Federal Trade Commission
Washington, DC 20850 Interpretation of Rules and Guides for Electronic Media
Comment, FTC Docket No. P974012
Comments of America Online, Inc.
America Online, Inc. ("AOL") welcomes the opportunity to respond to the Federal Trade Commissions Notice and Request for Comment on its proposal to issue a policy statement regarding the applicability of its rules and guides to new electronic media, such as the Internet, e-mail and CD-ROMs, 63 Fed Reg. 24996 (1998) (the "Notice"). With over 12 million subscribers to its America Online service and over 2 million to its CompuServe service, AOL is the world's leader in branded interactive services. In addition, in an average week, over 345 companies advertise or sell their products or services through the America Online service. Thus, AOL has extensive, first-hand knowledge of the possibilities and difficulties associated with disseminating advertisements and making sales in electronic media.
AOL firmly believes that the principles of fair and truthful advertising embodied in the rules and guides promulgated by the Federal Trade Commission (the "Commission") should apply to new electronic media advertising as they do to advertising in all other media. However, given the unique and still-developing characteristics of the Internet, the Commission should proceed very carefully and deliberately in any proposed application of the rules and guides themselves in this new medium. Technology in electronic media is constantly and rapidly changing, and generalized application of rules and guidelines to all Internet online advertisements would not be fair or make sense because of the vast differences in function, presentation and capabilities of emerging technologies. Given the context of a particular medium or technology involved, an interpretation must be narrowly tailored to prohibit unfair or deceptive practices, without imposing impractical or unnecessary disclosure obligations or creating undue burdens for advertisers
Moreover, application of the rules and guides must be fair and flexible so as not to discriminate against the new electronic media by imposing burdens not applicable to other media. Rather, the rules and guides must be interpreted with the specific goal of fostering continued growth of a medium that offers consumers unprecedented access to information about products and services and tremendous purchasing opportunities with low transaction costs.
Thus, it is appropriate and prudent for the Commission to educate itself thoroughly on the capabilities and limitations of electronic media so that it can better understand the potential implications of any proposed interpretations it might issue. No policy statement should be issued until the many issues and implications can be fully explored. AOL believes the solicitation of comments from industry members and the Commissions suggestion for a public workshop are important initial steps that will assist the Commission in establishing a well-informed policy for applying its rules and guides to newer forms of electronic media. AOL welcomes the opportunity to assist the Commission in this endeavor.
II. PUBLIC WORKSHOP
In the Notice, the Commission asks for comments on the advisability of convening a public workshop to discuss the issues raised in the Notice. AOL fully supports the idea of such a forum and encourages the Commission to convene a workshop as part its policy formulation process. A public workshop would provide an opportunity for participants to explore further the details and nuances of applying FTC rules and guides, originally written for "offline" media, in the Internet online environment, consider applications to specific examples, and hear and discuss the positions of various parties. AOL hereby requests that it be included as a participant in a workshop if the Commission decides to convene one.
AOL addresses its comments to certain issues and questions presented in the Notice as indicated below.
A. Scope of "Electronic Media"
In the introductory section of the Notice, the Commission states that the term "electronic media" refers to "newer forms of electronic media, such as e-mail, CD-ROMs, and the Internet" and notes that the "Internet encompasses the World Wide Web as well as other electronic information-exchanging features." However, technology is continually changing and improving, and interactive or information exchanging features may be integrated into "traditional" electronic media such as television or radio. Thus, it is important that any advertising policy statement, rules or guides issued by the Commission be clear that they apply uniformly to advertising in all substantially similar interactive media, even if they include traditional elements of television or radio.
B. Interpretation of Terms: "Writing," "Written" and "Printed" (Questions 4 7).
In the Notice, the Commission proposes that when used in its rules and guides, the terms "writing," "written" and "printed" "refer to information that is capable of being preserved in a tangible form and read, as opposed to an oral statement that is intangible and transitory." AOL submits that such a definition is not appropriate for this medium, as it fails to take into account the myriad features and effects of electronic media, the capability of many home computer systems to "save" or "print" just about anything appearing on a monitor and an advertisers or merchants intent in providing information on screen.
The many types of electronic communications defy easy classifications and cannot be simply grouped as "writings." Electronic media communications include features that are similar to those found in television, others that are like newspapers or magazines and still others with sound that are like radio. An Internet banner advertisement, for example, may include animation and sound, and then may link to an online "order form." Fairness dictates that some parts of the ad should be considered in light of the standards applicable to television commercials, while perhaps only the "order form" could be considered a "writing."
