[Federal Register Volume 63, Number 87 (Wednesday, May 6, 1998)]
[Proposed Rules]
[Pages 24996-25006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11942]
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FEDERAL TRADE COMMISSION
16 CFR Ch. I
Interpretation of Rules and Guides for Electronic Media; Request
for Comment
AGENCY: Federal Trade Commission.
ACTION: Notice. Request for public comments.
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SUMMARY: The Federal Trade Commission (``Commission'') seeks comment on
its proposal to issue a policy statement regarding the applicability of
its rules and guides to newer forms of electronic media, such as e-
mail, CD-ROMs, and the Internet (hereinafter collectively referred to
as ``electronic media''). This Federal Register Notice (hereinafter
``Notice'') does not contain a proposed policy statement. This Notice
is intended to provide a discussion of the issues that would be
addressed in a future policy statement and to solicit public comment on
these issues. The Commission believes that such a policy statement
would (1) clarify the extent to which the Commission's rules and guides
apply to representations disseminated through, and activities occurring
on, electronic media; (2) provide guidance to the public as to how to
comply with the Commission's rules and guides in
[[Page 24997]]
advertising products and services and conducting commercial activities
using electronic media; (3) interpret certain terms in light of the use
of electronic media and provide guidance regarding how electronic media
could be used to comply with the affirmative disclosure requirements of
the rules and guides; and (4) advise how disclosures required or
recommended by the Commission's rules and guides should be made in
advertising and other commercial transactions in electronic media. The
Commission also solicits comment regarding interest in participating in
or attending a workshop to discuss the issues raised in this Notice.
DATES: Comments must be submitted on or before July 7, 1998.
ADDRESSES: Written comments should be submitted to: Secretary, Federal
Trade Commission, Room H-159, Sixth Street and Pennsylvania Ave., N.W.,
Washington, D.C. 20580. The Commission requests that the original
comment be filed with five copies, if feasible. The Commission also
requests, if possible, that the comment be submitted in electronic form
on a computer disk. (Programs based on DOS or Windows are preferred.
Files from other operating systems should be submitted in ASCII text
format.) The disk label should identify the commenter's name and the
name and version of the word processing program used to create the
comment. Alternatively, the Commission will accept comments submitted
to the following e-mail address [email protected]>. All submissions
should be captioned: ``Interpretation of Rules and Guides for
Electronic Media--Comment, FTC File No. P974102.''
FOR FURTHER INFORMATION CONTACT: Laura J. DeMartino, Attorney, Federal
Trade Commission, Sixth Street and Pennsylvania Ave., N.W., Washington,
D.C. 20580, telephone (202) 326-3030, e-mail (for questions or
information only) [email protected]> .
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission proposes issuing a policy statement in the future
regarding the applicability of its rules and guides to electronic
media. The Commission is using the term ``electronic media'' in this
Notice to refer to the newer forms of electronic media, such as e-mail,
CD-ROMs, and the Internet.1 This Notice does not contain a
proposed policy statement. It is intended to provide a discussion of
the issues that would be addressed in an expected policy statement and
to solicit public comment on these issues. The purpose of the proposed
policy statement would be to eliminate or reduce any uncertainty as to
whether the Commission's rules and guides apply to electronic
media.2
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\1\ The Internet encompasses the World Wide Web as well as other
electronic information-exchanging features, including ``Telnet,''
``FTP'' (File Transfer Protocol), and USENET newsgroups. The
Commission is using the term the ``Internet'' to encompass the
Internet and proprietary online services, such as America Online and
Prodigy.
\2\ Some traditional forms of electronic media, such as
television and radio, have been used for advertising and marketing
purposes for years. This Notice is not intended to affect the
requirements of the Commission's rules and guides for television or
radio advertisements.
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The proposed policy statement also would clarify how the rules and
guides apply to these new media. Many of the Commission's rules and
guides, for example, use terms that may be more commonly associated
with print media. The Commission, however, believes these terms apply
to electronic media. The proposed policy statement also would discuss
the use of electronic media as a means of complying with some of the
requirements or recommendations of the rules and guides.3
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\3\ Other federal agencies, such as the U.S. Securities and
Exchange Commission, also have considered whether new technology may
be used to comply with the laws they enforce, and have issued
interpretive guidance and rule amendments to clarify these issues
and assist industry. See, e.g., 60 FR 53458 (Oct. 13, 1995); 61 FR
24652 (May 15, 1996).
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The unique features of electronic media present special challenges
and opportunities for making disclosures effectively. The proposed
policy statement, therefore, would provide guidance on how the
Commission would evaluate whether disclosures in electronic media are
clear and conspicuous. The Commission believes that such guidance will
encourage voluntary compliance by industry and promote industry self-
regulation. This Notice discusses the Commission's approach to achieve
these goals, which would form the basis of a future policy statement.
The issue of Commission guidance and public input on electronic
media issues arose during the Commission's review of the Trade
Regulation Rule Pursuant to the Telephone Disclosure and Dispute
Resolution Act of 1992 (``900-Number Rule''), 16 CFR part
308.4 During a public workshop on the 900-Number Rule,
workshop participants suggested that the Commission conduct a separate
proceeding that would address the issue of making clear and conspicuous
disclosures on the Internet and provide an opportunity for all
interested parties to submit comments.5 Accordingly, the
Commission has determined to publish this notice and seek public
comment from all interested parties on the Commission's proposed policy
statement. The Commission believes that public comment will be helpful
because of the challenging issues presented by electronic media and the
pace at which technological developments are occurring.6
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\4\ 62 FR 11749 (Mar.12, 1997) (soliciting comment, inter alia,
on whether the 900-Number Rule's disclosure requirements are
adequate for Internet advertisements).
\5\ Transcript of the Workshop on the 900-Number Rulemaking (Day
2, June 20, 1997), Volume 2, pp. 559-579. The transcript is
available in the Public Reference Room, Room 130, of the Commission
and on the Commission's Web site <http://www.ftc.gov>. Some
commenters stated that the Commission's determination regarding how
clear and conspicuous disclosures should be made in Internet
advertisements pursuant to the 900-Number Rule would have broad
implications for all Internet advertisements. Therefore, it was
argued that all interested parties, and not simply those persons
interested in the 900-Number Rule, should have notice of the review
of this issue and the opportunity to submit comments. Id.
\6\ The Commission recognizes the usefulness of maintaining a
dialogue with the public regarding these issues in order to benefit
both consumers and industry. See Commission staff report,
Anticipating the 21st Century: Consumer Protection Policy in the New
High-Tech Global Marketplace, p. 7 (May 1996) (summarizing testimony
presented during hearings regarding the need for a continuing
dialogue).
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A. Background
1. Technological Advances
Significant technological advances in recent years are dramatically
changing the global marketplace. With approximately 62 million people
in the United States having access to the Internet, it is becoming an
increasingly popular medium for advertising goods and services and for
conducting commercial transactions.7 It is estimated that
businesses spent $906.5 million for advertising on the Internet in
1997.8 Advertisements on the World Wide Web (``Web''), the
graphical segment of the Internet, often contain ``pages'' which may
contain text, pictures, video, sound, interactive graphics, or a
combination of all of these features.9
[[Page 24998]]
Consumers are able to purchase goods or services directly over the
Internet.10 Businesses also use CD-ROMs to disseminate
information about their products to consumers. In addition, businesses
use e-mail and facsimiles to communicate directly with consumers.
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\7\ IntelliQuest Information Group, Inc. (Feb. 5, 1998) <http://
www.intelliquest.com> (number of users as of the fourth quarter,
1997).
