In the Matter of
Interpretation of Rules and Guides for Electronic Media
FTC File No. P974102
Comments of Information Technology Association of America
Mark Uncapher, Esq.
July 7, 1998
The Information Technology Association of America (ITAA) represents 11,000 direct and affiliate information technology companies working at the forefront of computer software, Internet and electronic commerce, telecommunications, systems integration, outsourcing, consulting and more.
Every day our ITAA member companies deliver products and services that make the promise of the information age a reality. Our member companies are helping make the promise of the Internet in electronic commerce a reality.
ITAA commends the Federal Trade Commission ("FTC" or "Commission") for its solicitation of public comments on the important issues outlined in the Commission's May 6, 1998 Federal Register notice ("Notice") captioned Interpretation of Rules and Guides for Electronic Media. As new forms of electronic media proliferate, it is important that government, private industry, consumer advocates, and other interested parties maintain an open dialogue on these issues.
ITAA believes that it is vital to the proper interpretation of FTC rules -- including judgments as to their applicability to various forms of electronic media -- to thoroughly understand the technology underlying the particular medium at issue. As such, ITAA comments herein on a limited number of the issues outlined in the Notice that ITAA believes pertain to particular forms of electronic media with which its members have had significant experience. It is ITAA's hope that its comments in this regard will be helpful to the Commission and others contemplating these issues.
In particular, ITAA is concerned that the Commission may apply to the Internet false or at least questionable analogies from other media. To the extent that analogous application of rules designed for other media occurs because of a misunderstanding of the technology of the Internet, ITAA seeks to aid in the discussion of the application of FTC rules by exploring the nature and characteristics of Internet media. In addition, ITAA would clarify that different activities on the Internet -- e-mail and web browsing for example -- often require different treatment.
More generally, while ITAA supports the protection of consumers' interests -- and the FTC's role in that effort -- it urges the Commission to take a conservative approach to applying in a wholesale fashion its existing rules to the Internet. Certainly, when and where consumers' best interests are compromised on the Internet, measures should be taken to protect and enforce those interests. As ITAA has suggested in many other contexts, however, any government regulation of the Internet and the activities thereon must be carefully balanced against the unintended consequences of unnecessary and burdensome intrusion. This is particularly true at a time when efforts to engender self-regulation among participants in the Internet industry are ongoing.
Rules and Guides that Apply to Representations Generally
The Commission seeks to clarify that "rules and guides that apply to representations generally without reference to, or limitation on, the medium used to disseminate them apply equally to representations disseminated through electronic media." ITAA agrees with this proposition as a general principle. No new medium -- electronic or otherwise -- should be uniquely shielded from reasonable rules designed to protect consumers from unfair business practices. Moreover, as the Commission notes, businesses may find ways to employ new technologies in electronic media to comply with existing FTC rules more efficiently from an economic and administrative perspective and more effectively from a consumer's perspective. As a result, in many cases, benefits will incur to both businesses and consumers when compliance with FTC rules is made through electronic media.
Rules and Guides Referencing Specific Mode of Communication
The Commission seeks to clarify that "rules and guides that specify how or where representations are disseminated are broad enough to apply to representations disseminated through electronic media." The Commission proposes to clarify that where existing rules refer to a "writing," that term should be understood as "information that is capable of being preserved in a tangible form and read, as opposed to an oral statement that is intangible and transitory." In addition, the Commission notes that "consumers using electronic media can read the information and preserve it for possible later review either by printing it on paper, saving it on disk, or by some other means." As such, the Commission signals its intention to apply rules with references to "a writing," "in writing," or "a written statement," etc., to electronic media.
ITAA cautions the FTC against making a presumptive, across-the-board application of all such rules to electronic media. While the Commission's analysis may apply generally to certain electronic media such as electronic mail(1), other forms of new media may not have the characteristics the Commission assumes in its analysis. For example, multimedia content on the World Wide Web may in fact be "intangible and transitory" from the consumer's perspective in some cases. It might be ineffective, for example, to apply rules with references to "writings" to nontextual elements of a website such as sound and video. Conversely, the absurd result of a website purveyor avoiding rules with references to "writings" by employing nontextual media may be possible under an imprecise application of existing rules. To the extent that existing rules are divided among broadcast (video and sound) and print media ("writings"), application of these rules to the multimedia Internet may not always be appropriate.
