BEFORE THE FEDERAL TRADE COMMISSION
16 C.F.R. Ch. 1
Interpretation of Rules and Guides for Electronic Media;
PAUL, HASTINGS, JANOFSKY & WALKER LLP
The Direct Marketing Association ("DMA") welcomes this opportunity to comment on the Commission's proposal contained in the Federal Register of Wednesday, May 6, 1998, at pp. 24996-25005. At the outset, DMA takes this opportunity to applaud all reasonable and responsible efforts to safeguard consumers from unfair and deceptive acts and practices. Neither DMA nor its members have any interest in, nor would they condone, any activity that injures consumers. However, in the laudable pursuit of consumer protection, we urge the Commission to be mindful of the potential for inadvertent stifling of commercial expression and the imposition of unnecessarily burdensome restrictions.
Electronic media should be permitted to thrive and to continue to develop as ways to bring to millions of consumers the convenience of shopping at home and the ability to receive more information prior to purchase selection than is present with any other medium. To allow that to happen, however, there must be a recognition that marketing via electronic media may be sufficiently different in certain respects as to render inappropriate use of the specific application of legal principles to electronic media that is employed in traditional media. As will be discussed below, DMA urges the Commission to consider the appropriateness of applying far-reaching and disparate across-the-board rules to this medium rather than proceeding on a case-by-case basis (for example, under Section 5).
DMA is a trade association of member firms engaged in or associated with marketing goods and services through direct response methods, which includes, quite importantly, marketing in electronic media. DMA's members number over 3,200 companies located in all fifty states, with an additional 600 members from foreign countries, many of which would, in one way or another, be affected by the blanket imposition of rules and regulations on marketing activities in electronic media. However, notwithstanding that DMA has been a long time advocate of self-regulation, it recognizes the need for laws and regulations in the areas of assuring truthful advertising and preventing deceptive practices. Electronic media should enjoy the same level of protection enjoyed by traditional media. Because electronic commerce could, and should, be viewed as a form of direct marketing, DMA members and DMA itself have a keen interest in the Commission's proposal.
Any proposed workshop should be held for the primary purpose of the Commission's better appreciation and understanding of what, if any, problems would arise if the Federal Register proposal were to be implemented. Accordingly, DMA asks the Commission to consider a slightly different approach to the one followed in prior workshops.
The Commission's proposal itself is a clear indication of a perceived need for application of existing rules and regulations to commerce conducted in electronic media. Thus, there appears to be little to be gained from eliciting mere confirmatory opinions from proponents of such a proposal. Rather, because the benefit of law enforcement is so fundamental to the American culture and society, the issue really is not whether established legal principles should apply to electronic media, but how they should be applied. Thus, DMA asks the Commission to consider that any workshop conducted by the Commission be weighted toward eliciting participation and comment from those who would be affected by the proposed implementation.
DMA would be most interested in participating in any workshop and requests that if one were to be held that DMA be an active participant.
Interpretation of Terms Used in Rules and Guides
Historically, the Commission has had to determine when it is in the public's interest, and therefore appropriate, to proceed with an enforcement proceeding against an individual or company, and when it is appropriate to promulgate a trade regulation rule. Although each approach has its advantages, circumstances frequently dictate favoring one approach over the other. As a result, it appears that the Commission has seen fit to proceed on an ad hoc basis in the vast majority of its enforcement proceedings, leaving trade regulation rulemaking to those situations where commonality of practices warrants a more general approach.
The Federal Register proposal is a variation of this long-standing dichotomy. Now, instead of deciding whether certain practices are better addressed on a case-by-case basis rather than by rule, the Commission asks for comment on how existing rules should be applied to the new electronic media. DMA submits that the Commission should not make the leap from "whether" to "how" without first engaging in the same careful consideration and thought processes that have gone into prior Commission decisions. It may turn out that the proposal is appropriate for some rules, but not for others. It may turn out that the electronic media are so different in kind from any heretofore traditional medium that existing across-the-board rules do not make sense. Indeed, depending on the sophistication of the advertisement, for example, some electronic media advertisements are more analagous to print while others more closely resemble television. It may be difficult, if not impossible, therefore, to apply a particular rule to a particular electronic advertisement. Electronic commerce practitioners should be heard (e.g., at any workshop) to determine whether the rules are practically applicable.
A. "Writing", "Written" and "Printed"
DMA believes the Commission should take an approach of mutuality. That is, if a rule as applied to electronic commerce imposes the requirement of a writing on a marketer, application of that rule also should allow that marketer to select one of the electronic media when optional forms of communication are available for providing information, notice, etc. to consumers. Therefore, if a rule that requires a written statement obligates a marketer in electronic media to post such a statement on its website, then any notice provision or other consumer protection mechanism that is required to be in writing also should be satisfied by employing electronic media.
