To: Secretary, Federal Trade Commission
Date: July 3, 1998
The Silicon Valley Software Industry Coalition consists of several of the software and electronic commerce industry's leading edge companies. Collectively our members have over 240,000 employees and world-wide revenues of over $60 billion. Coalition members are focused on providing various components of the infrastructure for electronic commerce. Additional information on the Silicon Valley Software Industry Coalition is available on the Internet at www.SoftwareIndustry.org/coalition/
The Coalition is pleased to see that the Federal Trade Commission is considering revision of its policies regarding the applicability of its rules and guides to newer forms of electronic media. We encourage the FTC in those efforts and appreciate the opportunity to comment on the issues that would be a part of proposed policy revisions.
Silicon Valley Software Industry Coalition members use a variety of electronic media in the marketing and distribution of their products. In addition, our members provide products that enable other companies to use electronic media in their marketing and distribution functions. The Coalition strongly supports disclosure to consumers of information which leads to informed decision making on the part of buyers of information products. We support efforts to adjust standards for required disclosures to new technologies. However, we caution the Commission that such adjustments should focus on general standards that can be applied to a broad range of existing and future technologies. Standards should not be established in terms of specific design requirements relating to currently existing technologies.
Our comments will focus on three areas:
Paper Specific Terms
Requirements that disclosures be provided on paper are an inhibitor to electronic means of engaging in commerce. We urge to Commission to revise its specific rules and guidelines where necessary to make clear that electronic disclosures which are capable of being preserved for later review constitute acceptable disclosure mechanisms. We would request that the Commission focus on the ability to preserve and later access the information presented and to avoid delving into the confusing and contentious question of whether or not information preserved in electronic form is "tangible". Focusing on preservation and access is consistent with a consideration of whether the disclosures meet their intended purposes.
Clear and Conspicuous Disclosures
As the FTC's May 6 notice points out, many rules and guides contain disclosure requirements mandating or advising that disclosures be ``clear and conspicuous.'' While guidance is available on what the terms ``clear and conspicuous" mean in printed formats, guidance is needed on what the terms mean in electronic format. Electronic formats can be subject to technological restraints or user-specified control settings that affect the display of information in ways that are beyond the control of the provider of the information. These restraints or user preferences must not be allowed to act as a barrier to provision of information in electronic form. On the other hand providers should be encouraged to leverage the ability to use electronic features to enhance clarity and conspicuousness for users whose preferences allow such enhancement.
The Coalition is concerned with the issue of "unavoidability" of disclosures, as discussed in section II(C)(4)(a) of the May 6 notice. Our concern is twofold. Our first concern is that the disclosing party does not have control over the technology used to access the information in which the disclosure is contained. A handheld device may display information in a different format than a desktop device. In particular the screen size will be smaller and will of necessity display a different amount of data than a device with a larger screen. Our second concern is that any requirement to display specific information in a specific screen location of necessity limits the amount of information that can be so disclosed. As has long been realized in other media, there is a tradeoff between "unavoidability" and quantity of information. A requirement to provide the entirety of a disclosure on a single screen without an ability to link, activate a "pop up", or scroll, forces the provider to display the required information in as concise and cryptic a manner as possible while still meeting the requirements of the law. In some cases this will mean using legal terminology that is unfamiliar or even confusing to the consumer, without additional language that makes the disclosure more meaningful to the consumer. We are concerned that an unavoidability requirement would eliminate the advantage of electronic media by restricting it to the restraints of printed media. In fact, it would limit it beyond what is required of printed media. In particular, forbidding the use of scrolling or linking to access required disclosures limits electronic media to placing disclosures, in their entirety, on the "front page" of an electronic document. For comparison purposes, the FTC's guide(1) on the use of the word "Free" states that one of the required conditions for avoiding the preclusion of a mere notice of the existence of a ``Free'' offer on the main display panel of a label or package is that "the notice informs the customer of the location, elsewhere on the package or label, where the disclosures required by this section may be found" (emphasis added). We strongly believe that the FTC should encourage the use of scrolling, pop-ups, and links rather than discourage that use. The advantages of the essentially unlimited display space made possible by electronic media should be leveraged to provide MORE informative disclosures, not limited to force provision of less information.
Rather than making "unavoidability' the standard, the Coalition believes that a more appropriate standard is "unavoidability of availability" of disclosure. By this we mean that the consumer viewing an advertisement should necessarily be exposed to a clear and conspicuous indication that the text of the required disclosure is available, rather than requiring that the consumer necessarily be exposed to the entire text of the disclosure. Thus we specifically disagree with a requirement that the consumer not have to take any affirmative action such as scrolling down a page or clicking on a link. The FTC May 6 notice (especially footnote 51) compares the use of clickable icons or hyperlinking to the use of a footnote to which reference is made by an asterisk. The Coalition believes that clickable icons or hyperlinks are significantly different from the use of asterisk in that the asterisk does not, and cannot, inherently indicate the location of the referenced footnote. Clickable icons and hyperlinks are specifically used to not only indicate an exact location but to actually transport the reader to the point where the information is located. We believe the FTC would be fundamentally misguided if it discouraged the use of such information enhancing mechanisms. In fact, because of their ability to provide more and better information to consumers, we believe the FTC should encourage the use of clickable icons, hyperlinks and other information enhancing techniques. Those techniques do not detract from disclosures, rather they enhance them.