\8\ Internet Advertising Bureau (Apr. 6, 1998) <http://
www.iab.net/news/breaksource.html>.
\9\ A ``Web site'' is a collection of linked electronic
``pages.'' The main ``page'' within the Web site is often referred
to as a ``home page,'' from which links are provided to electronic
pages within the overall Web site. Frequently, the home page or
other pages within the site will provide links to other Web sites as
well. This linkage is possible because the Web allows users to
navigate or transfer from one electronic document to another--in
actually viewing files stored on various computers--through the use
of electronically coded links called hypertext.
\10\ Estimates of online sales vary dramatically. One survey,
however, estimates that as of the fourth quarter, 1997, 37.2 million
users were shopping online and 10.5 million users were purchasing
online. IntelliQuest Information Group, Inc. (Feb. 5, 1998) <http://
www.intelliquest.com>.
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2. The Commission's Role in the New Marketplace
The Commission believes that the use of this new technology should
be encouraged. The Internet provides consumers and businesses with
access to a global marketplace. Consumers have instant access to a
large amount of information and a greater array of products and
services. These newer forms of electronic media also provide businesses
with different ways of advertising, selling goods, and communicating
with customers. At the same time, the use of this new technology for
commercial activities raises consumer protection concerns.11
The Commission agrees with the statement by the Interagency Working
Group on Electronic Commerce, that ``[i]n order to realize the
commercial and cultural potential of the Internet, consumers must have
confidence that the goods and services offered are fairly represented,
that they will get what they pay for, and that recourse or redress is
available if they do not.''12 As a result, the Commission
believes that enforcement of consumer protection laws is necessary to
ensure the vitality and viability of the Internet as a new
marketplace.13
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\11\ The Commission examined consumer protection issues raised
by technological developments during hearings in November 1995. The
Commission staff report on the hearings describes the technological
developments, the challenges faced by law enforcement agencies to
address consumer protection issues without stifling the use of new
technology, and various proposed strategies for resolving consumer
protection concerns. Commission staff report, Anticipating the 21st
Century: Consumer Protection Policy in the New High-Tech Global
Marketplace (May 1996).
\12\ A Framework for Global Electronic Commerce, p. 17 (July 1,
1997) <http://www.whitehouse.gov/WH/New/Commerce>. ``Truthful and
accurate advertising shall be the cornerstone of advertising on all
media, including the Internet.'' Id. at 16.
\13\ See Commission staff report, Anticipating the 21st Century:
Consumer Protection Policy in the New High-Tech Global Marketplace,
pp. 27, 30-31 (May 1996). The Commission already has brought a
number of cases against companies engaged in unfair or deceptive
practices on the Internet. See, e.g., Global World Media Corp.,
Docket No. C-3772 (Oct. 17, 1997) (alleged false claims about an
herbal supplement in advertising on the Internet and other media);
FTC v. Audiotex Connection, Inc., CV-97-0726 (E.D.N.Y. filed Feb.
13, 1997) (Internet Web site program allegedly disconnected
consumer's access provider without consent or adequate disclosure
and re-connected computer to an international access provider that
billed consumers over $2 per minute); FTC v. Fortuna Alliance,
L.L.C., Civ. No. C96-799M (W.D. Wash. filed May 23, 1996) (alleged
illegal pyramid investment scheme marketed on the Internet); FTC v.
Brandzel, 96C 1440 (N.D. Ill. filed Mar. 13, 1996) (computer memory
chips advertised on the Internet allegedly were paid for but not
delivered in violation of section 5 of the FTC Act and the Mail or
Telephone Order Merchandise Rule, 16 CFR part 435).
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3. Legal Authority
This Notice addresses the applicability of certain rules and guides
issued pursuant to section 5 of the Federal Trade Commission Act (``FTC
Act''), 15 U.S.C. 45(a), and other statutes enforced by the Commission
to electronic media. Section 5 of the FTC Act gives the Commission
broad authority over the advertising and marketing of products and
services through its prohibition on ``unfair or deceptive acts or
practices in or affecting commerce.'' The Commission has issued policy
statements to provide guidance on how it evaluates whether acts or
practices are ``unfair or deceptive'' under section 5 of the FTC Act
and on how it will enforce the legal requirement that advertisers
possess a reasonable basis for objective claims about their products
and services.14
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\14\ Federal Trade Commission Policy Statement on Deception,
appended to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984)
(hereinafter ``Deception Statement''); Federal Trade Commission
Policy Statement on Unfairness appended to International Harvester
Co., 104 F.T.C. 949 1070 (1984) (superseded by 15 U.S.C. 45(n));
Federal Trade Commission Policy Statement Regarding Advertising
Substantiation, 48 FR 10471 (Mar. 11, 1983).
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The Commission rules addressed in this Notice prohibit specific
unfair or deceptive acts or practices and ``may include requirements
prescribed for the purpose of preventing such acts or practices.''
15 The Commission may initiate civil actions, seeking civil
penalties, against any person who 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.'' 16 The Commission also promulgates rules
pursuant to specific Acts of Congress.17 The remedies
available to enforce these rules vary.
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\15\ 15 U.S.C. 57a(a)(1)(B). The Commission is empowered to
promulgate rules which define with specificity unfair or deceptive
acts or practices when it has reason to believe that certain unfair
or deceptive acts or practices are prevalent. Id.
\16\ 15 U.S.C. 45(m)(1)(A). The Commission also may seek redress
for consumers. 15 U.S.C. 57b(a)(1).
\17\ For example, the Energy Policy and Conservation Act, 42
U.S.C. 6201, et seq., as amended, requires the Commission to
prescribe rules for energy consumption and efficiency labeling of
certain appliances. See 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 CFR part 305.
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The Commission's guides are ``administrative interpretations of the
laws administered by the Commission'' and are intended to assist the
public in voluntarily complying with the law (e.g., by providing
guidance on how to avoid unfair or deceptive acts or
practices).18 Although guides do not have the force and
effect of law, failure to comply with them may result in corrective
action under applicable statutory provisions (e.g., a proceeding
pursuant to section 5(a) of the FTC Act).19
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\18\ 16 CFR 1.5. Section 18(a)(1)(A) of the FTC Act authorizes
the Commission to issue ``interpretative rules and general
statements of policy with respect to unfair or deceptive acts or
practices in or affecting commerce.'' 15 U.S.C. 57a(a)(1)(A).
\19\ 16 CFR 1.5.
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B. Scope of the Proposed Policy Statement
The proposed policy statement would address those rules and guides
issued by the Commission that solely pertain to consumer protection
issues.20 These rules and guides are listed in the Appendix.
Other consumer protection rules and guides will not be addressed in
this proceeding.21 These rules and guides either may not
apply to electronic media or contain provisions that preclude uniform
treatment in a
[[Page 24999]]
policy statement and need to be examined separately. The Commission
also is not addressing regulations issued by the Federal Reserve Board
and enforced by the Commission.22
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\20\ The Commission is not addressing antitrust issues or the
Guides for Advertising Allowances and Other Merchandising Payments
and Services, 16 CFR part 240, in this Notice. Further, this Notice
does not address the Commission's rules of practice, 16 CFR parts 1-
4. Other issues relating to the use of electronic media generally,
such as privacy and electronic payment technologies, are being
examined in different proceedings. See 62 FR 10271 (Mar. 6, 1997)
(regarding previous Commission workshops on consumer information
privacy issues and children's online privacy); 62 FR 19173 (Apr. 18,
1997) and 62 FR 29392 (May 30, 1997) (discussing public meetings
held by the inter-agency Consumer Electronic Payments Task Force on
consumer issues raised by emerging electronic money and payment
technology).
