Interpretation of Rules and Guides for Electronic Media; Request for Comment

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

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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

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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

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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