UNITED STATES OF AMERICA
In the Matter of
Proposal to Issue Interpretation of
FTC File No. P974102
COMMENTS OF THE COUNCIL OF BETTER BUSINESS BUREAUS, INC. ON THE FTC'S PROPOSAL TO ISSUE A POLICY STATEMENT REGARDING THE INTERPRETATION OF FTC RULES AND GUIDES FOR ELECTRONIC MEDIA
The Council of Better Business Bureaus, Inc. ("CBBB"), through its undersigned counsel, respectfully submits these comments in response to the Commission's request for comments on its proposal to issue a policy statement regarding the interpretation of Federal Trade Commission ("FTC") Rules and Guides for electronic media.
We are pleased to have this opportunity to participate in the Commission's policy discussions regarding online advertising, and are hopeful that the result of this process will be both protective of consumers and useful to our membership. We look forward to participating in any follow-up workshop scheduled by the Commission.
The CBBB is the umbrella organization for the Better Business Bureau ("BBB") system of 135 local BBBs nationwide and 320 national member companies. Local BBBs were founded in 1912 and are presently supported by 250,000 business members. The CBBB and all local BBBs are private, non-profit organizations dedicated to promoting and fostering the highest ethical relationship between businesses and the public through voluntary self-regulation, consumer and business education, and service excellence.
To these ends, the CBBB is engaged in a wide variety of activities designed to protect and inform consumers and resolve marketplace disputes. Local BBBs regularly monitor advertising for adherence to BBB guidelines using the BBB Code of Advertising, which are based on broad principles of truth and accuracy. BBBs are not enforcement organizations; they seek to meet their goals through voluntary cooperation and self-regulation. Because most advertisers recognize the value of truthful and nondeceptive advertising, there has historically been and continues to be a high level of cooperation with our efforts.
CBBB is part of a strategic alliance named the National Advertising Review Council ("NARC"), which was formed in 1971 by the Association of National Advertisers, Inc., the American Association of Advertising Agencies, Inc., the American Advertising Federation, Inc., and the CBBB to foster truth and accuracy in national advertising through voluntary self-regulation. NARC is the body that establishes the ground rules for the advertising industry's voluntary program and that encourages the high success rate of the program.
The National Advertising Division ("NAD") of the CBBB is the keystone of the program to provide a system of voluntary self-regulation, designed to minimize the need for government intervention and foster public confidence in the credibility of advertising. For more than two decades, national advertisers have relied on the NAD to help maintain high standards of truthfulness and accuracy of national advertising claims and to resolve disputes about advertising. The NAD investigates questions of truth and accuracy in national commercial advertising, including on-line advertising, and issues published decisions on the merits of each case. Parties who disagree with the NAD's decisions can file an appeal with a panel of the National Advertising Review Board ("NARB"), a peer review group that consists of 80 advertising professionals and public interest members. In the rare instance where an advertiser refuses to participate in self-regulation or comply with a NAD or NARB decision, the matter is referred to the FTC for possible law enforcement action.
The Children's Advertising Review Unit ("CARU") of the CBBB reviews advertising directed at children under the age of 12. When advertising is found to be misleading, inaccurate, or inconsistent with CARU's Self-Regulatory Guidelines for Children's Advertising, CARU, like the NAD, seeks change through the voluntary cooperation of advertisers. Again, appeals of CARU decisions are referred to the NARB, and advertisers who refuse to participate are, in some cases, referred to the FTC.
The CBBB has been in the forefront of involvement in a wide range of activities designed to protect and inform consumers in the online context. For example, CARU's Self-Regulatory Guidelines for Children's Advertising provide voluntary steps that industry can take to ensure that interactive advertising and marketing effectively safeguard children's privacy. Also, the NAD routinely examines online advertising as part of its review of national advertisers' claims. And CBBB's reference book, Do's and Don'ts in Advertising, has an entire section dedicated to online advertising.
Moreover, the CBBB instituted a program in 1996, BBBOnLine, in which those online businesses that meet the BBB's standards are permitted to include a BBBOnLine icon on their Web sites. Criteria for participation in the BBBOnLine program include: being a member of a local BBB, providing company identifying information to the BBB, being in business for at least a year, having a satisfactory complaint record with the BBB, participating in the BBB's self-regulation programs, including the NAD and CARU, promptly responding to consumer complaints, and agreeing to arbitration, at a consumer's request, for unresolved disputes involving consumer products or services promoted online.