\21\ Rule and Regulations Under the Hobby Protection Act (16 CFR
part 304); Regulations under the Comprehensive Smokeless Tobacco
Health Education Act of 1986 (16 CFR part 307); Test Procedures and
Labeling Standards for Recycled Oil (16 CFR part 311); Unfair or
Deceptive Advertising and Labeling of Cigarettes in Relation to the
Health Hazards of Smoking (16 CFR part 408); Care Labeling of
Textile Wearing Apparel and Certain Piece Goods (16 CFR part 423);
Rule Concerning Cooling-Off Period for Sales Made at Homes or at
Certain Other Locations (16 CFR part 429); Funeral Industry
Practices Rule (16 CFR part 453); Ophthalmic Practice Rules (16 CFR
part 456); Rules, Regulations, Statements of General Policy or
Interpretation and Exemptions Under the Fair Packaging and Labeling
Act (16 CFR parts 500-503); and Procedures for State Application for
Exemption from the Provisions of the Fair Debt Collection Practices
Act (16 CFR part 901).
\22\ Regulation B, 12 CFR part 202; Regulation E, 12 CFR part
205; Regulation M, 12 CFR part 213; Regulation Z, 12 CFR part 226.
The Federal Reserve Board has issued an interim rule amending
Regulation E and proposed rules amending Regulations B, E, M and Z
regarding the use of electronic disclosures for matters covered by
those Regulations. 63 FR 14528, 14538, 14548, 14552, 14555 (Mar. 25,
1998).
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In addition, the Commission is currently reviewing certain rules
and guides as a part of its ongoing regulatory review
process.23 In some of these reviews, the Commission is
examining, among other things, the effect of new technology on the
provisions of those rules and guides.24 Comments regarding
specific amendments to those rules and guides in light of new
technology should be submitted in the course of those particular
reviews. To the extent that the broad policy issues addressed in this
Notice impact on those rules or guides, however, interested persons
also should submit comments in this proceeding. For example, if a rule
or guide under review requires or recommends that disclosures be clear
and conspicuous (which will be addressed in the context of electronic
media in this proposal), commenters should provide a submission in this
proceeding even if they have already commented in the other review.
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\23\ In 1992, the Commission implemented a regulatory reform
program to assess, at least once every ten years, the continued need
and usefulness of its rules and guides and revise or, as necessary,
rescind outdated rules and guides. See 63 FR 1802 (Jan. 12, 1998).
To date under this program, the Commission has reviewed 19 guides of
which it has repealed 15, and 28 rules of which it has repealed 13.
Many of the retained rules and guides have been amended to reduce
compliance burdens while still achieving their intended purpose.
\24\ See 900-Number Rule, 16 CFR part 308, 62 FR 11749 (Mar. 12,
1997); Rule Regarding the Use of Negative Option Plans by Sellers in
Commerce, 16 CFR part 425, 62 FR 15135 (Mar. 31, 1997); Rule
Regarding Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures, 16 CFR part 436, 62
FR 9115 (Feb. 28, 1997).
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This Notice and the proposed policy statement also are not intended
to address all of the substantive issues specific to certain rules or
guides that may arise because of the use of electronic media. For
example, this Notice addresses the applicability of the Guides
Concerning Use of Endorsements and Testimonials in Advertising
(``Endorsement Guides''), 16 CFR part 255, to electronic media and
proposes factors the Commission would use to evaluate the effectiveness
of disclosures that accompany endorsements in electronic media.
Developments in electronic media, however, may raise new issues unique
to the Endorsement Guides regarding what is--or is not--an
``endorsement.'' The Commission will address issues that are unique to
a particular rule or guide on a case-by-case basis or during the
regular review of the rule or guide.
The Commission does not consider the issuance of this proposal, or
any future policy statement that may result from this proceeding, to
constitute either a new rule or a substantive amendment of its current
rules. The policy statement would not create any new rights, duties,
obligations, or defenses, but instead would clarify the rights, duties,
obligations, or defenses that currently exist pursuant to the rules and
guides. Further, the Commission would retain its discretion for
determining how to proceed in particular cases. The Commission will
follow the rulemaking procedures required to substantively amend a
rule, if such amendments are necessary to extend a particular rule's
coverage to electronic media. Additionally, this proposal or any future
policy statement will not affect the Commission's
jurisdiction.25
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\25\ See 15 U.S.C. 44, 45(a)(2); Section 2 of the McCarran-
Ferguson Act, 15 U.S.C. 1012(b)
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C. Public Workshop
To assist in developing its proposed enforcement policy statement,
the Commission is soliciting comment from all interested parties
regarding the issues raised in this Notice. The Commission also seeks
comment as to the advisability of convening a public workshop to
discuss the issues raised in this Notice. A workshop would afford
Commission staff and interested parties a further opportunity to
discuss issues related to the applicability of the Commission's rules
and guides to electronic media. The workshop would not be intended to
achieve a consensus among participants, or between participants and
Commission staff, with regard to any issue raised in this Notice.
Persons interested in attending or participating in such a workshop are
requested to notify Commission staff in the comment submitted in
response to this proposal. If the Commission decides to convene a
public workshop, it will announce the date, time and location of the
workshop in a separate Notice in the Federal Register.
II. Proposals for an Enforcement Policy Statement
A. The Applicability of Rules and Guides to New Forms of Electronic
Media
One objective of the proposed policy statement would be to reduce
any uncertainty regarding whether specific Commission rules and guides
apply to electronic media. The Commission's rules and guides generally
address representations made about certain products or services
26 and other commercial activities.27 The
proposed policy statement would clarify that (1) rules and guides that
apply to representations generally without reference to, or limitation
on, the medium used to disseminate them apply equally to
representations disseminated through electronic media; and (2) rules
and guides that specify how or where representations are disseminated
are broad enough to apply to representations disseminated through
electronic media.
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\26\ See, e.g., Guides for the Use of Environmental Marketing
Claims, 16 CFR part 260 (addressing environmental claims made about
products and services).
\27\ See, e.g., Rule Concerning the Preservation of Consumers'
Claims and Defenses, 16 CFR part 433 (requiring that consumer credit
contracts contain certain provisions).
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1. Rules and Guides That Apply to Representations Generally
Many rules and guides are not limited to any media or mode of
dissemination. Rather, they apply generally to representations or any
form of advertising.
Example 1: The Guides for the Jewelry, Precious Metals, and Pewter
Industries (``Jewelry Guides''), 16 CFR 23.0(c), apply to ``claims and
representations about industry products included in labeling,
advertising, promotional materials, and all other forms of marketing *
* *.''
Example 2: The Guides for Select Leather and Imitation Leather
Products (``Leather Guides''), 16 CFR 24.2(g), state that disclosures
should be made ``in all advertising of such products irrespective of
the media used.''
Example 3: The Rule Concerning Deceptive Advertising as to Sizes of
Viewable Pictures Shown by Television Receiving Sets (``TV Picture Size
Rule''), 16 CFR 410.1, addresses ``designations'' used to refer to
television picture sizes without specifying how or where the
designation is made (e.g., orally, in television advertisements, in
print advertisements, etc.).
For this category, the plain language of each rule and guide
applies to
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representations and claims in any medium, including electronic media.
