Remarks by Bureau of Consumer Protection Director Jodie Bernstein at the FTC's Workshop on Application of Rules and Guides to Electronic Commerce

Remarks by Jodie Bernstein

For Release

 

May 14, 1999

Welcome to the FTC workshop on our consumer protection rules and guides. Our goal today is to discuss how they apply to newer forms of electronic media, with particular emphasis on the Internet, today's newest, and most dynamic, marketplace.

I want to take this opportunity to explain the Commission's approach to this emerging marketplace. As many of you know, online commerce is booming. And why not? The Internet gives consumers more choice and 24-hour, 7-day a week convenience. Whether it's computers or handmade baskets from Africa, you can find it and buy it online. And on the business side, it gives established marketers and creative entrepreneurs low-cost access to a virtually unlimited customer base.

The numbers show that consumers, marketers and advertisers are discovering the advantages of doing business online. According to the Department of Commerce, the amount consumers spent shopping online in 1998 - approximately 9 billion - eclipsed all expectations. And the proportion of retailers selling on the Internet tripled in just one year -- from 12 percent in 1997 to 39 percent in 1998.

By the same token, online advertising has enjoyed exponential growth-from $300 million in 1996 to $2 billion in 1998. (Jupiter Communications). Although this constitutes a relatively small percentage of national advertising expenditures, there is every indication that this trend will continue to skyrocket.

Just as consumers, retailers, marketers and advertisers have moved to the Internet, so has the FTC. Our efforts have included traditional law enforcement under our statutes, rules and guides, creative consumer and business education, and a special focus on policy issues unique to the Internet, such as online privacy and global electronic commerce. And with the exception of our ongoing rulemaking on children's online privacy which was mandated by statute, we have been successful in pursuing these efforts under our existing legal authority.

One of our latest projects is designed to help us focus on the burgeoning area of Internet advertising. The Bureau of Consumer Protection now has an Internet Advertising group within our Division of Advertising Practices. It is a one year project that is staffed by experienced FTC attorneys and computer specialists who are helping us build a state-of-the-art Internet lab.

Our goal is to become familiar with the online advertising, and industry trends and techniques. The group will rely on traditional advertising law principles - that advertising must be truthful and objective claims must be substantiated - and apply them to the Internet in a way that both protects consumers and recognizes the unique technology and benefits of the Internet. The Internet Lab will provide hardware and software to enhance our ability to monitor web advertising and marketing practices in a systematic way.

This project is a continuation of the Commission's longstanding policy to apply existing legal principles to evolving forms of advertising, whether it be infomercials, pay-per-call telephone (i.e., 900#), cable television or the Internet. It is consistent with our broader mission to better understand the unique issues presented by the new electronic marketplace and to help ensure that advertising on the Internet complies with FTC law.

The project that is culminating in today's workshop is also part of our overall mission to apply existing FTC law to the electronic marketplace. Our goal is to provide guidance for businesses about how to comply with the law in their online advertising and commercial transactions.

The Commission's rules and guides cover some 40 subjects ranging from environmental marketing claims to textile labeling. Nonetheless, we are aware that with respect to some aspects of these rules and guides there may be some uncertainty about how they apply to new media.

Because many of our rules and guides require that material information be disclosed "clearly and conspicuously" we will devote much of today's discussion on considerations affecting how disclosures can be made in electronic media advertisements. This analysis will take into account the unique features of Internet advertising, as well as the unique benefits it provides to consumers, and we are going to use some wonderful mock ads to illustrate these points.

The discussion later this afternoon will focus on the interpretation of the terms "written," "writing" and "printed," as used in the rules and guides, in light of the use of electronic media. This session also will discuss how electronic media may be used to comply with requirements to provide information to consumers "in writing" or by "mail."

I want to conclude with some special thanks to those responsible for pulling this together. First and foremost, I want to congratulate Laura DeMartino of the Division of Enforcement. Laura has taken the lead on this project from its inception, and with her customary competence and thoroughness has performed at a level beyond what anyone could reasonably expect. Of course, Laura has had tremendous support and help from many others in the agency.

This has been a multi-divisional, multi-bureau project which also included support from some of our Regional Offices. I want to give special thanks to Beverly Thomas and Dean Forbes of the Division of Advertising Practices, Faith Vieno of the Division of Enforcement, Tracy Thorleifson of the Seattle Regional Office, Sara Greenberg of the Boston Regional Office, Ori Lev of the Division of Financial Practices, Alice Saker Hrdy and Dana Rosenfeld of my office, Liz Grant of the Division of Marketing Practices, Lou Silversin of the Bureau of Economics, and Randy Clark of the Division of Policy and Information. Bruce Jennings and Barri Hutchins of our office of Information and Technology Management also deserve mention for their technical assistance. I also want to acknowledge Elaine Kolish, Associate Director for Enforcement, who has done a wonderful job managing this project, and I know will do a equally wonderful job leading the discussion today.

Finally, I want to thank the Direct Marketing Association and the Grocery Manufacturer's Association for generously providing us with coffee and snacks today.

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