We note also the Commission's discussion on the use of frames and other technologies in section II(C)(4)(d) of the May 6 notice. The Commission solicits input as to whether such technologies add to or detract from the prominence of disclosures. The Coalition is concerned that the FTC may issue policies or guidelines that are technology specific. The Coalition believes that technology specific guidelines discourage the use of new technologies, including those which enhance prominence, or which enhance prominence within specific markets. Technology specific rules and guidelines should be avoided to the extent that they limit or discourage the use of other technologies.
The Coalition is concerned that the FTC's belief that the display of disclosures both visually and in audio for those promotions that are presented in both modes are more effective may lead to requirements that disclosures be made in multiple modes. While we do not object to multiple-mode disclosure being looked upon as indication of intent to clearly and conspicuously disclose, we would be concerned that requirements for multiple-mode disclosure would preclude some technologies from use. For example, a display could be not only visual and audio, but tagged using XML to interface with automated information gathering and purchasing programs. A requirement to provide audio disclosure may not be practical or desirable in the context of an automated purchasing transaction which interacts with the same page, although in a different manner.
The Coalition is also concerned in general that specifications requiring a particular type size may be difficult or impossible to translate to Internet displays, especially since the design of the page to be displayed may be overridden by alternate display technologies or user preference settings. Even requirements for "more" prominence than other text could be problematical in this area. We would suggest consideration of universally applicable techniques such as stating required disclosures in all caps in a type size that is no less prominent than the balance of the text.
Automated Acquisition Technologies
In the future acquisition of both electronic and non-electronic products by automated means is expected to increase. While automated acquisition methods (EDI) exist today, they tend to be limited to parties with existing contractual relationships. New services and technologies are coming into existence that will automate acquisition procedures between previously unrelated parties. Those technologies are expected to serve both businesses and consumers. The Coalition urges the Commission to keep these emerging technologies in mind when revising disclosure policies. In particular the Commission should avoid developing rules that would preclude the use of automated acquisition technologies. For example, a requirement to provide warranty disclosures on the first page of an Internet document in such a way that the buyer could not avoid looking at it could inadvertently preclude the buyer's use of an electronic agent to automatically purchase the product once certain buyer specified requirements contained in an electronic purchasing agent were met. On the other hand a requirement that such disclosures be "made available" could enable both purchases by user browsing of the Internet page, AND by automated delivery of the disclosure (or the disclosure's URL) via an electronic agent.
We would also like to draw the Commission's attention to the provision in Section 208 (b) of the second reading draft of Uniform Commercial Code Article 2B. That section deals with the situation in which the offer is made subject to terms which the buyer may not have had an opportunity to review until after becoming obligated to pay for the information being acquired. If the purchaser does not agree to the terms upon review and returns or destroys (as provided) the information, the provision grants a right to the purchaser for a refund, reimbursement of any reasonable expenses of obtaining the refund, and compensation for any foreseeable loss caused by the installation of the information, if the information must be installed to enable review of the terms and the system is not returned to its original condition upon de-installation of the information.
Even now, prior to the adoption of Article 2B, many software publishers offer these or similar terms. Such terms appropriately balance the consumer's need for disclosure with the consumer's need for convenience. They enable the publisher to provide both convenience and disclosure. We recommend that the FTC consider whether a similar approach might be appropriate for certain FTC rules and guidelines as they relate to required disclosures especially when the disclosure is made as part of an automated transaction. We believe that such an approach is particularly appropriate for transactions which are easily "undone" - either prior to actual shipment of a physical product (when possible), by destruction of an electronically provided product such as music or software, or prior to access to or use of an electronic service. In today's electronic commerce environment, the most commonly used payment mechanism (credit card) has significant consumer protections associated with it. Consumer protections in the form of required disclosures should adjust to reflect this reality of electronic media and should thus offer consumers additional convenience in their purchasing habits when appropriate.
The Silicon Valley Software Industry Coalition appreciates this opportunity to present our views on updating the Commission's rules and guidelines to accommodate new technologies. We urge the Commission in doing so to seek to enable new technologies and in particular to enable those aspects of new technologies that promise enhanced consumer access to product information and that promise enhanced consumer convenience in product acquisition. We support the intention indicated in the May 6 notice to focus on whether a notice or disclosure can be preserved for later review, rather than whether it is presented on paper. However, we believe that the proposed conspicuousness requirements are not only inappropriate but detrimental. We urge the Commission to reconsider their position on this issue.