The policy statement would merely clarify that when a rule or guide
does not limit how covered representations are communicated to
consumers, how advertising is disseminated, or where commercial
activities occur, the provisions of the rule or guide apply to such
activities in electronic media.28
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\28\ The Mail and Telephone Order Merchandise Rule (``Mail Order
Rule''), 16 CFR part 435, applies to orders for merchandise made
using certain media, such as the telephone. The Mail Order Rule
defines the term ``telephone'' broadly, so that the Rule covers
orders placed by facsimile or by computer through telephone modems.
16 CFR 435.2(b). Thus, this Rule expressly encompasses electronic
media because information is transmitted over the telephone
infrastructure. Another provision of the Mail Order Rule states that
mail or telephone order sales occur regardless of ``the method used
to solicit the order.'' 16 CFR 435.2(a). Thus, the Rule covers any
means of soliciting orders, including those solicitations via
electronic media.
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2. Rules and Guides Referencing Specific Modes of Communication
Some rules and guides specify where or how representations or other
information are disseminated, e.g., referring to ``written''
advertisements or ``direct mail promotional materials,'' or specifying
that information needs to be provided to others ``in writing.''
Example 1: The disclosure obligations of the Telemarketing Sales
Rule, 16 CFR part 310, are triggered when consumers call telemarketers
in response to direct mail solicitations (unless certain disclosures
appear in the direct mail solicitation).29 The term ``direct
mail solicitations'' is not defined in the Rule. (See, discussion at
II. B. 2.)
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\29\ During the promulgation of the Telemarketing Sales Rule,
the Commission stated that it did not have sufficient information to
justify coverage of online services under the Rule's requirements,
and thus, this Rule does not apply to transactions conducted
entirely on the Internet. 60 FR 30406, 30411 (June 8, 1995). Any
modification to this general coverage will be handled separately, if
needed.
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Example 2: The Rule Concerning Labeling Requirements for
Alternative Fuels and Alternative Fueled Vehicles (``Alternative Fuels
Rule''), 16 CFR 309.11, 309.13, requires industry members to certify
the fuel rating of certain alternative fuels when they transfer fuel to
anyone who is not a consumer.30 The Rule states that
certifications may be made by delivery ticket, or by a letter or
``written statement.''
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\30\ The Rule also requires labels to be placed on fuel
dispensers and on alternative fueled vehicles. Since these
requirements do not raise concerns regarding the use of electronic
media, they are not addressed in this Notice.
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As discussed in greater detail below, the Commission believes that
these illustrated specifications include the use of electronic media
and that such inclusion is consistent with the intention of rules and
guides containing such specifications. Moreover, in certain instances,
it may be beneficial for firms to use electronic media to comply with
the requirements of the rules and guides. Thus, it is proposed that the
policy statement would clarify that those rules and guides apply
equally to electronic media.
B. Interpretation of Terms Used in Rules and Guides
The Commission's rules and guides use certain terms that may be
more commonly used in a paper-based context. With the increasing use of
computers, the meaning of such terms already has evolved to take into
account new technologies. The proposed policy statement would clarify
that the Commission interprets these terms in light of the use of new
technologies so that industry members understand their obligations
under the Commission's rules and guides.
1. The Terms ``Writing,'' ``Written'' and ``Printed''
Many of the Commission's rules and guides use the terms
``writing,'' ``written,'' or ``printed'' with reference to certain
documents.31 For example, the Appliance Labeling Rule, 16
CFR 305.4(d), states that it is unfair or deceptive to make any
representation ``in writing (including a representation on a label) or
in any broadcast advertisement,'' with respect to energy use or
efficiency of certain products, unless the product has been tested in
accordance with the Rule.32 Neither the Rule nor the
enabling statute, the Energy Policy and Conservation Act, defines the
term ``in writing.'' The Appliance Labeling Rule also requires that
certain disclosures be made in catalogs, which are defined as ``printed
material which contains the terms of sale, retail price, and
instructions for ordering, from which a retail consumer can order a
covered product.'' 16 CFR 305.2(m), 305.14. The Rule does not define
the term ``printed.''
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\31\ The rules and guides discussed in this section are used as
examples and not as an exhaustive list of the rules and guides that
use the described terms.
\32\ This provision simply restates section 323(c) of the Energy
Policy and Conservation Act, 42 U.S.C. 6201, which states that such
representations are considered unfair or deceptive acts or practices
in violation of the FTC Act.
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With the use of new technology, the terms ``writing,'' ``written,''
and ``printed'' are not merely associated with communications on paper.
The proposed policy statement would clarify that, when used in the
Commission's rules and guides, the terms ``written,'' ``writing,'' and
``printed'' refer to information that is capable of being preserved in
a tangible form and read, as opposed to an oral statement that is
intangible and transitory. As with information presented on paper,
consumers using electronic media can read the information and preserve
it for possible later review either by printing it on paper, saving it
on disk, or by some other means.
Using this interpretation, the Appliance Labeling Rule's
substantiation requirements for energy efficiency representations made
``in writing * * * or in any broadcast advertisement'' would apply to
representations in electronic media that are capable of being preserved
and read, such as representations on CD-ROMs or on the Internet.
Further, the Commission would interpret the Rule's definition of
catalog (``printed material'') to include any material that is capable
of being preserved in tangible form and read, and that also meets the
remainder of the Rule's definition (e.g., from which a retail consumer
can order a covered product).
The Commission solicits comment on its proposed interpretation of
the terms ``written,'' ``writing,'' and ``printed'' that apply to the
use of electronic media. The Commission seeks information on whether
the interpretation adequately reflects the understanding of the terms
and the underlying purpose of the rules and guides that use them, and
accounts for technological developments.
2. The Term ``Direct Mail''
The understanding of other terms also has evolved with the advent
of new technology. The concept of ``mail,'' for example, is understood
to encompass electronic mail through the Internet as well as
traditional mail delivery.33 Some of the Commission's rules
and guides refer to ``direct mail,'' in the context of direct mail
solicitations. For example, the Telemarketing Sales Rule, 16 CFR
310.6(e), applies to telephone calls initiated by consumers in response
to ``direct mail solicitations,'' unless specified information is
disclosed in the solicitation.34
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\33\ Traditional mail includes mail delivered by the United
States Postal Service as well as by private mail carriers.
\34\ The Rule always applies to consumer telephone calls in
response to direct mail solicitations for certain types of products
and services, regardless of the disclosures made in the
solicitation. See 16 CFR part 310 for the full text of the Rule.
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Where the Commission's rules or guides refer to ``direct mail,''
the
[[Page 25001]]
proposed policy statement would state that the term refers to private
communications, i.e., traditional mail as well as electronic
communications that are individually addressed and capable of being
received privately. This interpretation would clarify that direct mail
includes those communications that are directed to particular
individuals, such as facsimiles or e-mail, but not directed to the
public at large, as are Internet bulletin boards.35
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\35\ Messages posted on Internet bulletin boards, however, may
be considered to be advertising for the purposes of the
Telemarketing Sales Rule, 16 CFR 310.6(e), and other rules and
guides.
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E-mail, for example, requires that the sender address the message
to individual recipients' e-mail addresses (which is true even if the
sender addresses a single e-mail to multiple individuals at their
personal e-mail addresses) and is capable of being received privately
by the recipients. Therefore, telemarketers or sellers who send
individually addressed e-mail that provides a telephone number for
consumers to call may be subject to the provisions of the Telemarketing
Sales Rule, 16 CFR part 310.
