Although the number of
companies advertising onlineand the number of consumers
shopping onlineare soaring, fraud and deception may dampen consumer confidence in the e-marketplace. But cyberspace is not without boundaries, and fraud and deception are unlawful no matter what the medium. The FTC has enforced and will continue enforcing its consumer protection laws online to ensure that products and services are described truthfully in online ads and that consumers get what they pay for. These activities benefit consumers as well as sellers, who expect and deserve a fair marketplace.
Many of the general principles of advertising law apply to Internet ads, but new issues arise almost as fast as technology develops. This booklet describes the information businesses should consider as they develop online ads to ensure that they comply with the law. Briefly,
|The same consumer protection laws that apply to commercial activities in other media apply online. The FTC Acts prohibition on "unfair or deceptive acts or practices" encompasses Internet advertising, marketing and sales. In addition, many Commission rules and guides are not limited to any particular medium used to disseminate claims or advertising, and therefore, apply to online activities.|
|Disclosures that are required to prevent an ad from being misleading, to ensure that consumers receive material information about the terms of a transaction or to further public policy goals, must be clear and conspicuous. In evaluating whether disclosures are likely to be clear and conspicuous in online ads, advertisers should consider the placement of the disclosure in an ad and its proximity to the relevant claim. Additional considerations include: the prominence of the disclosure; whether items in other parts of the ad distract attention from the disclosure; whether the ad is so lengthy that the disclosure needs to be repeated; whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration; and, whether the language of the disclosure is understandable to the intended audience.|
To make a disclosure clear and conspicuous, advertisers should:
|Commission rules and guides that use specific
terms"written," "writing," "printed" or "direct
mail"are adaptable to new technologies.
and day out, businesses are going online to advertise and sell their products
and services. The Internet combines aspects of print, television, and radio advertising in an interactive environment, and while it presents a new and fast-paced experience for consumers, it also raises interestingand occasionally complexquestions about the applicability of laws that were developed long before "dot com" became a household phrase.
The Federal Trade Commission has examined how its own consumer protection rules and guides apply to advertising and sales made via the Internet. This staff working paper discusses FTC requirements that disclosures be presented clearly and conspicuously, in the context of Internet advertisements. It also discusses how certain rules and guides apply to online activities, when the rule or guide refers to "written" ads or "direct mail" solicitations or requires notices to be sent to consumers.
The publication of this staff working paper follows a public comment period and a public workshop which was held to discuss the applicability of FTC rules and guides to online activities.1 In evaluating how disclosures can be displayed clearly and conspicuously in online ads, the comments and workshop discussion focused specifically on disclosures required by the rules and guides.2 The same analysis that applies to rule and guide disclosures also applies to disclosures that are necessary to prevent deception under Section 5 of the FTC Act. They, too, must be clear and conspicuous. Therefore, this paper addresses both types of disclosures.3
II. The Applicability of FTC Law to Internet Advertising
The FTC Acts
prohibition on "unfair or deceptive acts or practices" broadly covers
advertising claims, marketing and promotional activities, and sales practices in general.4 The Act is not limited to any particular medium. Accordingly, the Commissions role in protecting consumers from unfair or deceptive acts or practices encompasses advertising, marketing, and sales online, as well as the same activities in print, television, telephone and radio. Indeed, since 1994, the Commission has brought over 100 law enforcement actions to stop fraud and deception online and is working to educate businesses about their legal obligations and consumers about their rights.
For certain industries or subject areas, the Commission issues rules and guides. Rules prohibit specific acts or practices that the Commission has found to be unfair or deceptive.5 Guides help businesses in their efforts to comply with the law by providing examples or direction on how to avoid unfair or deceptive acts or practices.6 Many rules and guides address claims about products or services or advertising in general and are not limited to any particular medium used to disseminate those claims or advertising.7 Therefore, the plain language of many rules and guides applies to claims made on the Internet.8 For example, the Mail or Telephone Order Merchandise Rule, which addresses the sale of merchandise that is ordered by mail, telephone, facsimile or computer, applies to those sales regardless of "the method used to solicit the order."9 Solicitations made in print, on the telephone, radio, TV or online naturally fall within the Rules scope. In addition, the Guides Concerning the Use of Endorsements and Testimonials in Advertising apply to endorsements, which are defined as "any advertising message . . . [that] consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser."10 The Guides refer to advertising without limiting the media in which it is disseminated, and therefore, encompass online ads.
III. Clear and Conspicuous Disclosures in Online Advertisements
When it comes to online ads, the basic principles of advertising law apply:
Advertising must be truthful and not misleading;11
Advertisers must have evidence to back up their claims ("substantiation");12 and
Advertisements cannot be unfair.13
Unique features in Internet ads also may affect how an ad and any required disclosures are evaluated.
A. Background on Disclosures
Advertisers must identify all express and implied claims that the ad conveys to consumers. When identifying claims, advertisers should not focus only on individual phrases or statements, but should consider the ad as a whole, including the text, product name and depictions.14 If an ad makes express or implied claims that are likely to be misleading without certain qualifying information, the information must be disclosed. Advertisers must determine which claims might need qualification and what information should be provided in a disclosure. If qualifying information is necessary to prevent an ad from being misleading, advertisers must present the information clearly and conspicuously.