Even with all these different features contained in electronic media, many computers are capable of preserving them in some form. It is often possible to make "screen shots" of whatever appears on a monitor or to download to a disc images and content from a web page or banner advertisement. However, the fact that something can be preserved in this manner, does not mean it should be considered a "writing." By this standard printed words in a television commercial could be considered "writing" because it is possible to preserve the image with a VCR and later read the contents. Moreover, the image or information saved from a web site loses many of its originally intended features (perhaps animation or sound) and loses the interactive links that can provide consumers with more information and options.
On the other hand, there are some cases where consumers, advertisers and merchants intend for electronic communications to constitute "written" documents. Online order forms or enrollment forms, detailed statements of information that do not change or require links to other areas, and email communications and notices to and from consumers are examples of situations in which the representations in question might be considered "written" or to satisfy a "writing" requirement under a law or regulation. Indeed, proposed Uniform Commercial Code Articles 2 and 2B, and the proposed Uniform Electronic Transactions Act ("UETA"), recognize that an electronically transmitted agreement or form satisfies the Articles' requirements that certain contracts be set forth in a "record." For example, proposed UCC 2-210 provides that "a record or authentication may not be denied legal effect, validity or enforceability solely on the ground that it is electronic." Similar language can be found in UCC 2B-113 and UETA Section 201.
Thus, while the Commissions interpretation could work in certain cases, it is inapposite in others. As such, any interpretation should be narrowly tailored to fit the circumstances of the particular medium, advertisement or transaction involved in a given case. In addition the Commission should note and consider carefully existing and proposed laws like the Uniform Commercial Code to ensure development of consistent rules with respect to "writing" requirements.
C. Interpretation of Terms: "Direct Mail" (Questions 8 10).
The Commissions proposed policy statement would state that the term "direct mail" refers to "private communications, i.e., traditional mail as well as electronic communications that are individually addressed and capable of being received privately." Such an interpretation would equate email to traditional mail, which would not be appropriate in all cases. In addition, the interpretation is somewhat ambiguous with respect to targeted advertising on the Internet, an issue on which the Commission solicits comments in the Notice.
Traditional mail, the method of communication on which the term "direct mail" is apparently based, has a number of similarities to email. Each is sent to a particular address and is capable of being received privately by the recipient.
On the other hand, there are significant differences between email and traditional email that make the wholesale application of rules for "direct mail" to email inappropriate. The capacity to include links to web pages in email and the capability of consumers to respond directly and quickly to the sender of an email provide consumers with significantly greater opportunities to obtain more information about a product or service than traditional mail provides. Thus, a piece of email should not be considered as the equivalent of traditional mail in determining, for example, whether and what disclosures have been made in the piece of mail. The email, with its interactivity and links, may provide more information than a traditional piece of mail, even if the information, which is only a "click" away, is not contained in the "four corners" of the email.
In its Notice, the Commission solicited comments on whether "targeted" advertising on the Internet "should be considered the electronic equivalent of direct mail." AOL submits that it is erroneous to consider "personalized" or specialized banner ads to be "targeted" in the same manner as direct mail. Such advertisements differ significantly from direct mail promotions and should not be considered as such. The Commissions proposed interpretation is problematic in that regard because it could encompass "targeted" Internet advertising in its definition of "direct mail."
Some ads may appear on a web site or in an area of an online service only when a visitor enters the site or area. The appearance of the ads may be based on the subject matter of the area or the fact that the visitor has previously been to the web site. In some cases, the ad may incorporate the visitors electronic identity or email address in a greeting. Such "named" ads are not targeted at all, but simply include a personal identifier based on a software program. One of the difficulties with attempting to define "targeted" ads is that the definition could wrongly include a "named" advertisement.
In addition, ads placed in a particular site or online area (e.g, a sports web site, or a city guide) are no different than ads placed in particular magazines delivered to subscribers in specifically-selected areas or commercials appearing in special interest channels on a local cable system. While these ads are "targeted" in the sense that they are directed at a particular geographic area or demographic group, they do not have the other indicia of private communications directed to a particular recipients address. They are not sent to an individuals address designated for the receipt of correspondence. Rather, they appear when a computer user visits a particular area or site.
The Commissions proposed definition is potentially overinclusive because it could capture such ads, when it should not. Under the Commissions standard, a personalized ad could wrongly be considered "addressed" simply because the visitors electronic identity appears on a greeting in the ad (e.g., "Welcome User123"). Similarly, almost all communications on a computer are "capable of being received privately" because there is typically only one user on a particular computer at one time.