The Commission solicits comment regarding whether its proposed
interpretation of the term ``direct mail'' adequately reflects the
understanding of the term and appropriately encompasses the electronic
equivalents of ``direct mail.'' The Commission also solicits comment on
whether targeted advertising on the Internet should be considered as
the electronic equivalent of ``direct mail.'' For example, some
Internet advertisers track users' interests through their click
patterns or use of search terms. These advertisers may then target
advertisements to a particular user. Although this advertising appears
on a Web site, which generally may be considered to be a public forum,
the targeted advertisement is addressed to a particular user's computer
and is capable of being received privately by that user.
3. Use of Electronic Media To Comply With Affirmative Requirements
Some rules and guides require or recommend that businesses provide
information in writing to another person. The Commission recognizes
that it may be easier, more efficient and less costly for industry
members to comply with various requirements by using electronic media.
This is consistent with the Commission's intention that its rules and
guides should not discourage the use of electronic media.
The Automotive Fuel Ratings, Certification and Posting Rule, 16 CFR
306.6, for example, requires that industry members certify the fuel's
octane rating when they transfer fuel to anyone who is not a
consumer.36 The Rule permits industry members to do this in
two ways: Members may include with each transfer, a delivery ticket or
other paper such as an invoice or ``any other written proof of
transfer,'' or they may ``(g)ive the person a letter or other written
statement'' that contains certain information. 16 CFR 306.6(a) and (b).
With the Commission's interpretation of the term ``written,'' described
above, the transferor could deliver information in a form that is
capable of being preserved in a tangible form and read. Thus, the
transferor could use electronic media, such as e-mail or facsimile, to
give the person ``a letter or other written statement.'' 37
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\36\ As mentioned above, the Alternative Fuels Rule, 16 CFR part
309, contains a similar requirement.
\37\ Even if electronic media is used to provide certain
``written'' information, the Rule's record-keeping requirements
would continue to apply.
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The requirement that certain information should be provided to
another person implies that such information actually be received by
that person. Therefore, although it may be advantageous to use new
technology to comply with affirmative requirements, industry members
should be mindful of certain issues. For example, the requirement to
give, mail, deliver or furnish information would not be met if the
intended recipient does not have the technological capabilities of
receiving or viewing the information. In certain circumstances,
industry members may need to obtain the recipient's consent to deliver
information by a certain electronic method, inform the recipient of any
particular media applications needed to view the information, or
deliver the information on paper. Because there may be technological
difficulties that could impede the electronic delivery of information,
it may be necessary for industry members to confirm that the recipient
in fact received the information. Most facsimile machines routinely
confirm when the facsimile has been successfully transmitted. Senders,
for example, might require recipients to confirm receipt by return e-
mail or verify in some manner the recipients' access to information
posted on a Web site. The Commission seeks comment on what, if any,
guidance is necessary regarding the use of electronic media to comply
with affirmative disclosure requirements.
4. Other Terms
Where other terms are reasonably susceptible of being interpreted
as applying to, or occurring within the realm of, electronic media, the
proposed policy statement would clarify that the terms are to be read
broadly and inclusively so as to apply to electronic media. The Guides
Against Bait Advertising (``Bait Advertising Guides''), 16 CFR 238.1,
for example, advise that advertisements containing an offer to sell a
product should not be published unless the offer is a bona fide effort
to sell the advertised product. The Commission interprets the term
``publish'' to include information that is made available to the public
in online catalogs or other Web pages.38 The Commission
solicits comment on this general proposal and whether there are
additional terms that should be specifically addressed by the
Commission in a policy statement.
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\38\ This interpretation is consistent with the Guides'
definition of the term ``advertising'' as including ``any form of
public notice however disseminated or utilized.'' 16 CFR 238, n. 1.
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C. Clear and Conspicuous Disclosures in Electronic Media
The application of the Commission's rules and guides to electronic
media advertising presents new issues regarding the evaluation of
disclosures.39 Many rules and guides contain disclosure
requirements mandating or advising that disclosures be ``clear and
conspicuous.'' Numerous Commission precedents offer guidance on the
meaning of the clear and conspicuous standard in traditional
advertising media. Electronic media advertisements, however,
incorporate both traditional and unique features that raise new issues
in evaluating the effectiveness of disclosures. In proposing guidance
in this area, the Commission is attempting to provide consumers with
comprehensible disclosures to prevent deception, while not imposing
undue burdens or restrictions on businesses in complying with the
disclosure requirements.
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\39\ The Commission discusses the Internet specifically in this
section because the examples are most pertinent to disclosures on
Web sites. The guidance proposed by the Commission below, however,
also may be applicable to disclosures in other electronic media.
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1. Disclosures Required or Advised by Rules and Guides
The rules and guides that contain disclosure requirements generally
require or recommend that material information be disclosed to
consumers to prevent deception, to ensure that consumers receive
complete information regarding the terms of a transaction, or to
further public policy goals. For example, the Endorsement Guides, 16
CFR 255.2, protect against
[[Page 25002]]
deception by advising that advertisers disclose what performance
consumers can generally expect with a product when an endorsement is
not representative of that performance. In addition, the Guides for the
Advertising of Warranties and Guarantees (``Warranty Guides''), 16 CFR
239.2(a), provide for complete disclosure of warranty information by
advising that if an advertisement mentions a product warranty, a
disclosure should be made that consumers may review the complete
details of the warranty prior to purchase at the place where the
product is sold. The required energy efficiency disclosures in the
Appliance Labeling Rule, 16 CFR 305.4, further the statutory policy
goal of promoting energy conservation.
Some disclosures are required when a certain term, representation
or claim (i.e., a ``triggering representation'') is made. The Leather
Guides, 16 CFR 24.2, for example, advise that the term ``leather'' (the
triggering term) be qualified when used to describe a product that is
not composed in all substantial parts of leather. Other disclosure
requirements may not be linked to a specific triggering term, but
nonetheless are necessary to prevent deception, e.g., the Guides for
the Rebuilt, Reconditioned and Other Used Automobile Parts Industry
(``Used Auto Parts Guides'') 16 CFR 20.1(b), advise that it is unfair
or deceptive to offer for sale or sell used auto parts unless the fact
that the parts are used is disclosed in advertising and on invoices. In
other cases, rules and guides advise that information be disclosed to
consumers prior to the completion of the transaction, e.g., the Credit
Practices Rule, 16 CFR 444.3, requires that certain information be
disclosed to a cosigner prior to becoming obligated.
2. The Clear and Conspicuous Standard in Traditional Media
In all cases the required or advised disclosures must be
effectively communicated to consumers. To achieve this general
performance standard, the Commission's rules and guides require that
disclosures be ``clear and conspicuous,'' using that term or other
conceptually similar articulations.\40\ The Commission views such terms
as synonymous, and this Notice collectively refers to them as the
``clear and conspicuous'' standard. Other, more specific disclosure
standards, such as ``equally prominent,'' and ``in close proximity
to,'' are discussed below.
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\40\ The following are examples of other articulations found in
the Commission's rules and guides: ``clearly, adequately, and
conspicuously,'' ``clearly, conspicuously, and non-deceptively,''
``adequate and non-deceptive'' (Guides for the Nursery Industry
(``Nursery Guides''), 16 CFR 18.8(b)); ``sufficiently clear and
prominent'' (Jewelry Guides, 16 CFR 23.1 n.2); ``of such
conspicuousness and clarity'' (Leather Guides, 16 CFR 24.2(g), and
Guides for the Watch Industry, 16 CFR 245.3(o)); ``clearly and
adequately'' (Tire Advertising and Labeling Guides (``Tire
Guides''), 16 CFR 228.14(b)(3); Bait Advertising Guides, 16 CFR
238.3(c); Retail Food Store Advertising and Marketing Practices
Rule, 16 CFR 424.1); ``of sufficient clarity and conspicuousness''
(Guides for the Decorative Wall Paneling Industry (``Wall Paneling
Guides''), 16 CFR 243.1(c)(4)); ``legible and conspicuous'' (Rules
and Regulations Under Fur Products Labeling Act, 16 CFR
301.38(a)(1)); and ``conspicuous'' (Tire Guides, 16 CFR 228.11).
