BEFORE FEDERAL TRADE COMMISSION
Interpretation of Rules and Guides for Electronic Media
Comment, File No. P974102
COALITION FOR ADVERTISING SUPPORTED
A coalition of the
July 7, 1998
Harold A. Shoup
Daniel L. Jaffe
These comments are submitted on behalf of the Coalition for Advertising Supported Information and Entertainment ("CASIE"). CASIE is a coalition of the American Association of Advertising Agencies and the Association of National Advertisers, Inc., two trade associations that collectively represent the advertising and advertising agency industries.(1) CASIE seeks to foster the growth of marketing and advertising on the Internet.
CASIE is pleased to submit its comments on the Federal Trade Commission's ("FTC") proposal to issue a policy statement regarding the applicability of its Rules and Guides to newer forms of electronic media (the "proposal"). CASIE commends the FTC for initiating this timely and relevant project. Indeed, CASIE agrees that traditional consumer protection principles should be applicable online.
However, CASIE believes that a policy statement based on the notice would be premature for at least two reasons. First, many of the proposed interpretations of existing FTC's rules are unprecedented and untested even in their traditional contexts. Indeed, as discussed in further detail below, many of these proposed interpretations are likely to prove impractical and/or counterproductive. Second, the speed with which the Internet has evolved in just the past few years demonstrates that the specific interpretations of the type suggested in the notice quickly would be rendered obsolete.
Meanwhile, several industry groups, such as the newly formed Online Privacy Alliance, the Children's Advertising Review Unit of the Council of Better Business Bureaus, and BBBOnline have been extremely active in both policing existing Internet problems and expanding their scope and reach. At the same time, the FTC has continued aggressive policing of the Internet under traditional Section 5 enforcement authority. Given the existing state of enforcement, no immediate need exists for a new Internet policy statement from the FTC.
Accordingly, CASIE recommends that the FTC study these issues further before adopting a policy statement for the Internet. In that regard, if the FTC convenes a public workshop to discuss the issues raised in the notice, CASIE hereby requests an opportunity to participate on behalf of its members.
In these comments, CASIE will not address specific issues experienced by its members on a day to day basis. Instead, CASIE's comments will speak to general advertising principles as they pertain to the Internet and the reasonableness of the FTC's proposals in this regard.
CASIE is concerned that the development of a policy statement today would be premature. A policy statement that is relevant today may be inapplicable to new technologies developed in the near future. CASIE also recognizes that the FTC's enforcement activity in combating online fraud to date has not been hampered by the lack of a clear policy statement. In fact, several of the agency's seminal online cases, including FTC v. Corzine, FTC v. Timothy R. Bean d/b/a D.C. Publishing Group, and FTC v. Brandzwel, involved traditional credit repair, business opportunity, and mail order rule violations, respectively. The Commission's first major Internet case, against Fortuna Alliance, brought an end to an allegedly huge pyramid scheme that bilked consumers out of $11 million dollars. Clearly, the FTC has not been deterred or handicapped in carrying out its consumer protection mission without a policy statement.
CASIE is concerned with the FTC's interpretation of how and when online disclosures should be made. We strongly encourage the FTC to continue to adhere to a "clear and conspicuous" standard when reviewing online disclosures; that is, that a disclosure must be easy to find and must communicate the intended message effectively to a reasonable consumer. In the online environment, there are many different ways to make a disclosure "clear and conspicuous." Advertisers should be provided this flexibility, rather than be required to follow any rigid or mandated formula for the frequency, size or placement of disclosures.
CASIE recognizes that the online medium is unique and presents marketers with new opportunities to provide consumers with vast amounts of information in a truly dynamic environment. However, these opportunities should not be stifled by overly burdensome disclosure requirements; the need for, and placement and presentation of, a given disclosure should be reviewed on a case by case basis according to the specific context of the triggering language. As discussed below, CASIE believes that some of the proposed disclosure requirements are unprecedented and impracticable. Section C. 4. of the proposal discusses the elements the FTC uses to evaluate whether a disclosure is clear and conspicuous in electronic media. We shall discuss each of these elements separately.
