be. Disclosures made in a frame might be treated differently than disclosures made in the body of the screen. Issue: No corresponding requirement exists in the paper world today. Positing a difference between a long document on a computer screen, and a long paper contract in small print, is not supportable. The question should be whether a term that is required to be conspicuous is conspicuous, not how long the document is. As for framing, most web browsers which are currently used by potential purchasers today do not support the use of frames. While the newer versions of the primary browsers, Netscape and Internet Explorer, support the use of frames, many users have made the decision to not upgrade their browsers due to technical limitations of their existing hardware (RAM limitations, processor speeds and hard drive limitations), FCC limitations on transmission speeds over existing telecommunications lines, bugs which are present in the newer versions of the browsers, and the additional slow-down caused by the loading and use of frames-supported browsers and web sites. Some users with browsers which support the use of frames disable the feature to speed up downloads. In effect, the Seller has no control over the browser which the potential purchaser may use to view their web site and, therefore, no control over what the user actually sees.

• Page 25003: Item (d) - Disclosures that are large or in sharply contrasting color and remain visible or audible for a sufficiently long duration are likely to be more effective than those lacking such prominence. Issue: Unlike print media, where the Seller has control over what the proposed purchaser sees, in the electronic world, the purchaser's software and systems control what they see and hear. Some browsers do not support the use of frames or all graphics or audio features. Additionally, most browsers allow the user to change fonts, color and accents, such as bolding, and to disable framing and audio feeds. Some users deliberately destroy all formatting, framing and audio, and download pages in text-only format, to speed up the download from the Internet or to avoid computer viruses that may be buried in Java applets, Active X files and audio files. Regarding "duration," the general rule is sufficient and no special rule is needed. If the disclosure is so brief that a reasonable person would not have noticed it, then it is not conspicuous.

• Page 25003: Item (f) - Repetition may be required. Issue: Regarding repetition, under current law, consumers are free to ignore disclosures or put them in a drawer and never look at them again if they so choose. How many people actually read the disclosure boxes they are requested to initial on the automobile rental contracts when they are getting off of a plane for a business trip or vacation? Studies I have seen suggest a web-based buyer does not want to make more that 4-5 clicks of their computer mouse in navigating a web site. If more clicks are required, they leave the site and go elsewhere. If we make purchasing on the web more cumbersome than in person, we are unduly burdening electronic commerce.

• Page 25003: Item (g) - Disclosures are more effective if presented in the same mode (audio or visual) as the triggering cause for the disclosure. Disclosures made in two modes are more effective than one. Issue: The premise that disclosures should be made in the same mode as the triggering term is flawed. Using another mode to deliver the disclosure might, in fact, be more conspicuous than using the same mode. For example, the use of a "pop-up" window is likely to cause the potential purchaser to take notice of the text contained in the window. Also, requiring two modes increases the Seller's costs of operating a web-based sales site and materially increases the programming complexity, which will drive small operators off of the web. As noted above, the user may also have system or browser limitations or may select preferences which do not support the use of alternative methods. I am not aware of an analog in existing law. When a business delivers a written disclosure, it is not also required to read it audibly to the consumer or to illustrate it.

• Page 25003: Paragraph 5 - All of the above will apply in addition to specific size and prominence criteria listed in the rule or guide. Issue: That is completely inappropriate. The purpose of express size and prominence criteria is either to ensure conspicuousness for consumers and/or to create a safe harbor for the Seller who attempts to comply. It is untenable to load additional, vague requirements on top of specific rules. They are unnecessary and destroy any safe harbor.

Conclusion

While well-intentioned, the Proposal is unworkable and reflects little understanding of electronic commerce. Therefore, I would request that the Commission withdraw the Proposal and undertake further study.

I would commend the Commission staff to evaluate the approach suggested in the current draft of proposed Article 2B to the Uniform Commercial Code. Professor Raymond T. Nimmer, the reporter for the project, and the drafting committee have each spent an extensive amount of time researching and debating the issue and have come up with the following proposal to deal with "conspicuousness" issues:

"Conspicuous", with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. In the case of an electronic record intended to evoke a response by an electronic agent, a term is conspicuous if it is presented in a form that would enable a reasonably configured electronic agent to take it into account or react without review of the record by an individual. Conspicuous terms include but are not limited to the following:

(A) with respect to a person:

 

(i) a heading in capitals equal or greater in size to the surrounding text;

 

(ii) language in a record or display in larger or other contrasting type or color than other language or set off from other language by symbols or other marks that call attention to the language; or

 

(iii) a term prominently referenced in the body or text of an electronic record or display and which is readily accessible and reviewable from the record or display; and

 

(B) with respect to a person or an electronic agent, a term or clause that is so placed in a record or display that the person or electronic agent cannot proceed without taking some additional action with respect to the term.

I appreciate the opportunity to comment on the Proposal.

Very truly yours,

Terrence P. Maher