Recognizing the significant differences between email and Internet online advertisements, on the one hand, and traditional direct mail, on the other, the Commission should not attempt on a wholesale basis to apply rules for "direct mail" to electronic communications.
D. Affirmative Disclosure Requirements (Question 11).
The Commission correctly recognizes that "it may be easier, more efficient and less costly for industry members to comply with various [affirmative disclosure] requirements by using electronic media" than by using traditional paper-based methods of providing disclosure. Indeed, many companies already conduct business with other companies using only electronic data interchange to provide information and notices to each other. Similarly, many businesses communicate and transact with consumers electronically without the need for any exchange of paper.
However, rules and guides should not be interpreted, as the Notice suggests, to impose additional burdens of confirming receipt or reading by the consumer. Such an interpretation would unfairly burden interactive merchants and advertisers and increases costs for both businesses and consumers. With respect to traditional mail, notice is deemed to be given if proof of mailing can be provided. If an industry member can verify that electronic notice has been sent to a valid e-mail address, the business should enjoy the same presumption, as it would with traditional mail, that the disclosures have been provided.
E. Clear and Conspicuous Disclosures (Questions 13 19).
The Notice contains an extensive discussion of application of the "clear and conspicuous" standard to disclosures in electronic media. In the Notice, the Commission notes that a disclosure is "clear and conspicuous" if, in the overall context of the advertisement, "it is displayed in a manner that is readily noticeable, readable, and/or audible (depending on the medium), and understandable to the audience to whom it is disseminated." (footnote omitted). AOL believes that the same general standard should apply to electronic media and opposes the imposition of any additional requirements to electronic media. Indeed, because of their interactive features, electronic media offer more and different options for advertisers to make disclosures and for consumers to obtain information than many traditional media.
The Commission lists several factors it would consider in evaluating whether disclosures in electronic media are "clear and conspicuous." AOL addresses a number of these factors below.
1. Unavoidability. The Commission suggests that to be "clear and conspicuous," a disclosure must be "unavoidable," which in electronic media, means "that the consumer should necessarily be exposed to the disclosure without having to take affirmative action, such a scrolling down a page [or] clicking on a link to other pages" to view the disclosure. AOL submits that such an interpretation is neither practical nor necessary for numerous reasons.
First, this interpretation fails to recognize that, by their very nature, interactive electronic media continuously require affirmative actions by the parties to the electronic communications. Second, the interpretation imposes a standard not required of print media. In a print advertisement, the advertiser is often free to place a disclosure at the bottom of a page, which requires a consumer to take the affirmative act of reading to the bottom of the page.
Third, scrolling is an inherent attribute of electronic communication and is controlled as much by the consumer as by the advertiser. Scroll bars are a familiar and common means of "reading down" an on-screen display, whether in a word processing document, spread sheet or web page. Moreover, whether scrolling is required is determined by a number of factors, many of them totally outside the control of an advertiser or interactive service provider. Consumers can configure their browsers to display web pages in different ways and also control the size of various "windows" they might open when viewing various functions and features on their computer screen.
Finally, rather than being an impediment to disclosure, clicking on a link to other pages or information can provide enhanced disclosures to consumers. For example, if a banner advertisement contained references to a warranty, it may be difficult to include all disclosures required by the Guides for Advertising of Warranties and Guarantees, 16 C.F.R. §239, in limited space. This might discourage advertisers from including claims about their warranty coverage in their ads, which would be detrimental to consumers. On the other hand, a button clearly labeled "Warranty Information" appearing in the ad and linking to another page can provide all relevant information to consumers. As long as the information is clearly available to the consumer, the fact that the consumer must take one or two steps to see the information does not mean that the disclosure is not "clear and conspicuous."
2. Access to Disclosures. In the Notice, the Commission suggests that to be effectively communicated, "disclosures should remain accessible to consumers at all times during the communication." The Commission explains further that this means that "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.
Generally, users can quickly and easily return to pages they viewed previously by clicking a "back" button or by using a "history" list. Thus, most Internet and online disclosures remain "accessible" in one respect, and the Commissions proposed standard will be appropriate for certain situations. However, as noted by the Commission in its Notice, electronic media advertisements may contain video or animated features, which are similar to television advertisements. As such, those electronic media advertisements should be treated similarly with respect to disclosure requirements. There is no comparable "accessibility" standard applicable to television commercials, and therefore, it should not be applied discriminatorily to similar ads appearing on the Internet.