The proposal states that the Commission believes that to be effective, a disclosure should be unavoidable:
We note that disclosures have never been required to be "unavoidable" in any FTC rules, guides, or consent decrees. Clearly, a disclosure should be of sufficient size and placement to be seen by a reader, but to require that a disclosure be unavoidable is not a realistic expectation. Consumers will read what they want to read, when they want to read it. Placing a disclosure in or near the central portion of an offer may in fact provide the consumer with too much information, resulting in misapprehension or avoidance altogether. Referencing a disclosure by use of an asterisk or other legend, as is common practice in almost every industry and in every medium (with the exception of the FTC's Guide Concerning Use of the Word "Free" and Similar Representations), will similarly suffice online. A clearly referenced disclosure could still be on the same page of an offer, which consumers will see when they scroll down to view the entire page.
Alternatively, we note that the Internet presents a unique method by which consumers may have access to more comprehensive disclosures than ever before. While traditional modes of advertising, such as print and television, have limited space and time in which to provide all necessary disclosures, resulting in a significant amount of information squeezed into a small space, a Web site's ability to have a consumer hot link to a full disclosure page can also answer additional questions the consumer may have. Furthermore, there can be separate and distinct disclosure pages for each element of an offer. However, to require that a disclosure be unavoidable may be impossible and counterproductive if construed literally.
We also note that an advertiser that wants to make a sale and keep a customer will make sure that all material terms of an offer are made available to and understood by a consumer. Similarly, consumers will be reluctant to accept an offer where the information is incomplete or suspect. In this regard, we note that several FTC officials, including Jodie Bernstein, Director of the Bureau of Consumer Protection, and Eileen Harrington, Associate Director for Marketing Practices, have commented that consumers are reluctant to make online purchases because they are unsure about the security and terms of an online offer. Consumers will be reluctant to make purchases from sites that do not provide essential information or that hide material terms. Accordingly, sites that do not provide consumers with adequate disclosures may well not survive. In addition, sites that engage in fraudulent activities can and should be pursued by the FTC under traditional enforcement tools.
2. Access to Disclosures
CASIE agrees with the FTC that a consumer who hyperlinks from a disclosure to another page should not be prevented from returning to the disclosure. CASIE notes that returning to a page containing a disclosure is easily accomplished by clicking on the browser's "Back" button. Consumers that surf the Internet for information about, and with the intention to buy, particular products and services, are acutely aware of how the medium works, that is, how to search for specific information and navigate through a web site. As opposed to traditional forms of advertising where consumers have information placed before them, consumers that use the Internet are more sophisticated in their buying habits as they exercise greater control over their information gathering. Even the casual surfer knows that clicking on certain items on a page will bring them to another page. CASIE believes that consumers that use the Internet for information and purchases are technologically sophisticated enough to know when and how to access information effectively from a given web page.
3. Proximity and Placement
The proposal correctly indicates that Internet advertisements often include many pages and that the length of any Web site page can easily exceed the length of a traditional off-line page. However, CASIE believes that a consumer seriously considering an online offer likely will read as much information as he feels is necessary before making a purchase. Therefore, CASIE believes that it is likely that a consumer will scroll through an entire page and link to other pages seeking relevant information before accepting an offer. If necessary, the FTC should only require that disclosures be easily available to those consumers that choose to read them.
The proposal also states that the "effectiveness of disclosures is ordinarily enhanced by their proximity to the representation they qualify." CASIE agrees with this statement to the extent that the disclosure presents the reader with necessary and relevant information about a specific term of an offer without providing too much information. Requiring a disclosure to appear on the same screen as a triggering representation may not be feasible, and may in fact be counterproductive, as some advertising may include multiple triggering terms for which significant disclosures would be required. This situation clearly would present the reader with too much information in one place, as well as compromise the fluidity, and hence, comprehension, of the primary message. Instead, CASIE believes that a triggering term that appears in a color different from the full text or is noticeable due to other technologically feasible mechanisms (such as blinking), which signify that it may be linked to the required disclosures for that term, would allow an advertiser to provide all necessary (and other relevant) information on the disclosure pages.
Providing a required disclosure in a separate frame may provide consumers the ability to read through an offer and at the same time keep the disclosure on the screen. While this vehicle may be available to large sophisticated sites, smaller sites or those with less technical capabilities may not be able to provide this mechanism. Therefore, although the split frame concept could make sense in certain circumstances, it may not be feasible for all site operators, due to economic or technological restraints, and certainly should not be mandated.