A disclosure only qualifies or limits a claim, to avoid a misleading impression. It cannot cure a false claim. If a disclosure provides information that contradicts a claim, the disclosure will not be sufficient to prevent the ad from being deceptive. In that situation, the claim itself must be modified.
Many Commission rules and guides spell out the information that must be disclosed in connection with certain claims. In many cases, these disclosures prevent a claim from being misleading or deceptive.15 Other rules and guides require disclosures to ensure that consumers receive material information about the terms of a transaction,16 or to further public policy goals.17 These disclosures also must be clear and conspicuous.
B. The Clear and Conspicuous Requirement
Disclosures that are required to prevent deceptionor to provide consumers material information about a transactionmust be presented "clearly and conspicuously."18 Whether a disclosure meets this standard is measured by its performancethat is, how consumers actually perceive and understand the disclosure within the context of the entire ad. The key is the overall net impression of the adthat is, whether the claims consumers take from the ad are truthful and substantiated.19
In reviewing their online ads, advertisers should adopt the perspective of a reasonable consumer.20 They also should assume that consumers dont read an entire Web site, just as they dont read every word on a printed page.21 In addition, it is important for advertisers to draw attention to the disclosure. Making the disclosure available somewhere in the ad so that consumers who are looking for the information might find it doesnt meet the clear and conspicuous standard.
Even though consumers have control over what and how much information they view on Web sites, they may not be looking foror expecting to finddisclosures. Advertisers are responsible for ensuring that their messages are truthful and not deceptive. Accordingly, disclosures must be communicated effectively so that consumers are likely to notice and understand them.
C. What are Clear and Conspicuous Disclosures?
There is no set formula for a clear and conspicuous disclosure. In all media, the best way to disclose information depends on what information must be provided and the nature of the advertisement. Some disclosures are quite short, while others are more detailed. Some ads use only text, while others use graphics, video and audio. Advertisers have the flexibility to be creative in designing their ads, so long as necessary disclosures are communicated effectively and the overall message conveyed to consumers is not misleading.
To evaluate whether a particular disclosure is clear and conspicuous, consider:
the placement of the disclosure in an advertisement and its proximity to the claim it is qualifying,
the prominence of the disclosure,
whether items in other parts of the advertisement distract attention from the disclosure,
whether the advertisement is so lengthy that the disclosure needs to be repeated,
whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration, and
whether the language of the disclosure is understandable to the intended audience.
The following discussion uses these traditional factors to evaluate whether disclosures are likely to be clear and conspicuous in the context of online ads. In the online version of this booklet, the underlined hyperlinks link to mock ads. In the printed booklet, the circles in the margin correspond to mock ads in the appendix. Each mock ad presents a scenario to illustrate one or more particular factors. Advertisers must consider all of the factors, however, and evaluate an actual disclosure in the context of the ad as a whole.
1. Proximity and Placement
A disclosure is more effective if it is placed near the claim it qualifies or other relevant information. Proximity increases the likelihood that consumers will see the disclosure and relate it to the relevant claim or product. For print ads, an advertiser might measure proximity in terms of whether the disclosure is placed adjacent to the claim, or whether it is separated from the claim by text or graphics. The same approach can be used for Internet ads. Web sites, however, are interactive and have a certain depthwith multiple pages linked together and pop-up screens, for examplethat may affect how proximity is evaluated.
a. Evaluating Proximity in the Context of a Web Page
Some disclosures must be made when an ad contains a certain claim (often referred to as a "triggering claim"). On a Web page, the disclosure is more likely to be effective if consumers view the claim and disclosure together on the same screen. Example 1. Even if a disclosure is not tied to a particular word or phrase, it is more likely that consumers will notice it if it is placed next to the information, product, or service to which it relates.
In some circumstances, it may be difficult to ensure that a disclosure appears on the "same screen" as a claim or product information. Some disclosures are long and difficult to place next to the claims they qualify. In addition, computers and other information "appliances" have varying screen sizes that display Web sites differently.22 In these situations, consumers may need to scroll to view a disclosure. If scrolling is necessary, advertisers should ask whether consumers are likely to do it. If consumers dont scroll, they may miss important qualifying information and be misled.
In these circumstances, advertisers are advised to:
Use text or visual cues to encourage consumers to scroll.
Text prompts can indicate that more information is available. An explicit instruction like "see below for important information on diamond weights" will alert consumers to scroll and look for the information. The text prompt should be tied to the disclosure that it refers to. General or vague statements, such as "see below for details," provide no indication about the subject matter or importance of the information that consumers will find and are not adequate cues.
The visual design of the page also could help alert consumers to the availability of more information. For example, text that clearly continues below the screen, whether spread over an entire page or in a column, would indicate that the reader needs to scroll for additional information. Example 2. Advertisers should consider how the Web page is displayed by the default Web browser setting for which the ad is designed, as well as for different display options.
A scroll bar on the side of a computer screen is not a sufficiently effective visual cue. Although the scroll bar may indicate to some consumers that they have not reached the end of a page, many consumers may not look at the scroll bar. In fact, some consumers access the Internet with devices that dont display a scroll bar.