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In order to determine whether the disclosure is effectively
communicated, the Commission considers the disclosure in the context of
all of the elements of the advertisement.\41\ Ordinarily, a disclosure
is clear and conspicuous, and therefore is effectively communicated,
when it is displayed in a manner that is readily noticeable, readable
and/or audible (depending on the medium), and understandable to the
audience to whom it is disseminated.\42\
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\41\ This approach is set out in the Commission's general policy
on deception. ``[T]he Commission will find deception if there is a
representation, omission or practice that is likely to mislead the
consumer acting reasonably in the circumstances to the consumer's
detriment.'' Deception Statement, 103 F.T.C. at 176. In evaluating
an advertisement or other promotional message, the Commission
focuses not on the individual elements of the message in isolation,
but on its ``overall'' or ``net'' impression. Id. at 175, n. 4. See
also American Home Products, 98 F.T.C. 136, 374 (1981), aff'd 695
F.2d 681 (3d Cir. 1982).
\42\ Deception Statement, 103 F.T.C. at 180-181, ``Qualifying
disclosures must be legible and understandable. In evaluating such
disclosures, the Commission recognizes that in many circumstances,
reasonable consumers do not read the entirety of an ad or are
directed away from the importance of the qualifying phrase by the
acts or statements of the seller.''
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The Commission examines a number of factors to determine whether
disclosures in traditional media (e.g., print, television, and radio)
meet this general performance standard. Thus, in print or other visual
media, the Commission may consider a disclosure's type size, placement,
color contrast to background, duration, and timing, as well as the
existence of any images that detract from the effectiveness of the
message. In audio messages, such as those delivered over the radio, the
Commission may examine the volume, cadence, and placement of a
disclosure, as well as the existence of any sounds that detract from
the effectiveness of the message.\43\ In all media, the Commission
further evaluates the language and syntax of the disclosure to
determine whether it is likely to be understood by the relevant
audience.
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\43\ E.g., Kraft, Inc., 114 F.T.C. 40, 124 (1991), aff'd, 970
F.2d 311 (7th Cir. 1992), cert. denied, 507 U.S. 909 (1993);
Thompson Medical Co., 104 F.T.C. 648, 797-98 (1984), aff'd, 791 F.2d
189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987); See also
Commission consent orders in European Body Concepts, Inc., Docket
No. C-3590 (June 23, 1995); Eggland's Best, Inc., Docket No. C-3520
(Aug. 15, 1994).
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3. Special Issues in Electronic Media
Because the newer forms of electronic media transmit information in
writing and through audio and visual messages, the same factors
considered by the Commission in applying the clear and conspicuous
standard in traditional media apply. The special attributes of
advertising on electronic media, however, may call for additional
guidance. Many Internet advertisements, for example, include scroll
bars to maneuver down pages that usually exceed one screen in length.
They also often include hyperlinks, both to other pages on a Web site
as well as directly to other Web sites. On the Internet and in other
electronic media, new graphics technologies create messages that
scroll, blink, spin, pop-up, relocate, etc.
These unique features may require the Commission to give special
consideration to certain factors in determining whether a disclosure is
effectively communicated on electronic media.44 As is true
for any medium, the specific elements necessary to effectively
communicate a disclosure may vary depending on the nature of the
advertisement and the nature of the claim.45 The focus on,
or the weight given to, any specific factor will vary accordingly.
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\44\ Certain rules and guides expressly include factors that are
analyzed in determining the adequacy of a disclosure. For example,
the Used Auto Parts Guides require that disclosures be ``of such
size or color contrast and so placed as to be readily noticeable.''
16 CFR 20.1(b)(2). Such specific articulations are consistent with
the general ``clear and conspicuous'' standard and would continue to
inform the analysis of whether the disclosure is effectively
communicated.
\45\ For example, some e-mail messages or facsimiles may contain
only text, while Web pages or CD-ROMs may contain text, graphics,
video and audio.
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4. Factors Used To Evaluate Clear and Conspicuous Disclosures on
Electronic Media
a. Unavoidability. The Commission believes that, to ensure
effectiveness, disclosures ordinarily should be unavoidable by
consumers acting reasonably. On the Internet or other electronic media,
this means that consumers viewing an advertisement should necessarily
be exposed to the disclosure in the course of a communication without
having to take affirmative action, such as scrolling down a page,
clicking on a link to other
[[Page 25003]]
pages, activating a ``pop up,'' or entering a search term to view the
disclosure.
b. Access to Disclosures. The Commission believes that in order to
be effectively communicated, disclosures should remain accessible by
consumers at all times during the communication. Therefore, after
initially viewing a Web page that contains disclosures, a consumer who
hyperlinks to another page should not be prevented from returning to
the page containing the disclosures.
c. Proximity and Placement. Internet and other electronic media
advertisements often include many pages and the length of each
individual page can far exceed that of a traditional off-line page.
Consumers may choose not to scroll completely through each page and not
to link to each available page on the Web site, thus possibly missing
important disclosures.
Based on its experience in evaluating disclosures in traditional
media, the Commission believes that the effectiveness of disclosures is
ordinarily enhanced by their proximity to the representation they
qualify. This is especially important for disclosures that are made
because of a triggering representation. For example, disclosures on the
same screen as the triggering representation are likely to be more
effective than those on separate screens. For those disclosures that
are not required in response to a triggering representation, the
disclosure nevertheless is likely to be more effective if it is
proximate to relevant information.
The Commission also recognizes that electronic media offers new
ways of placing claims in advertisements as compared to advertisements
on paper. For example, some Web pages may use frames to separate the
screen. Although a consumer may scroll down the Web page, a frame can
remain constant on the side, top or bottom of the screen. The
Commission solicits comment on whether consumers generally notice
disclosures placed within a separate frame and the effectiveness of
such placement as compared to disclosures that appear elsewhere on a
Web page.
d. Prominence. Disclosures that are large in size and/or emphasized
through a sharply contrasting color, and remain visible or audible for
a sufficiently long duration, are likely to be more effective than
those lacking such prominence. Electronic media affords new
possibilities for adding to (or detracting from) the prominence of
disclosures through animated graphics, graphics that facilitate
segregating certain claims, and displays that remain on the screen for
a long or indefinite duration. Disclosures that are supported by new
display technologies such as animation, or that are distinguished from
(i.e., not embedded within) surrounding text, such as within a border,
may or may not be more prominent. The Commission solicits comment on
whether these technologies, and other technologies unique to electronic
media advertisements add to or detract from the prominence of
disclosures.
e. Non-Distracting Factors. Even if a disclosure is large in size
and long in duration, other elements of an advertisement may distract
consumers so that they fail to notice, read, or listen to the
disclosure. For example, Web pages may contain large flashing images,
background sounds, or other items that are separate from the disclosure
and may reduce the prominence of the disclosure. The Commission
solicits comment on whether there are specific display technologies
that distract consumers and reduce the effectiveness of disclosures.
f. Repetition. The repetition of a disclosure in conjunction with
the claim that triggers it tends to enhance the likelihood of consumers
noticing and understanding them. This is particularly relevant to
Internet advertisements which can be extremely lengthy, with many and/
or long Web pages.
g. Audio and Visual Presentation. Some electronic media
advertisements contain both visual 46 and audio elements.