The FTC suggests that disclosures that are "large in size and/or emphasized through a contrasted color and remain visible or audible for a sufficiently long duration, are likely to be more effective than those lacking such prominence." CASIE believes that a disclosure should be evaluated on the basis of whether or not it is clear and conspicuous to a reader. In this regard, a disclosure should not be required to appear in a specific location or be visible for a stated amount of time, but rather, should be evaluated on its ability to effectively communicate the intended message.
In some instances repeated disclosures may enhance the likelihood of consumers noticing and understanding them, but repetition should not be required to meet the clear and conspicuous standard.
6. Acknowledgment Button (Question 19)
Question 19 of the proposal queries whether the interactive nature of the Internet presents an opportunity to assure that disclosures are noticed and understood, by, for example, having a consumer click on an "Understood" button after reading and before accepting an offer. There may be value in employing such a mechanism, particularly in situations where a consumer may later claim that he did not understand the nature of the offer. It provides the marketer with proof that the consumer took affirmative action to acknowledge his understanding of the offer. However, utilizing such a mechanism should be the decision of the marketer and should not be mandated. This type of acknowledgment is not required in any other advertising medium; a consumer's mere acceptance of an offer has traditionally been sufficient evidence that he read and understood its terms. Moreover, some sites may lack the technology necessary to employ the mechanism and capture and maintain responses thereto.
C. Additional Specific Standards Contained in Rules and Guides
CASIE notes that the FTC proposes to interpret rules and guides that require specific type sizes to apply to electronic media. While CASIE strongly supports adoption of a "clear and conspicuous" standard in electronic media, it questions how specific type sizes may be maintained on different computer platforms, developed in varying languages, and appear on different sized monitors. Clearly, it is impossible to require that disclosures appear in specific type sizes given the multiplicity of elements that affect how each character is created, transferred, displayed, and viewed. Even if technologically feasible, it should be the decision of the advertiser to determine how best to effectively provide such information to consumers.
D. Perspective of the Reasonable Consumer
CASIE strongly supports the FTC's proposal to examine representations and practices from the perspective of the reasonable consumer.
E. Direct Mail
CASIE agrees that the term "direct mail" should be applicable to electronic communications that are individually addressed and capable of being received privately. CASIE does not believe that the term should encompass advertising that appears on a user's screen simply because he or she entered a certain search term or engaged in a particular click stream pattern. These advertisements appear most often where a consumer enters a specific search term in a search engine, and based on that entry, a specific advertisement that is related to the search term appears in a banner adjacent to the search form. CASIE notes that these advertisements are solely term driven, that is, they are not created for or directed to specifically designated individuals, and are simply made available to consumers entering an identical or similar search term. Therefore, CASIE does not believe that these forms of advertising should be considered direct mail.
CASIE appreciates the opportunity to offer its comments on the FTC's proposal to provide industry and consumers with a policy statement regarding its interpretation of its rules and guides in electronic media. While CASIE understands and encourages the FTC's interest in this area, we believe that a policy statement could be outdated as soon as its adopted. Furthermore, as discussed above, the proposals set forth in the Federal Register notice may not be feasible for all Web site operators and present interpretations that may be impracticable and indeed, unprecedented. CASIE is also concerned that any rigid regime of disclosure requirements mandated by the FTC could also raise serious First Amendment concerns. CASIE therefore believes that additional dialogue, particularly in the form of a workshop, would be necessary before any formal policy statement is instituted. Accordingly, CASIE would welcome the opportunity to participate in a public workshop to discuss these issues further should the FTC determine that such a forum is necessary.
COALITION FOR ADVERTISING SUPPORTED
American Association of Advertising Agencies
Association of National Advertisers, Inc.
Hall Dickler Kent Friedman & Wood LLP
1. The American Association of Advertising Agencies (AAAA) is the national trade association of the advertising agency business. Its more than 1,300 advertising agency offices across the country produce approximately 80% of all national advertisements, as well as significant portions of regional and local advertising. AAAA is dedicated to the preservation of a robust free market in commercial ideas.
The Association of National Advertisers, Inc. (ANA) is the advertising industry's oldest trade association and the only organization exclusively dedicated to serving the interests of corporations that advertise regionally and nationally. ANA's membership is a cross-section of American industry, consisting of manufacturers, retailers and service providers. Representing more than 7,300 separate advertising entities, its member companies market a wide array of products and services to consumers and other businesses. ANA represents the needs of its members through advertising industry leadership, legislative leadership, information resources, professional development and industry-wide networking.