Avoid Web page formats that discourage scrolling.
The design of some pages might indicate that there is no more information on the page and no need to continue scrolling. If the text ends before the bottom of the screen or readers see several inches of blank space, chances are they will stop scrolling and miss the disclosure. Example 3. In addition, if there is a lot of unrelated informationeither words or graphicsseparating a claim and a disclosure, even a consumer who is prompted to scroll might miss the disclosure or not relate it to a distant claim theyve already read.
b. Hyperlinking to a Disclosure
With hyperlinks, additional information, including disclosures, might be placed on a Web page entirely separate from the relevant claim. Disclosures that are an integral part of a claim or inseparable from it, however, should be placed on the same page and immediately next to the claim. In these situations, the claim and the disclosure should be read at the same time, without referring the consumer somewhere else to obtain the disclosure. This is particularly true for cost information or certain health and safety disclosures. For example, if the total cost of a product is advertised on one page, but there are significant additional fees that the consumer would not expect to be charged, the existence of those additional fees should be disclosed on the same page and immediately adjacent to the total cost claim.23 Example 4. In other situations, it may not even be necessary to use a hyperlink to convey disclosures. Often, disclosures consist of a word or phrase that may be easily incorporated into the text, along with the claim. Example 5. This placement increases the likelihood that consumers will see the disclosure and relate it to the relevant claim.
Under some conditions, however, a disclosure accessible by a hyperlink may be sufficiently proximate to the relevant claim. Hyperlinked disclosures may be particularly useful if the disclosure is lengthy or if it needs to be repeated (because of multiple triggers, for example). The key considerations for effective hyperlinks are:
the labeling or description of the hyperlink,
the consistency in the use of hyperlink styles,
its placement and prominence on the Web page, and
the handling of the disclosure on the click-through page.
Choosing the right label for the hyperlink. A hyperlink that leads to a disclosure should be labeled clearly and conspicuously. The hyperlinks labelthe text or graphic assigned to itaffects whether consumers actually click on it and see and read the disclosure.
Make it obvious. Consumers should be able to tell that they can click on a hyperlink to get more information.
Label the link to convey the importance, nature and relevance of the information it leads to. The hyperlink should give consumers a reason to click on it. That is, the label should make clear that the link is related to a particular advertising claim or product and indicate the nature of the information to be found by clicking on it. Example 6. The hyperlink label should use clear, understandable text. Although the label itself does not need to contain the complete disclosure, it may be useful to incorporate part of the disclosure to indicate the type and importance of the information the link leads to.
Dont be coy. Some text links may provide no indication about why a claim is qualified or the nature of the disclosure. In most cases, simply hyperlinking a single word or phrase in the text of an ad may not be effective. Example 7. Although some consumers may understand that there is additional information available, they may have different ideas about the nature of the information and its significance. Example 8. The same may be true of hyperlinks that simply say "disclaimer," "more information," "details," or "terms and conditions." Example 9 and Example 10.
- Dont be subtle. Asterisks or other symbols by themselves may not be effective. Typically, they provide no clues about why the claim is qualified or the nature of the disclosure.24 Example 11. In fact, consumers may view an asterisk or another symbol as just another graphic on the page. Example 12. Even if a Web site explains that a particular symbol is a hyperlink to important information, consumers might miss the explanation, depending on where they enter the site and how they navigate through it.
Using hyperlink styles consistently allows consumers to know when a link is available. Although the text or graphics used to signal a hyperlink may differ among Web sites, treating hyperlinks inconsistently within a single site can increase the chances that consumers will not noticeor click ona disclosure hyperlink. For example, if hyperlinks usually are underlined in a site, chances are consumers wouldnt recognize italicized text as being a link, and could miss the disclosure.
Placing the link near relevant information and making it noticeable. The hyperlink should be proximate to the claim that triggers the disclosure so that consumers can notice it easily and relate it to the claim. Typically, this means that the hyperlink is adjacent to the triggering term or other relevant information. Example 13. Consumers may miss disclosure hyperlinks that are separated from the relevant claim by text, graphics, blank space, or intervening hyperlinks. Example 14. Format, color or other graphics treatment also can help to ensure that consumers notice the link. (See below for more information on prominence.)
Getting to the disclosure on the click-through page should be easy. The click-through pagethat is, the page the hyperlink leads tomust contain the complete disclosure. The disclosure must be displayed prominently. Distracting visual factors, extraneous information, and many "click-away" opportunities to link elsewhere before viewing the disclosure can obscure an otherwise adequate disclaimer. Example 15.
Get consumers to the message quickly. The hyperlink should take consumers directly to the disclosure. They shouldnt have to search a click-through page or go to other pages for the information. Example 16. In addition, the disclosure should be easy to understand.
Assessing the effectiveness of a hyperlink disclosure is important. Tools are available to allow advertisers to evaluate the effectiveness of disclosures through hyperlinks. For example, advertisers can monitor click-through rateshow often consumers click on a hyperlink and view the click-through pagefor accurate data on the efficacy of the hyperlink. Advertisers also can evaluate the amount of time visitors spend on a certain page, which may indicate whether consumers are reading the disclosure.