Any consumer that communicates with a marketer via electronic media should be deemed to have given permission to receive communications back from that marketer via electronic media. In the same manner that the presumption of regularity assumes that something placed in the U.S. mails will be delivered and received, a corresponding presumption should apply where, as in the example just given, a consumer has demonstrated the technological capability of receiving a marketer's communication.
No additional burden should be placed on a marketer to prove actual receipt. None is present in traditional media. Similarly, in those circumstances where a consumer has expressly authorized a marketer to communicate via electronic media (as distinguished from the implied authorization that follows from the consumer's having used electronic media to contact the marketer), a marketer should be able to rely on the fact that the communication was sent (without the further burden of proving receipt).
B. "Direct Mail"
At this early stage of the evolution of commerce in electronic media, there does not appear to be any difficulty with the term "direct mail" encompassing electronic mail as well as traditional mail, although DMA points out on a closely related issue that it may be very difficult to identify what constitutes targeted advertising in electronic media. However, because traditional direct mail has such a well-established and understood meaning and because electronic mail has commonly become known as e-mail, and is perceived as something different from direct mail, the Commission, and therefore the industry, will be confronted with a semantic issue if rules intended to encompass traditional direct mail were to be applied to electronic media. An education process, and time for it to work, appears to be in order.
Additionally, the Commission proposes to include in the definition of "direct mail" electronic communications that are individually addressed and capable of being received privately. At this early stage of consideration, it appears that electronic communications that are received privately and are directed (i.e., addressed) to particular individuals would be a clearer and more understandable definition.
C. "Clear and Conspicuous" Disclosures In Electronic Media
The proposal regarding clear and conspicuous disclosures is perhaps the area, more than any other area addressed in the proposal, in which DMA most strongly urges the Commission to proceed with caution. The underlying policy of any clear and conspicuous requirement is that a consumer should be in a position to receive the information contained in the disclosure, i.e., the disclosure will be readily noticeable, readable and comprehensible. However, there may be a number of different ways to accomplish that.
First Amendment principles and fairness to the conveyor of the information (i.e., the advertiser) require that the advertiser should be allowed to choose any method available as along as it satisfies the goals and needs of providing consumer information and protection. There is no dispute that disclosures that are required in traditional media in order to avoid deception should also be made in electronic media. The issue is whether the precise form of disclosure should be mandated when there are equally effective alternatives. Indeed, electronic media may provide means that heretofore were not available (e.g., disclosure next to a triggering representation in small, but contrasting font, that is capable of being enlarged when the user clicks on it). They should not be precluded by rules that are too specific in their mandate.
DMA agrees that the overall or net impression approach is the correct one when determining whether or not a disclosure is effective and avoids deception. In short, DMA believes that such a disclosure should be easy to find, easy to read, and easy to understand. That is as far as the Commission needs to go. The frequency, placement and content of a disclosure will depend entirely on the format and context in which it appears and what it is intended to accomplish. Any effort to itemize specific requirements, i.e., to define and mandate the elements that make up the overall or net impression, is a dangerous undertaking. The overall or net impression should remain the test. A blanket rule that dictates what constitutes prominence, detraction, distraction and the like does not appear to be appropriate. What preliminarily is believed to be a distraction may actually be an enhancement to conveying a message clearly and conspicuously. It should not be pre-judged by rule.
A case-by-case approach, with consumer research and evidence specific to each situation, ultimately may provide the basis for a broader based approach. There does not appear to be any reason to mandate that disclosures required in multi-sensory promotions appearing in electronic media must themselves always be multi-sensory. Television, for example, which contains both audio and video, does not have such a requirement. Again, disclosures of sufficient size and prominence and in such location to be easy to find, easy to read and easy to understand, in context, should be the requirement.
Size requirements may present a unique difficulty to marketers in electronic media. Dictating size requirements may result in disclosures running over onto subsequent pages which will benefit neither the marketer nor the consumer. Those and other placement considerations should be allowed to evolve (i.e., by individual case analysis) and not be legislated without adequate experience on which to base a decision.
What screen location is most likely to attract a consumer's attention may depend on the design of the page. Pop-ups, animation, blinking, borders, etc. may attract a consumer's attention depending on format and location. How they affect overall context and impression will vary from situation to situation.
DMA appreciates the opportunity to provide these preliminary comments. It favors the establishment and maintenance of electronic media that have a high level of consumer confidence when commerce is conducted in those new media. Its only caution is to be certain that the method of applying established legal principles does not inadvertently create unnecessarily burdensome requirements for e-marketers, burdens which will create costs that ultimately will be borne by consumers.
DMA would be pleased to participate in any workshop that further explores and analyzes the issues raised by the Commission's proposal.