The Commission believes that disclosures are likely to be more
effective if they are presented in the same mode (audio or visual) in
which a triggering or relevant claim is presented. In addition,
research suggests that disclosures that are made in both visual and
audio modes generally are more effectively communicated than
disclosures made in either mode alone.47 Therefore, the
Commission also believes that the display of disclosures both visually
and in audio, for those promotions that are presented in both modes, is
likely to be more effective than disclosures in only one.
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\46\ The Commission is using the term ``visual'' in this Notice
to include both static visual displays (e.g., a fixed image) and
non-static video displays (e.g., moving video clips).
\47\ Mariea Grubbs Hoy & Michael J. Stankey, Structural
Characteristics of Televised Advertising Disclosures: A Comparison
with the FTC Clear and Conspicuous Standard, J. Advertising, June
1993, at 47, 50; Todd Barlow & Michael S. Wogalter, Alcoholic
Beverage Warnings in Magazine and Television Advertisements, 20 J.
Consumer Res. 147, 151, 153 (1993); Noel M. Murray, et al., Public
Policy Relating to Consumer Comprehension of Television Commercials:
A Review and Some Empirical Results, 16 J. Consumer Pol'y 145, 164
(1993).
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The Commission solicits comment on all of the factors set forth
above. In particular, the Commission solicits comment on (1) its
underlying assumptions about consumer perceptions regarding Internet
and other electronic media advertisements, (2) the discussion of the
state of technology, including any existing or reasonably foreseeable
technology that is not addressed in this Notice, and (3) the costs and
benefits of applying the factors discussed above. The Commission also
requests comment on specific questions listed in Part III, below.
5. Additional Specific Standards Contained in Rules and Guides
Some of the Commission's rules and guides specify in more detail
the manner in which the disclosure should be made, instead of simply
stating that the disclosure should be clear and conspicuous. In these
instances, the underlying objective of the rule or guide is the same:
the effective communication of the disclosure. Thus, the Commission
intends to draw on the factors described above, as embellished by the
specific requirements of the individual rule or guide, in evaluating
compliance with the disclosure provisions of the rules and guides in
advertising on electronic media.
For example, certain rules and guides specify a particular type-
size in which the disclosure should appear or contain language such as
``of equal size and conspicuousness,'' ``of equal conspicuousness,''
and ``more prominently.'' 48 The Commission proposes that
these rules and guides be interpreted as requiring compliance with the
general effective communication performance standard, as well as the
specific size and prominence criteria listed in the rule or guide.
Other rules and guides state that disclosures should be clear and
conspicuous and in close conjunction or proximity to a designated
claim.49 The Commission will evaluate whether the disclosure
is effectively communicated, following the factors described above,
with a special focus on the placement of the disclosure.
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\48\ See, e.g., Rule Concerning the Preservation of Consumers'
Claims and Defenses, 16 CFR 433; Rules and Regulations Under the
Textile Fiber Products Identification Act, 16 CFR 303.41(b); Jewelry
Guides, 16 CFR 23.4; and Rule Concerning Power Output Claims for
Amplifiers Utilized in Home Entertainment Products, 16 CFR 432.2.
\49\ See, e.g., Leather Guides, 16 CFR 24.2(g); Guides Against
Deceptive Labeling and Advertising of Adhesive Compositions, 16 CFR
235.7; Wall Paneling Guides, 16 CFR 243.1(c)(4); Guides for the
Household Furniture Industry, 16 CFR 250.1(b)(2); and Guide
Concerning Use of the Word ``Free'' and Similar Representations, 16
CFR 251.1(c).
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[[Page 25004]]
With respect to rules and guides that call for the placement of
certain disclosures in a specific context, the Commission will consider
interpreting the language in these rules and guides to permit alternate
ways of disclosing information using electronic media, so long as the
disclosure is effectively communicated to consumers and is consistent
with the underlying objective of the rule or guide.50
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\50\ For example, in the consent orders issued in America
Online, Inc., Docket No. C-3787, Prodigy Services Corporation,
Docket No. C-3788, and CompuServe, Inc., Docket No. C-3789, (Mar.
16, 1998), advertisements of a ``free'' offer must contain a
disclosure directing consumers to the location where the terms and
conditions of the offer can be found, and full disclosure of the
terms, conditions, and obligations of the offer can occur during the
online registration process, prior to consumers incurring any
financial obligation.
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Similarly, when rules and guides contain specific disclosure
provisions that may not translate precisely to the Internet, the
Commission proposes to interpret these requirements for Internet
advertising in a manner that is consistent, to the extent possible,
with both the requirements of the rule or guide and the underlying
objective of effective communication.51
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\51\ For example, the TV Picture Size Rule, 16 CFR 410.1, n. 2,
prohibits the disclosure of required information in a footnote to
which reference is made by an asterisk. Following the principles
stated herein, this Rule would be interpreted as not allowing
asterisked footnotes as well as their functional Internet
equivalent--placing the disclosure in a separate location accessed
by clicking on an icon or hyperlinking to a separate page. This is
consistent with the Commission's proposal, discussed above, that
disclosures should be unavoidable by consumers acting reasonably.
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The Commission solicits comment on these approaches to applying
specific standards in rules and guides to electronic media marketing,
and whether additional guidance regarding the specific standards is
necessary.
6. Perspective of the Reasonable Consumer
In determining if representations or practices are deceptive, in
any and all media, the Commission examines them from the perspective of
a reasonable consumer. A representation or practice directed to a
particular group, such as children, is evaluated from the perspective
of a reasonable consumer within that group.52 The same
``reasonable consumer'' standard applies to disclosures required by the
rules and guides in electronic media advertising.
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\52\ Deception Statement, 103 F.T.C. at 175, 179. Some rules and
guides define the relevant audience for analyzing the adequacy of
disclosures, e.g., ``purchasers or prospective purchasers,''
``purchasers and prospective purchasers . . . casually reading, or
listening to, such advertising,'' and ``prospective purchasers.''
See Nursery Guides, 16 CFR 18.2; Leather Guides, 16 CFR 24.2(g); and
Warranty Guides, 16 CFR 239.2(b), respectively. Other rules and
guides do not address the issue.
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III. Request for Comments
The Commission solicits comments on the issues discussed in this
Notice. Comments should, if appropriate, suggest specific alternatives
to various proposals and indicate why alternative approaches would
better serve the Commission's statutory mandate of protecting consumers
against unfairness and deception. The Commission also seeks comment on
the following specific questions:
Applicability of Rules and Guides to Electronic Media
1. Does the Commission's proposal to clarify the applicability of
its rules and guides to electronic media provide adequate guidance to
industry and to the public?
2. What are the costs and benefits to consumers of the Commission's
proposed policy regarding the applicability of its rules and guides to
electronic media?
3. What significant burdens or costs, including costs of
compliance, would the proposed policy impose on firms subject to the
provisions of a rule or guide? Would the proposed policy provide
benefits to such firms?
a. What are the costs, burdens, and benefits of the proposed policy
for small businesses in particular?
b. What changes should be made to the proposal to reduce the
burdens or costs imposed on firms subject to the admonitions of the
rules and guides?
c. How would these changes affect the benefits provided by the
proposal?
Interpretations of Terms
4. Do the Commission's proposed interpretations of the terms
``written,'' ``writing,'' ``printed,'' and ``direct mail'' provide
adequate guidance to the public?