- Dont ignore your data. If hyperlinks are not followed, another method of conveying the required information would be necessary.
c. Using High Tech Methods For Proximity and Placement
Disclosures may be displayed on Web sites in many ways. For example, a disclosure may be placed in a frame that remains constant even as the consumer scrolls down the page or navigates through another part of the site. A disclosure also might be displayed in a window that pops-up or on interstitial pages that appear while another Web page is loading. New techniques for displaying information are being unveiled all the time. But there are special considerations for evaluating whether a technique is appropriate for providing required disclosures.
Dont ignore technological limitations. A scrolling marqueeinformation that scrolls through a box on a Web sitemay display differently depending on the type of browser a consumer uses. Example 17. Similarly, some browsers or information appliances may not support or display frames properly, so a disclosure placed in one portion of the frame may not be viewable. Example 18. Certain Internet tools may overcome this limitation by determining if a consumers Web browser can view frames and if not, serving a page that is formatted differently. Without such tools, advertisers should be concerned about whether a required disclosure will appear; if it wont, they should choose different ways to communicate the disclosure.
Recognize and respond to characteristics of each technique. Some consumers may miss information presented in a pop-up window or on an interstitial page if the window or page disappears and they are unable or unaware of how to access it. Others may inadvertently minimize a pop-up screen by clicking on the main page and may not know how to make the pop-up screen reappear. Example 19. There may be ways to get around these drawbacks, such as requiring the consumer to take some affirmative action to proceed past the pop-up or interstitial (for example, by clicking on a "continue" button).
- Research can help. Research may be useful to help advertisers determine whether a particular technique is an effective method of communicating information to consumers. For example, research may show that consumers dont actually read information in pop-up windows because they immediately close the pop-up on the page they want to view. It also may indicate whether consumers relate information in a pop-up window or on an interstitial page to a claim or product they havent encountered yet. Advertisers should consider this information in determining effective methods of presenting required disclosures.
d. Displaying Disclosures Prior to Purchase
Disclosures must be effectively communicated to consumers before they make a purchase or incur a financial obligation. Disclosures are more likely to be effective if they are provided in the context of the ad, when the consumer is considering the purchase. Where advertising and selling are combined on a Web site, disclosures should be provided before the consumer makes the decision to buy, say, before clicking on an "order now" button or a link that says "add to shopping cart."
- Dont focus only on the order page. Some disclosures must be made in connection with a particular claim or product. Consumers may not relate a disclosure on the order page to information they viewed many pages earlier. Example 20. It also is possible that after surfing a companys Web site, some consumers may decide to purchase the product from the companys "bricks and mortar" store. Those consumers would miss any disclosures placed only on the ordering page.
e. Evaluating Proximity With Banner Ads
Most banner ads displayed today are teasers. Because of their small size, they generally do not provide complete information about a product or service. Instead, consumers must click through to the Web site to get more information and learn the terms of an offer. In some instances, a banner may contain a claim that requires qualification.
Disclose required information in the banner itself or clearly and conspicuously on the Web site it links to. In some cases, a required disclosure can be incorporated into a banner ad easily. Because of the space constraints of banner ads, other disclosures may be too detailed to be disclosed effectively in the banner. In some instances, these disclosures may be communicated effectively to consumers if they are made clearly and conspicuously on the Web site the banner links to and while consumers are deciding whether to buy a product or service. In determining whether the disclosure should be placed in the banner itself or on the Web site the banner links to, advertisers should consider how important the information is to prevent deception, how much information needs to be disclosed, the burden of disclosing it in the banner ad, how much information the consumer may absorb from the ad, and how effective the disclosure would be if it was made on the Web site.25
Use creativity to incorporate or flag required information. Scrolling text or rotating panels in a banner can present an abbreviated version of a required disclosure that indicates that there is additional important information and a more complete disclosure available on the click-through page. Example 21. With lengthier disclosures, the banner can direct consumers to the Web site for more information. The full disclosure then must be clearly and conspicuously displayed on the Web site.
Provide any required disclosures in interactive banners. Some banner ads allow consumers to interact within the banner, so that they may conduct a transaction without clicking through to a Web site. If consumers can get complete information about a product or make a purchase within an interactive banner, all required disclosures should be included in the banner.
Its the advertisers responsibility to draw attention to the required disclosures.
Display disclosures prominently so they are noticeable to consumers. The size, color, and graphics of the disclosure affect its prominence.
Size Matters. Disclosures that are at least as large as the advertising copy are more likely to be effective.
Color Counts. A disclosure in a color that contrasts with the background emphasizes the text of the disclosure and makes it more noticeable. Example 22. Information in a color that blends in with the background of the ad is likely to be missed. Example 23.
Graphics Help. Although using graphics to display a disclosure is not required, they may make the disclosure more prominent.
- Dont bury it. The prominence of the disclosure also may be affected by other factors. A disclosure that is buried in a long paragraph of unrelated text would not be effective. The unrelated text detracts from the message and makes it unlikely that a consumer would notice the disclosure or recognize its importance. Even though the unrelated information may be useful, advertisers must ensure that the disclosure is communicated effectively.