ITAA neither claims to have the answers, nor advocates a particular solution, to such problems. Rather, ITAA seeks to emphasize the point that application of existing FTC rules to electronic media in general -- especially without regard to the differences among the various forms of electronic media -- may often be ineffective at best, and, worse, could lead to absurd and unfair results. As such, ITAA, again, urges the Commission to adopt a conservative and measured approach to applying "analog" rules in the Digital Age.
To that end, ITAA applauds the Commission's proposal in the Notice to convene a public workshop to discuss these issues. Such a forum would serve to (1) further raise awareness of these issues; (2) solicit information, experience, and advise from interested parties who do not normally participate in a Notice and Comment proceeding; and (3) help engender a spirit of cooperation among government, industry, and consumer groups in addressing these important issues fairly and effectively.
The Term "Direct Mail"
The Commission seeks comment on the extent to which the use of "click patterns" or Internet search criteria to target advertising to websites should be considered "direct mail" for the purpose of existing FTC rules. While the Commission states its intention to define direct mail as "private communications capable of being received privately," it nonetheless seeks comment on whether targeted advertising on public websites is the equivalent of direct mail.
ITAA believes that equating targeted advertising on public websites with the typical direct mail delivered to private postal addresses is an incorrect analogy. ITAA suggests that targeted advertising on websites is more closely analogous to "niche" cable television channels that serve a demographically homogeneous audience. A consumer's tuning in to such a niche channel is roughly equivalent to entering selection criteria into a search engine. Both the website and the niche cable channel "return" targeted advertising that is "capable of being received privately." Yet, advertising on cable television is not subject to the FTC's rules regarding direct mail. This alternative analogy may not be perfect; ITAA merely seeks to make the point that any application by analogy of existing rules for other media should be rigorously examined.
Disclosures Required or Advised by Rules and Guides
The Commission discusses in the Notice various issues associated with disclosure requirements under FTC rules, including warranties and the "clear and conspicuous" standard that applies to traditional media. Specifically, the Commission suggests that consumers viewing an advertisement [e.g., on a website] should necessarily be exposed to the disclosure.without having to take affirmative action, such as scrolling down a page [or] clicking on a link" While this may appear to the Commission to be an innocuous application of existing rules to electronic media, ITAA would caution the FTC against developing a solution in search of a problem. First, it does not necessarily follow from the passive nature of traditional media (e.g., television) that requiring "affirmative action" in the Internet environment would result in an ineffective disclosure. Second, application of such a rule to the initial screen space of a website would result in disclaimers taking precedence over the actual advertisements themselves. Advertisers would be forced to create ads that accommodate for variations in user screen sizes and the proliferation of hand-held Internet enabled devices. Third, ITAA urges the Commission to take note of developing case law in this area and the extent to which it is promising effective self-regulation in complying with disclosure requirements. Unilateral action by the FTC may be unnecessary.
In addition ITAA notes that many of these issues - particularly with respect to express and implied warranties -- as they apply to electronic media are being discussed pursuant to the development of a major new addition to the Uniform Commercial Code. It is anticipated that the new Article 2B will govern the establishment and enforcement of contractual relationships developed online.
Audio and Visual Presentation
In the Notice, the Commission reports its finding that disclosures made in both visual and audio modes "generally are more effectively communicated than disclosures made in either mode alone." This, of course, stands to reason. ITAA cautions, however, that in the event that the Commission seeks to require such "double exposure" for the benefit of consumers, it should take into consideration the potential effect on Internet resources. Audio, and to a greater extent video, employ far greater transmission capacity ("bandwidth") than text. Indeed, multimedia representations in video and audio are largely driving some of the current bandwidth shortages on the Internet.
In addition, as the Commission knows, one of the great benefits of the Internet for both businesses and consumers is its relatively inexpensive accessibility. The provision and transmission of high-bandwidth content such as audio and video, however, is still complex and expensive compared to simpler text. As a result, any rule requiring that a disclosure be particularly "dynamic" could be effectively discriminatory and result in unanticipated consequences.
ITAA applauds the Commission's effort to clarify how its rules and guides apply to electronic media and generally agrees with its proposed common sense approach to the issues. ITAA cautions the FTC, however, to pursue a studied, cautious approach to new electronic media in general and the Internet in particular. The wholesale imposition of existing rules by improper analogy could negatively impact the Internet at a time when its use is growing and Internet-based electronic commerce is in its infancy. As is surely true of many other types of regulation, on the Internet, less is more.
1. ITAA applauds the Commission in general, and Commissioner Anthony in particular, for her efforts to address fraud perpetrated by some senders of unsolicited bulk e-mail, or "spam." The Commission is urged to concentrate attention on spam related issues.