FTC Announces Proposal to Clarify How the Law Will Apply to Advertising and Commercial Transactions on the Internet

The Federal Trade Commission today published a proposal regarding the applicability of the Commission's rules and guides to electronic media, including the Internet, e-mail and CD-ROMs. The proposal, announced today in a Federal Register notice, seeks public comments to initiate a dialogue on the issues with the goal of formulating a formal policy statement. The Commission's purpose is to clarify that while most offline rules apply online, a policy statement, based on public comment, would reduce any uncertainty as to how they apply to the electronic media.

"The Internet's development as a commercial medium is transforming the global marketplace -- carrying with it the potential to provide enormous benefits to consumers," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "In order to ensure its potential, however, consumers need to know the extent to which consumer protections that apply in the offline world also apply to the Internet. This proposal is the first step in developing clear guidance about how the law will apply to online advertising and commercial transactions. The Commission's experience has been that formal policy guidance generally results in voluntary compliance by industry."

According to industry surveys, 62 million people in the United States, now have access to the Internet, making it a popular medium for advertising goods and services and for conducting commercial transactions. It is estimated that businesses spent $906.5 million for advertising on the Internet in 1997. These advertisements may contain text, pictures, video, sound, interactive graphics or a combination of all of these features. In addition to using the Internet to advertise their products, businesses also use CD-ROMs and e-mail to disseminate information about their products to consumers.

An Enforcement Policy Statement would describe how and why many of the Commission's consumer protection rules and guides apply to advertising and marketing on electronic media. The rules and guides cover some 40 subjects ranging from environmental marketing claims to credit practices. Uncertainty about the applicability of the rules and guides to electronic media may currently exist because of the use of terms, such as "written," that may more commonly be associated with print media. The understanding of the term "written" and other terms has evolved with the use of new technology. Therefore, the Commission's proposal would clarify that, when used in the rules and guides, the term "written" refers to information that is capable of being preserved in a tangible form and read. The Commission's proposal also discusses how electronic media could be used to comply with the rules and guides.

In addition, the proposal also would provide guidance regarding how disclosures should be made in electronic media advertising. Many rules and guides require or recommend that material information be disclosed to consumers to prevent deception. Internet advertising contains unique features that raise new issues in making disclosures effectively. The proposal discusses the factors the Commission would consider in evaluating the effectiveness of disclosures and solicits comment on these issues.

Submission of comments is requested by July 7, 1998 and should be submitted to the Secretary of the Federal Trade Commission, Room H-159, Sixth Street and Pennsylvania Ave., N.W., Washington, D.C. 20580 or to the following e-mail address: elecmedia@ftc.gov (no period). All of the comments submitted will be available for public inspection at the FTC's Consumer Response Center, Room 130, at the same address and to the extent technically possible on the FTC's web site at: http://www.ftc.gov (no period).

The Commission's vote to approve the Federal Register notice was 5-0.

Copies of the notice as well as information about the FTC's Consumer Privacy Initiative on the Internet are available on the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 974 102)