3. Distracting Factors in Ads
The clear and conspicuous analysis does not focus only on the disclosure itself. It also is important to consider the entire ad. Elements like graphics, sound, text or even hyperlinks that lead to other pages or sites, may result in consumers not noticing, reading or listening to the disclosure.
It may be necessary to disclose important information more than once in an advertisement to convey a non-deceptive message. Repeating a disclosure makes it more likely that a consumer will notice and understand it. Still, the disclosure need not be repeated so often that consumers would ignore it and that it would clutter the ad.
Repeat disclosures on lengthy Web sites, as needed. Consumers can access and navigate Web sites differently. Many consumers may access a site through its homepage, but others might enter in the middle, perhaps by linking to that page from a search engine or another Web site. Consumers also might not click-on every page of the site and may not choose to scroll to the bottom of each page. And many may not read every word on every page of a Web site. As a result, advertisers should question whether consumers who see only a portion of their ad are likely to miss a necessary disclosure and be misled.27
Repeat disclosures with repeated claims, as needed. If claims requiring some qualification are repeated throughout an ad, it may be necessary to repeat the disclosure too. In some situations, a disclosure is tied so closely to a claim that it must always accompany the claim to prevent deception. Depending on the disclosure, a clearly-labeled hyperlink could be repeated on various pages so that the full disclosure would be placed on only one page of the site.
5. Multimedia Messages
Internet ads may contain audio messages, video clips and other animated segments with claims that require qualification. As with radio and television ads, the disclosure should accompany the claim. In evaluating whether disclosures in these multimedia portions of online ads are clear and conspicuous, advertisers should evaluate all of the factors discussed in this paper and these special considerations:
For audio claims, use audio disclosures. The disclosure should be in a volume and cadence sufficient for a reasonable consumer to hear and understand it. The volume of the disclosure can be evaluated in relation to the rest of the message, and in particular, the claim. Of course, consumers who do not have speakers, appropriate software, or appliances with audio capabilities will not hear the claim or the disclosure. Because some consumers may miss the audio portion of an ad, disclosures triggered by a claim or other information in an ads text should not be placed solely in an audio clip.
Display visual disclosures for a sufficient duration. Visual disclosures presented in video clips or other dynamic portions of online ads should appear for a duration sufficient for consumers to notice, read and understand them. As with brief video superscripts in television ads, fleeting disclosures on Web sites are not likely to be effective.
6. Understandable Language
To ensure that disclosures are effective, consumers must be able to understand them. Advertisers should use clear language and syntax and avoid legalese or technical jargon. Disclosures should be as simple and straightforward as possible. Incorporating extraneous material into the disclosure also may diminish the message that must be conveyed to consumers.
IV. Specific Issues in Applying Certain Rules and Guides to Internet Activities
A. Its Not Just Paper Anymore
Some Commission rules and guides use certain termssuch as "written," "writing" and "printed"that connote words or information on paper. With the increasing use of computers and other electronic devices, that meaning is changing. In addition, thanks to email, businesses are no longer limited to using traditional communications vehicles like mail or the telephone to comply with rule or guide requirements to notify consumers.
1. Rules and Guides that Use the Terms "Written," "Writing" or "Printed"
Many rules and guides use the terms "written," "writing" and "printed," but in different ways. Some apply to written ads or transactions, using the term written to connote visual text. Others require information to be disclosed in writing, signaling the importance of text and the ability to retain and refer to the information more than once. Because each term must be analyzed within the context of the rule and guide itself, the Commission will continue to examine the exact nature of how these rules and guides apply to the paperless world of e-commerce and online advertising on a case-by-case basis and through periodic rule and guide reviews.28
For the most part, however, Commission rules and guides that use the words "written," "writing" and "printed" will apply online. In many cases, an Internet ad that uses visual text is the equivalent of a "written" ad. Consumers expect to receive the same information and protections whether theyre looking at a paper catalog or an online one. For example:
Claims "in writing . . . or in any broadcast advertisement" about an appliances energy use or efficiency must be tested in accordance with the Appliance Labeling Rule.29 Common sense dictates that this includes online claims. An energy use claim presented in visual text on a Web site should be treated the same as a claim in a print ad.
If certain information about energy efficiency must be provided in "printed" catalogs featuring appliances,30 the information also should be provided online. There are no more constraints to providing this information on a Web site than there would be on paper.
2. Using New Technologies to Comply with Rules & Guides
As more activities and transactions take place online, businesses are using email to communicate with their customers. In some cases, email may be used to comply with a rule or guide requirement to provide or send required notices or documents to consumers. A key consideration for choosing this method of delivery is whether consumers understand or expect that they will receive important information by email. In addition, information should be provided in a form that consumers can retain, either by saving or printing. Here are examples of how these considerations apply to particular rules:
If a seller cannot ship goods ordered by mail, telephone, or computer within the time promised (or otherwise 30 days), the seller must inform consumers of the delay and give them the option to agree to the delay or cancel the order and get a refund.31 Sellers are not required to use a particular method to send delay notices and online merchants may use email to send these notices. Consumers often provide their email address as part of an online order form. It may make good business sense for a seller to tell consumers that they plan to send any delay notices to that email address. This information may be added to an online order form without substantial cost or difficulty and may alert consumers that future communications about the order will occur online.