Our comments primarily focus on the Commission's proposal regarding the standard for evaluating "clear and conspicuous" disclosures online. Our comments also are more broadly applicable to other aspects of the Commission's proposals for online regulation. Fostering consumer confidence in advertising was one of the primary concerns that led to the formation of the CBBB and NAD. We believe that consumers will have the confidence they need to conduct transactions via electronic media only if they can depend on adequate information about the offers they receive or view. Indeed, we believe that consumer confidence is key to the future of electronic commerce. Moreover, without clarification as to what constitutes "clear and conspicuous," in the context of online disclosures, businesses are left with little guidance as to how they can lawfully -- and successfully -- market their goods and services via electronic media. For these reasons, we support the Commission's efforts in examining what constitutes a "clear and conspicuous" disclosure in the context of electronic media. We believe, however, that imposition of a technical standard in this area may, at this point in time, be premature and, because of that, may not promote consumer confidence in online advertising.
The Commission seeks comments about whether specific technologies unique to electronic media are effective for communicating the disclosures required by various Commission rules and guides. In particular, the Commission suggests that one way of determining whether a required disclosure is "clear and conspicuous" is to evaluate whether it is "unavoidable" to consumers. Interpretation of Rules and Guides for Electronic Media; Request for Public Comments, 63 Fed. Reg. 24,996, 25,0002 (May 6, 1998). The Commission proposes that, on the Internet or in other electronic media, "unavoidability" should mean that a viewer does not have to take any affirmative action, such as scrolling down a Web page or clicking on a link to another page, in order to view the disclosure. Id. at 25,003. We believe that the Commission's focus on a technical standard -- rather than on the traditional performance standard(1) -- is misplaced at this point in the development of electronic media. Without more information about consumers' use and perceptions of electronic media disclosures, the Commission risks issuing a particular standard or guidance that may prove to be wrong for all contexts.
A. A Technical Standard May Be Underprotective, Unworkable and Soon Obsolete.
If the Commission proceeds with introducing technical standards for what constitutes "clear and conspicuous" disclosures online, it runs the risk that its rules and guides will quickly become outmoded as technology develops. Consumer confidence in disclosures that are made in compliance with such standards may be eroded where advertisers are precluded from taking advantage of consumers' current understanding of and facility with online media.
Moreover, as online technology develops, new and better ways of providing disclosures are likely to develop. Indeed, in 1998, some forms of electronic media already provide advertisers with the opportunity to make even more complete and helpful disclosures than are possible in more traditional media, such as television and radio. On the Internet, for example, advertisers can use hyperlink technology to their advantage by, in effect, forcing consumers to link through pages containing disclosures before they can proceed to an order form, or by requiring them to link through a set of terms and conditions before being able to participate in a promotion. But the Commission has no way of knowing what technical innovations will be introduced in the near future, no less 10 years from now. Technical standards frozen in 1998 technology may stifle the development and use of these new media -- a loss for the business community and consumers alike.
Similarly, a technical standard that prohibits scrolling to disclosures or including disclosures via a link, fails to recognize that scrolling and linking may, in some instances, allow for fuller disclosures than are possible in other media, such as print or television, where costs of advertising space are much higher. Also, including long and complex disclosures in Web site text that may be more appropriately included in a link may lessen consumers respect for disclosures and defeat the very purpose of their existence. This is akin to the lack of respect many consumers felt for auto lease disclosures in television advertisements before the Commission brought the numerous enforcement actions challenging the adequacy of such disclosures. The FTC should not, without further information about consumers' experience and use of links and scrolling, limit what may be an opportunity for advertisers to provide more meaningful disclosures to consumers than those disclosures advertisers can provide in other media.
We also believe that the record is not yet adequate to support a technical standard for online disclosures. Introducing technical disclosure requirements may unintentionally result in disclosures that are not, in fact, "clear and conspicuous" to all consumers. We are not aware of any studies that have evaluated consumers' perceptions of what messages are being understood by consumers, including constitutes a "clear and conspicuous" disclosure in the context of electronic advertising.
Moreover, compliance with specific technical requirements may be impossible for advertisers to meet, due to the variety of browsers and individual computer settings used by consumers. As a result, an online advertiser could be in full compliance with Commission technical requirements with regard to some consumers but may not be able to comply with regard to others. For example, attached as Exhibit 1 are examples of two sample Web pages, one which portrays what is viewed by a consumer with Netscape Navigator version 2.0, the other using Netscape Navigator version 4.0. As the examples show, a "clear and conspicuous" disclaimer comprised of a table with a background color cannot be viewed with Netscape Navigator 2.0. In addition, all of the major browsers provide consumers with the ability to override the "default" settings for fonts (type and size), color of text, backgrounds, and unvisited and visited links. An advertiser who uses a large blue font on a white background to ensure that its disclosures are conspicuous and unavoidable may nevertheless find that its disclosure is not readable, does not appear on the same screen, or is otherwise problematic for reasons beyond its control. We caution the Commission against setting inflexible technical requirements that may prove to be unworkable.