3. Proximity, Placement and Prominence. As with any advertisement in traditional media, the location and prominence of a disclosure in an electronic media advertisement should be considered in the overall context of the advertisement in determining whether the disclosure is "clear and conspicuous." Application of additional, rigid proximity, placement or prominence requirements, however, would unfairly burden advertisers and consumers. With the multitude of features available to highlight and deliver disclosures in electronic media, the rules and guides should be applied flexibly to permit advertisers to utilize disclosure delivery methods that are appropriate in the circumstances, as long as they provide the required information to consumers.
In addition, requiring disclosures be of a particular size or color could unnecessarily add to the size of the image to be communicated to consumers and the time it takes to deliver it. This would only add time and expense to consumers and businesses alike and should, therefore, be avoided.
4. Acknowledgement by Consumer. In Question 19, the Commission asks for comment on the costs and benefits of requiring consumers to affirm that they have read and understood disclosures (e.g., requiring consumers to click on an "Understood" button before they could link to other information). In the context of Internet online advertising, such a step would require more pages and add time to the advertising process, thereby increasing costs to advertisers and consumers alike. In addition, imposition of such a requirement could put electronic media at a disadvantage versus traditional media that are not subject to an acknowledgement requirement. Although an individual advertiser may choose, based on its own business objectives, to offer interactive acknowledgement features to consumers in its advertising, such a practice should not be mandatory.
F. New Technology (Question 20).
In the Notice, the Commission asks for guidance with respect to addressing new technologies. Indeed, as stated earlier, it is the continual emergence of new technologies in electronic media that makes wholesale application of rules and guides to electronic media very difficult. As such, the Commission must proceed cautiously, always keeping in mind the ever-changing nature of the Internet and other new media.
There are a host of "rich-media" technologies being developed that take advertising far beyond the approach of banner advertisements with "click-through" to other screens. Applets, streaming ads (slideshows), and virtual worlds are just three examples of technologies that are likely to be integral to e-commerce and advertising in the very near future.
Applets: Advertising or promotion might appear in the form of an "applet," a "mini" software application. For instance, a loan company might present a banner from which a consumer could select a loan type, answer a few financial questions, and then be presented with a credit product and interest rate. It is difficult to say at what stage and where disclosures would need to appear in the operation of the applet. Similarly, applets illustrate the problems of applying "direct mail" rules in the online environment. An applet might be very general until the user starts using it, answering questions and providing data. At some point the resulting information provided to the consumer through use of the applet might be very direct and highly "targeted." However, the applet is not sent to the user in the same way a direct mail piece, a private communication, is directed to a private address.
Streaming Ads: With a streaming ad, a user "watches" or "listens" to the message. As stated previously, these ads are substantially similar to television and radio ads and should not have additional burdens imposed on them simply because they appear in new electronic media.
Virtual Worlds: A "virtual world" could be included in an online advertisement through integration of products such as "Cosmo." In these "virtual worlds," there is no up or down, no beginning or end, no slide bar controls or scrolling. A user, for example, might see an ad for a concert series; after clicking on the banner, the user can "move around" the stadium to find the best seats with the best views, then move on to the box office to look at schedules and then buy tickets. Even the "traditional" Internet actions of clicking, scrolling or printing might not be required. It is difficult to suggest how "offline" rules and guides could be applied in such a context until the commercial use of "virtual world" advertising is fully developed and the Commission, advertisers and consumers fully understand the implications of such technology.
AOL appreciates the opportunity to submit its comments and assist the Commission in developing its policies for application of FTC rules and guides to new forms of electronic media. AOL fully recognizes the need to develop consumer trust in and understanding of Internet online communication and commerce and supports reasonable efforts to ensure that advertisers do not engage in unfair or deceptive practices in any medium.
The Internet online medium changes every day, with new technologies, applications and services constantly emerging. As such, AOL urges the Commission to study the many issues thoroughly and to proceed carefully in proposing any policy for application of rules and guides to electronic media. The Internet online medium offers features and options for communicating information that were not available in the media for which many rules and guides were created. As such, rules and guides must be applied flexibly to recognize the capabilities of new electronic media. On the other hand, application of rules and guides must be fair so as not to discriminate against the Internet online medium by imposing burdens not applicable to other media.
The Commission should take no action that will hamper growth of this nascent medium or add unnecessary costs for consumers or advertisers. Sound policy for application of the Commissions rules and guides to the Internet online environment will ensure that it continues to foster growth of a medium that offers consumers unprecedented access to information and tremendous purchasing opportunities with very low transaction costs.
America Online, Inc.
By: Kevin E. Duke
William W. Burrington