Online sellers of negative option planssuch as book-of-the-month clubsalso may use email to communicate with consumers. With these plans, sellers send announcements that identify the merchandise that will be shipped and billed for that month unless the consumer declines by a certain date.32 These monthly notices are an important part of the plan. If consumers dont understand that notices are sent by email, they may not respond and may incur charges for merchandise they dont want. Because sellers are required to clearly and conspicuously disclose the material terms of the plan in their promotional materials, they should clearly inform consumers about how the notices will be sent before consumers enroll in the plan.
Sellers that offer written warranties on consumer products must include certain information in their warranties and make them available for review at the point of purchase.33 Warranties communicated through visual text on Web sites are no different than paper versions and the same rules apply. The requirement to make warranties available at the point of purchase can be accomplished easily on the Internet. For example, Internet merchants may use a clearly-labeled hyperlink such as "click here for warranty information" to lead to the full text of the warranty. Because consumers may need to refer to the warranty while comparison shopping or after the purchase, the warranty should be presented in a way that is capable of being preserved, either by downloading or printing. This is especially important if a paper warranty is not included with the product.
B. Direct Mail Solicitations Online
"Direct mail" solicitations generally refer to promotional materials that consumers receive through traditional mail. With technological advances, these kinds of solicitations have moved online.
Although the Telemarketing Sales Rule applies largely to telemarketing calls from business-to-consumer, it also applies to telephone calls the consumer places in response to a "direct mail" advertisement.34 As with direct mail sent by traditional means, email can convey the false impression that the recipient has been "specially selected" for an offer not available to the general public. That impression may be exploited in a telemarketing call, particularly if the direct mail piece omits important information about the products or services offered. Therefore, if an email invites consumers to telephone the sender to purchase goods or services, the phone call is subject to the Telemarketing Sales Rule35as is the subsequent sale.
Not all online advertisements are considered "direct mail" solicitations. Consumers who view most Web sites, newsgroups, or electronic bulletin board postings are likely to understand that the goods or services are being offered on the same terms and conditions to all consumersand that they havent been "specially selected" for the offer. Like television and newspaper advertisements, Web sites generally, newsgroups, and electronic bulletin board postings are different forms of advertising than "direct mail."36 Telephone calls placed in response to these types of ads would generally be exempt from the Telemarketing Sales Rule.37
number of companies advertising onlineand the number of consumers
shopping onlineare soaring, fraud and deception may dampen consumer confidence in the e-marketplace. To ensure that products and services are described truthfully in online ads and that consumers get what they pay for, the FTC has, and will continue to, enforce its consumer protection laws. Many of the general principles of advertising law apply to online ads, but new issues arise almost as fast as technology develops. The FTC will continue to evaluate online advertising, using traditional criteria, while recognizing the uniqueness of the new medium. Businesses as well should consider these criteria when developing online ads and ensuring they comply with the law.
1 The Commission initially requested written comment on a proposal that discussed how it would apply its rules and guides to online activities. 63 Fed. Reg. 24998 (May 6, 1998). After reviewing the comments, the Commission held a public workshop on May 14, 1999, to explore the issues further. See 64 Fed. Reg. 14156 (Mar. 24, 1999) (announcing the workshop). Twenty-five groups, including businesses, trade associations and consumer organizations, participated in the workshop discussion. The focus of the workshop was an evaluation of how disclosures required by FTC rules and guides can be displayed clearly and conspicuously in Internet advertisements. A shorter session examined how terms such as "written," "writing" and "printed" are used in FTC rules and guides and should be interpreted in light of the use of electronic media. Additional written comments were submitted after the workshop. The public comments and the workshop transcript are available at http://www.ftc.gov/bcp/rulemaking/elecmedia/index.htm or from the FTCs Consumer Response Center, 600 Pennsylvania Avenue, NW, Room 130, Washington, DC 20580.
2 With the rules and guides, the content of the disclosure generally is prescribed. Thus, it was unnecessary to examine broader issues that might arise in examining advertising in generalfor example, whether a disclosure is even necessary or what it should say.
3 This working paper, however, does not address disclosures required by regulations issued by the Federal Reserve Board: Regulation B, 12 C.F.R. Part 202; Regulation E, 12 C.F.R. Part 205; Regulation M, 12 C.F.R. Part 213; Regulation Z, 12 C.F.R. Part 226. This paper also does not address which countrys laws govern a particular transaction or sale. The FTC and other countries and organizations have been evaluating these issues and will continue to work cooperatively in this area. See http://www.ftc.gov/bcp/icpw/index.htm for more information about international issues.
4 The Commissions authority covers virtually every sector of the economy, except for certain excluded industries, such as the business of insurance and banks.
5 The Commission issues rules pursuant to Section 5 of the FTC Act when it has reason to believe that certain unfair or deceptive acts or practices are prevalent in an industry. 15 U.S.C. § 57a(a)(1)(B). The Commission may seek civil penalties from any person or company that violates a rule "with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by such rule." 15 U.S.C. § 45(m)(1)(A). The Commission also may seek redress for consumers. 15 U.S.C. § 57b(a)(1). In addition, the Commission promulgates rules pursuant to specific statutes, which are designed to further particular policy goals. The remedies available to enforce these rules vary.