Because the technology continues to be in a state of constant development, and because the Commission has had just a few opportunities to consider the adequacy of online disclosures, we urge the Commission to continue to endorse the traditional -- and more flexible -- performance standard. As it does in the context of more traditional media, the Commission can evaluate the adequacy of required disclosures from the point of view of how effectively they are conveyed to consumers, at least until such a time as the technology is sufficiently developed to make technical standards meaningful for both consumers' benefit and businesses' ability to comply.
B. The Commission Should Proceed Cautiously Because Of The Far-Reaching Consequences of Its Determination.
Any action by the Commission pertaining to electronic media advertising will have an impact that reaches far beyond mere applicability to the Commission's rules and guides. Any Commission action will, for example, very likely be used as guidance in self-regulatory actions, including NAD and CARU investigations, and Lanham Act cases. Furthermore, the Commission should be particularly cautious in considering technical standards because its determination will likely influence the way that similar representations -- intellectual property notices, explanation of logos, and disclaimers -- are eventually required to be disclosed in electronic media. It is therefore crucial that the Commission's actions in this area be based upon sufficient real world information and experience.
C. Previous Commission Orders Do Not Support a Technical Standard For All Types of Disclosures.
The few Commission actions that have addressed a standard for "clear and conspicuous" disclosures in electronic media do not support introduction of a technical standard for all types of required disclosures. The Commission has never litigated the issue of what constitutes "clear and conspicuous" in the context of electronic media. Moreover, the few consent decrees that have addressed the issue have primarily required disclosures to meet the traditional performance standard. Any requirements that disclosures be "unavoidable" have been limited to disclosures of financial terms and fees. For example, the consent decrees in America Online, (FTC Dkt. No. C-3787) 1998 FTC Lexis 25 (Mar. 16, 1998), CompuServe, Inc., (FTC Dkt. No. C-3789) 1998 FTC Lexis 27 (Mar. 16, 1998), and Prodigy Services Corp. (FTC Dkt. No. C-3788) 1998 FTC Lexis 26 (Mar. 16, 1998), provide that "[a]ll mandatory financial obligations" be disclosed "clearly and prominently." "Clearly and prominently" is defined as "of a size and shade, and appears for a duration sufficient for an ordinary Consumer to notice, read, and comprehend it. In addition to the foregoing, such disclosure shall not be avoidable by Consumers." This definition was tailored to fit the particular situations of these three cases but is not necessarily an appropriate standard for all disclosures in electronic media contexts. The orders provide that other required disclosures meet a traditional performance standard, namely, that they appear "clearly and prominently," which is defined as "in a type size and in a location that are sufficiently noticeable so that an ordinary Consumer could notice, read, and comprehend (the disclosure)."
In two other recent orders, Global World Media Corp., (FTC Dkt. No. C-3772) 1997 FTC Lexis 314 (Oct. 17, 1997) and Comtrad Industries, Inc., (FTC Dkt. No. C-3719) 1997 FTC Lexis 62 (Feb. 25, 1997), the standard for a "clear and prominent" disclosure is defined in the following way:
As with the three orders discussed above, this disclosure standard was specifically tailored for the cases involved but is not necessarily appropriate for all required disclosures in all types of electronic media. In particular, the requirement that disclosures appear on an ordering screen may be illogical for some disclosures and, thus, confusing for consumers(2).
We commend the Commission for opening this issue for public debate and for giving all interested parties an opportunity to provide input on this important topic. We, however, urge the Commission to act only after it has gathered sufficient information about these new technologies as well as consumer usage and perceptions. In the interim, the traditional performance standard will have time to develop in the online context. Three years ago, the Commission took a similar approach in its decision not to extend the Telemarketing Sales Rule to the online context. After considering including online services in the Rule's coverage, the Commission acknowledged "it does not have the necessary information available to it to support coverage of on-line services under the Rule." Telemarketing Sales Rule, Revised Notice of Proposed Rulemaking, 60 Fed. Reg. 30,406, 30,411 (June 8, 1995). Here, too, where online technology is developing at a breathtaking rate, we believe that the Commission should avoid adopting standards for online disclosures that may be unworkable now and outdated and/or underprotective in the near future.
We look forward to continuing to work with the Commission on the issue of electronic media advertising.
Dated: July 13, 1998
Steven J. Cole
1. The "traditional" performance standard for disclosures usually requires them to be "clear and conspicuous," without dictating to the advertiser the technical aspects (e.g., font size, duration on screen) of how the standard is met.
2. For example, it is unclear why a disclosure that a particular testimonial does not represent the typical experience of a purchaser needs to be on the ordering screen if there is a conspicuous disclosure made in connection with the testimonial.