Federal Trade Commission Chairman Robert Pitofsky
at the FTC-FCC Joint Public Forum on Advertising and
Marketing of Dial-around and Other Long Distance Services*
November 4, 1999
Good morning. I would like to thank the Federal Communications Commission for working with the Federal Trade Commission to organize this public forum on the advertising of dial-around and other long-distance telecommunications services. I would particularly like to thank Chairman Kennard for the leadership he has shown in emphasizing the importance of responsible, non-deceptive advertising, and by establishing strong consumer protection policies as an important agency goal.
This forum, co-hosted with FCC, affords a unique opportunity to combine each agency's expertise and work with industry, consumer groups and the states to look at the advertising and marketing of dial-around and other long distance services. We want to learn more about how these services are advertised and encourage good advertising for telecommunications.
Not so long ago, consumers had no choice about what long-distance service to select. There was one option -- one size fits all -- offered by AT&T, and consumers could either take it or leave it. Also, until only recently, not many of us had even heard of dial-around services. Today, we have seen tremendous growth in the number and type of choices offered to consumers about what long-distance services they can choose. The provision of long-distance services has become an intensely competitive area, and there is no question that competition has improved what is offered to consumers.
We are all aware of concerns expressed about certain advertising for dial-around and other long-distance services. Many consumers are not accustomed to the notion of shopping for a long-distance carrier and the barrage of advertising across all media has led to considerable confusion. As you know, I am a steadfast advocate of the role advertising plays to benefit sellers, consumers and competition. It is a powerful tool that enables consumers to learn of new products and services, to understand existing choices, and to be able to decide in a fast and efficient manner what service likely fits their individual needs. At the same time, advertising spurs innovation and competition.
Indeed, we need only look at the explosion in the advertising of long-distance services to see a vivid example of such growth. Given the paramount importance of advertising in the market place, the Supreme Court was right to extend First Amendment protections to commercial speech.
The fundamental principle of advertising law enforced by the FTC for decades is that advertising must be truthful and non-deceptive. We have articulated such basic principles of advertising law and applied them through formal law enforcement actions and regulations, and through industry guidelines and consumer and business education outreach efforts. If I see an advertisement for an automobile lease that touts "zero down," I should not learn when I go to the dealership that in fact there are added fees totaling upwards of $1000 required as a down payment. That's a false ad and we've brought many cases challenging such misconduct.
Complaints about dial-around and other long distance services suggest similar problems might exist. I've seen ads that have large bold rate claims and have struggled - often unsuccessfully without a magnifier because its size is less than one seventieth of the prominent price claim - to read the mouse print buried at the bottom indicating that extra monthly fees apply. We've heard complaints that some consumers simply never received such key pieces of information.
I've also seen ads comparing one plan to various other plans. The catch - unbeknownst to me and I suspect others -- is that the rates of the rivals that are compared have not been in effect for months and no longer reflect what they are offering. By the same token, comparisons to so-called "basic rates" may well be troubling because it is unclear whose rates they refer to or what those rates may be.
These types of marketing materials raise significant concerns and implicate fundamental advertising law issues not dissimilar to those the FTC has examined across the full range of consumer products and services, from automobile leasing, as I mentioned before, to advertising for foods and dietary supplements.
The FTC has a long history of ensuring that advertising is truthful and non-deceptive. Today, with the FCC, we want to be clear on what advertising law principles should be followed. I join Chairman Kennard in expressing the hope that this industry will undertake greater efforts at compliance with the well-established advertising law principles. The FTC is ready to consider ways in which the agency can assist this effort, such as through the issuance of advertising guidelines. But, if we do not see an improvement in the accuracy and clarity of the advertisements, we will work with the FCC to consider what other actions are appropriate. I believe this forum offers a genuine opportunity to ensure that consumers receive the kind of accurate and material information in advertising they are entitled to receive. There should be a race to the top in providing truthful ads, not a race to the bottom.
* These remarks represent the views of the Chairman and are not necessarily representative of the views of the entire Commission or any individual Commissioner.