6 Guides are "administrative interpretations of the laws administered by the Commission." 16 C.F.R. § 1.5. Although the guides do not have the force and effect of law, the Commission may bring an enforcement action if a person or company fails to comply with a guide and engages in an unfair or deceptive practice in violation of the FTC Act.
7 The following rules and guides are included in this category: Guides for the Nursery Industry (16 C.F.R. Part 18); Guides for the Rebuilt, Reconditioned and Other Used Automobile Parts Industry (16 C.F.R. Part 20); Guides for the Jewelry, Precious Metals, and Pewter Industries (16 C.F.R. Part 23); Guides for Select Leather and Imitation Leather Products (16 C.F.R. Part 24); Tire Advertising and Labeling Guides (16 C.F.R. Part 228); Guides Against Deceptive Pricing (16 C.F.R. Part 233); (16 C.F.R. Part 238); Guides for the Advertising of Warranties and Guarantees (16 C.F.R. Part 239); Guides for the Household Furniture Industry (16 C.F.R. Part 250); Guide Concerning Use of the Word "Free" and Similar Representations (16 C.F.R. Part 251); Guides for Private Vocational and Distance Education Schools (16 C.F.R. Part 254); Guides Concerning Use of Endorsements and Testimonials in Advertising (16 C.F.R. Part 255); Guides Concerning Fuel Economy Advertising for New Automobiles (16 C.F.R. Part 259); Guides for the Use of Environmental Marketing Claims (16 C.F.R. Part 260); Rules and Regulations Under the Wool Products Labeling Act of 1939 (16 C.F.R. Part 300); Rules and Regulations Under Fur Products Labeling Act (16 C.F.R. Part 301); Rules and Regulations Under the Textile Fiber Products Identification Act (16 C.F.R. Part 303); Rule Concerning Disclosures Regarding Energy Consumption and Water Use of Certain Home Appliances and Other Products Required Under the Energy Policy and Conservation Act ("Appliance Labeling Rule") (16 C.F.R. Part 305); Rule Concerning Automotive Fuel Ratings, Certification and Posting (16 C.F.R. Part 306); Labeling Requirements for Alternative Fuels and Alternative Fueled Vehicles (16 C.F.R. Part 309); Telemarketing Sales Rule (16 C.F.R. Part 310); Deceptive Advertising as to Sizes of Viewable Pictures Shown by Television Receiving Sets (16 C.F.R. Part 410); Retail Food Store Advertising and Marketing Practices (16 C.F.R. Part 424); Use of Prenotification Negative Option Plans (16 C.F.R. Part 425); Power Output Claims for Amplifiers Utilized in Home Entertainment Products (16 C.F.R. Part 432); Preservation of Consumers Claims and Defenses (16 C.F.R. Part 433); Mail or Telephone Order Merchandise Rule (16 C.F.R. Part 435); Credit Practices Rule (16 C.F.R. Part 444); Used Motor Vehicle Trade Regulation Rule (16 C.F.R. Part 455); Labeling and Advertising of Home Insulation (16 C.F.R. Part 460); Interpretations of Magnuson-Moss Warranty Act (16 C.F.R. Part 700); Disclosure of Written Consumer Product Warranty Terms and Conditions (16 C.F.R. Part 701); Pre-Sale Availability of Written Warranty Terms (16 C.F.R. Part 702); Informal Dispute Settlement Procedures (16 C.F.R. Part 703).
8 A rule or guide applies to online activities if its scope is not limited by how claims are communicated to consumers, how advertising is disseminated, or where commercial activities occur. As needed, the Commission will amend or clarify the scope of any particular rule or guide in more detail during its regularly scheduled review. The Commission has a program in place to periodically review its rules and guides to evaluate their continued need and to make any necessary changes.
9 16 C.F.R. § 435.2(a).
10 16 C.F.R. § 255(b).
11 As explained in the FTCs Deception Policy Statement, an ad is deceptive if it contains a statementor omits informationthat is likely to mislead consumers acting reasonably under the circumstances and is "material" or important to a consumers decision to buy or use the product. See FTC Policy Statement on Deception, appended to Cliffdale Associates, Inc., 103 F.T.C. at 174 ("Deception Policy Statement"). A statement also may be deceptive if the advertiser does not have a reasonable basis to support the claim. Advertising Substantiation Statement. See FTC Policy Statement on Advertising Substantiation, appended to Thompson Medical Co., 104 F.T.C. 648, 839 (1984), affd, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987).
12 Before disseminating an ad, advertisers must have reasonable support for all express and implied objective claims that the ad conveys to consumers. When an ad lends itself to more than one reasonable interpretation, there must be substantiation for each interpretation. The type of evidence needed to substantiate a claim may depend on the product, the claims, and what experts believe is necessary. If an ad specifies a certain level of support for a claim"tests show x"the advertiser must have at least that level of support.
13 According to the FTC Act, 15 U.S.C. § 45(n) and the FTCs Unfairness Policy Statement, an advertisement or business practice is unfair if it causes or is likely to cause substantial consumer injury that consumers could not reasonably avoid and that is not outweighed by the benefit to consumers or competition. See FTC Policy Statement on Unfairness, appended to International Harvester Co., 104 F.T.C. 949, 1070 (1984).