5. What are the costs and benefits of the proposed interpretations?
6. Do the Commission's proposed interpretations of the terms listed
encompass all the newer forms of electronic media?
7. Are there more appropriate alternatives to the various
interpretations of the terms proposed by the Commission? If so, please
explain the alternative interpretation and the benefits of the
alternative.
8. Does the Commission's discussion of ``direct mail'' adequately
address the various new means of electronic communication, e.g., e-
mail, facsimiles or list servers, and adequately account for the
differences inherent in these various formats?
9. Should the Commission's interpretation of the term ``direct
mail'' be limited to communications that are capable of being received
privately? Should individually addressed communications posted on
Internet Bulletin Boards or USENET groups be considered ``direct
mail''?
10. Should Web page or banner advertisements that are targeted to
certain consumers on consumer preference information be characterized
as ``direct mail''? If so, are such advertisements adequately addressed
by the Commission's proposed interpretation? To what extent should
specific forms of online targeted marketing (e.g., push technology or
consumer-selected ``channels'') be considered ``direct mail''?
11. What issues, if any, need to be addressed by the Commission
regarding the use of electronic media to deliver information required
to be provided in writing by a rule or guide?
a. How should the Commission address those issues?
b. Under what circumstances, if any, should the Commission advise
that information be provided on paper and not electronically?
12. Are there other terms in the rules and guides that should be
specifically addressed by the Commission in the context of electronic
media? If so, how should the terms be interpreted and why?
Disclosures
13. Do the proposed factors for evaluating disclosures provide
adequate guidance to industry regarding making disclosures in
electronic media?
14. What are the costs and benefits of applying the factors
proposed by the Commission to evaluate disclosures required or
recommended by the rules and guides?
15. To what extent will an individual consumer's Web browser or
computer capabilities affect the format of an advertisement (e.g., Web
page), and therefore, the format of a disclosure? Should the Commission
advise that advertisers take these differences into account in
designing their advertising to ensure that disclosures are clear and
conspicuous?
16. What technologies exist to prevent or hinder consumers from
accessing a disclosure after initially viewing it? What are the costs
and benefits of advising against their use?
17. Are the Commission's underlying assumptions about consumers'
perceptions with respect to Internet and other electronic media
advertisements accurate? Are there surveys, copytests,
[[Page 25005]]
or other direct evidence of consumer behavior that will aid the
analysis?
a. How do consumers behave in navigating through a Web site,
reading e-mail or viewing a CD-ROM?
i. Do consumers generally scroll completely through Web pages or e-
mail?
ii. Do consumers generally link to each available page on the Web
site?
b. Under what circumstances are consumers more likely to examine
the top of a Web page, rather than the middle or the bottom of a Web
screen or page?
c. Are consumers more likely to notice information that is placed
within a separate frame on a Web page or in other electronic media
advertisements?
d. In what circumstances, if any, must a disclosure appear multiple
times to be effectively communicated?
18. What features and technologies particular to advertising on
electronic media enhance or detract from the prominence, and therefore
the effectiveness, of a disclosure?
a. Do disclosures with graphical elements, such as pop-up features,
animation, blinking, or borders surrounding disclosures, enhance or
detract from the effectiveness of disclosures?
b. What features can appear in Internet advertisements that may
distract consumers from noticing, reading, or listening to disclosures?
19. Could the interactive nature of the Internet present an
opportunity to assure that disclosures are noticed and understood by
the consumer (i.e., could a consumer be required to click on an
``Understood'' button following the disclosure before being permitted
to link to other information)? What are the costs and benefits of using
such features?
General
21. Are there new technologies that are not adequately addressed by
the Commission's proposals? If so, how should these technological
changes be addressed by the Commission?
22. Are there other issues that the Commission should address in
clarifying the applicability of its rules and guides to electronic
media?
By direction of the Commission.
Donald S. Clark,
Secretary.
Appendix
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Titles CFR parts
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Guides for the Nursery Industry......... 16 CFR 18
Guides for the Rebuilt, Reconditioned 16 CFR 20
and Other Used Automobile Parts
Industry.
Guides for the Jewelry, Precious Metals, 16 CFR 23
and Pewter Industries.
Guides for Select Leather and Imitation 16 CFR 24
Leather Products.
Tire Advertising and Labeling Guides.... 16 CFR 228
Guides Against Deceptive Pricing........ 16 CFR 233
Guides Against Deceptive Labeling and 16 CFR 235
Advertising of Adhesive Compositions.
Guides Against Bait Advertising......... 16 CFR 238
Guides for the Advertising of Warranties 16 CFR 239
and Guarantees.
Guides for the Dog and Cat Food Industry 16 CFR 241
Guides for the Decorative Wall Paneling 16 CFR 243
Industry.
Guides for the Watch Industry........... 16 CFR 245
Guides for the Household Furniture 16 CFR 250
Industry.
Guide Concerning Use of the Word 16 CFR 251
``Free'' and Similar Representations.
Guides for the Feather and Down Products 16 CFR 253
Industry.
Guides for Private Vocational and Home 16 CFR 254
Study Schools.
Guides Concerning Use of Endorsements 16 CFR 255
and Testimonials in Advertising.
Guides for the Law Book Industry........ 16 CFR 256
Guides Concerning Fuel Economy 16 CFR 259
Advertising for New Automobiles.
Guides for the Use of Environmental 16 CFR 260
Marketing Claims.
Rules and Regulations Under the Wool 16 CFR 300
Products Labeling Act of 1939.
Rules and Regulations Under Fur Products 16 CFR 301
Labeling Act.
Rules and Regulations Under the Textile 16 CFR 303
Fiber Products Identification Act.
Rule Concerning Disclosures Regarding 16 CFR 305
Energy Consumption and Water Use of
Certain Home Appliances and Other
Products Required Under the Energy
Policy and Conservation Act.
Automotive Fuel Ratings, Certification 16 CFR 306
and Posting.
Trade Regulation Rule Pursuant to the 16 CFR 308
Telephone Disclosure and Dispute
Resolution Act of 1992.
Labeling Requirements for Alternative 16 CFR 309
Fuels and Alternative Fueled Vehicles.
Telemarketing Sales Rule................ 16 CFR 310
Deceptive Advertising as to Sizes of 16 CFR 410
Viewable Pictures Shown by Television
Receiving Sets.
Retail Food Store Advertising and 16 CFR 424
Marketing Practices.
Use of Negative Option Plans by Seller 16 CFR 425
in Commerce.
Power Output Claims for Amplifiers 16 CFR 432
Utilized in Home Entertainment Products.
Preservation of Consumers' Claims and 16 CFR 433
Defenses.
Mail or Telephone Order Merchandise Rule 16 CFR 435
Disclosure Requirements and Prohibitions 16 CFR 436
Concerning Franchising and Business
Opportunity Ventures.
Credit Practices Rule................... 16 CFR 444
Used Motor Vehicle Trade Regulation Rule 16 CFR 455
Labeling and Advertising of Home 16 CFR 460
Insulation.
Interpretations of Magnuson-Moss 16 CFR 700
Warranty Act.
Disclosure of Written Consumer Product 16 CFR 701
Warranty Terms and Conditions.
Pre-Sale Availability of Written 16 CFR 702
Warranty Terms.
Informal Dispute Settlement Procedures.. 16 CFR 703
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[[Page 25006]]
[FR Doc. 98-11942 Filed 5-5-98; 8:45 am]
BILLING CODE 6750-01-P