14 Copy tests or other evidence of how consumers actually interpret an ad can be valuable. In many cases, however, the implications of the ad are clear enough to determine the existence of the claim by examining the ad alone, without extrinsic evidence.
15 For example, if an endorsement is not representative of the performance that consumers can generally expect to achieve with a product, advertisers must disclose this fact so that consumers are not misled. Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. § 255.2.
16 For example, any solicitation for the purchase of consumer products with a warranty must disclose the text of the warranty offer or how consumers can obtain it for free. Pre-Sale Availability of Written Warranty Terms, 16 C.F.R. § 702.3.
17 For example, the required energy efficiency disclosures in the Appliance Labeling Rule, 16 C.F.R. § 305.4, further the public policy goal of promoting energy conservation.
18 Some rules and guides, as well as some FTC cases, use the phrase "clearly and prominently" instead of "clearly and conspicuously." These two phrases are synonymous.
19 Deception Policy Statement at 175-76.
20 Deception Policy Statement at 178.
21 Deception Policy Statement at 180-81.
22 Web pages can vary in length, and one Web page may be the equivalent of many printed pages.
23 In some cases, the details about the additional fees might be too complex to describe adjacent to the price claim and may be provided by using a hyperlink. But, a clear statement about the existence and nature of the extra fees should appear adjacent to the price. Of course, all cost information should be presented to consumers at the time of purchase. Consumers should understand the exact amount they will be charged and should not have to learn this information by clicking on hyperlinks.
24 Asterisks and other symbols also are used in different ways on Web pages, which may confuse consumers as to where the related disclosure may be found. Some online asterisks and symbols are hyperlinks that click-through to a separate page and others are static, referring to a disclosure at the bottom of the page.
25 This approach is consistent with Commission policy for disclosures in other media. For example, the Commission has required fuller disclosures in print ads and a shorter disclosure in a short television ad with a referral to another location for more complete information. See, e.g., Nutri/System, Inc., 116 F.T.C. 1408 (1993) (consent order requiring a shorter disclosure for 15 second television ads).
26 Web sites may display differently depending on the browser, computer screen, or other information appliance used. Advertisers may be working with a default view, but also evaluating different display options so that the site will be attractive and accessible to most consumers. Considering different display options also may be necessary to ensure that qualifying information is displayed clearly and conspicuously. Evaluating the prominence of the disclosure in relation to the rest of the ad helps ensure that consumers are able to view the disclosure.
27 See, e.g., Kent & Spiegel Direct, Inc., 124 F.T.C. 300 (1997); Synchronal Corp., 116 F.T.C. 1189 (1993) (consent orders requiring disclosures to be repeated during television infomercials).
28 For example, the Commission specifically amended the Textile Rules requirement to disclose textile origin in "print" catalogs to clarify that these disclosures must be made in online catalogs as well. See 63 Fed. Reg. 7507 (Feb. 13, 1998) or http://www.ftc.gov/os/1998/9802/textile.htm for a discussion of the amendments to the Rules and Regulations Under the Textile Fiber Products Identification Act, 16 C.F.R. Part 303.
29 16 C.F.R. § 305.1(d).
30 16 C.F.R. §§ 305.2(m), 305.14.
31 Mail or Telephone Order Merchandise Rule, 16 C.F.R. § 435.1(b).
32 Rule Concerning Use of Prenotification Negative Option Plans, 16 C.F.R. § 425(a)(2).
33 Disclosure of Written Consumer Product Warranty Terms and Conditions, 16 C.F.R. § 701.3, and Pre-Sale Availability of Written Warranty Terms, 16 C.F.R. § 702.3. According to the Rule Regarding Pre-Sale Availability of Written Warranty Terms, an alternative to making the warranty terms available prior to purchase is for sellers to provide information about how consumers may obtain the written warranty for free by mail. 16 C.F.R. § 702.3(c)(2).
34 16 C.F.R. § 310.6. The Telemarketing Sales Rule prohibits deceptive and abusive telemarketing practices. Among other things, it requires that certain information be disclosed in telemarketing calls. The scope of the Rule does not extend to transactions that take place entirely online. The sales transaction must involve a traditional voice telephone call. See 60 Fed. Reg. 30,406, 30,411 (June 8, 1995). In addition, in most situations, the Rule does not apply if a consumer calls a business in response to an advertisement. However, if a consumer calls a business in response to a "direct mail" advertisement, that call is subject to the Rule.
35 The telephone call may be exempt from the Rules coverage if the direct mail piece contains certain disclosures, such as the total cost to purchase the goods or services.
36 Whether certain types of online ads, such as targeted banner ads or personalized solicitations on Web sites, constitute direct mail should be evaluated on a case-by-case basis.
37 A small number of telemarketing transactions relating to specific types of goods or services are covered by the Telemarketing Sales Rule, regardless of the advertising method or manner in which the telemarketing calls were initiated. For example, credit repair services and advance fee loan services sold through telemarketing are covered by the Telemarketing Sales Rule, regardless of whether the consumer called in response to a direct mail piece, television advertisement, or Web site. 16 C.F.R. § 310.6(e) and (f).