FTC Guidelines on Internet Advertising

The Federal Trade Commission today issued a staff working paper examining how its own consumer protection rules and guides -- many of which were developed long before "dot com" became a household phrase -- apply to advertising and sales on the Internet. The paper, Dot Com Disclosures: Information about Online Advertising, provides guidance to businesses about how FTC law applies to online activities with a particular focus on the clarity and conspicuousness of disclosures in Internet ads. The paper also discusses how Commission rules and guides that use certain words -- "written," "writing," "printed" and "direct mail" -- apply to new technologies.

"Dot commerce is the new Main Street," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "This guidance represents the cooperative efforts of government, communications experts in industry and consumer groups to achieve fair and informative online advertising for consumers."

The working paper advises online advertisers that the same consumer protection laws that apply to commercial activities in other media apply online and that any disclosures required to prevent an ad from being misleading must be clear and conspicuous. The paper focuses on how required disclosures may be presented clearly and conspicuously in online ads and provides key considerations for evaluating their effectiveness.

The paper discusses, in the context of online ads, the traditional factors used to evaluate whether disclosures are likely to be clear and conspicuous, including: the placement of the disclosure in an ad and its proximity to the relevant claim; the prominence of the disclosure; whether items in other parts of the ad distract attention from the disclosure; whether the ad is so lengthy that the disclosure needs to be repeated; whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration; and, whether the language of the disclosure is understandable to the intended audience.

The appendix of the working paper contains mock advertisements that illustrate one or more of these particular factors. The paper notes that actual disclosures must be evaluated in the context of an advertisement as a whole.

Further, the working paper addresses specific issues in applying certain Commission rules and guides to Internet activities and the use of new technologies to comply with those rules and guides. For example, some rules and guides use certain terms -- such as "written," "writing" and "printed" -- that connote words or information on paper. Consumers expect to receive the same information and protections whether they are looking at a paper catalog or an online one. The paper explains that those rules and guides that apply to written ads or printed materials also apply to visual text displayed on the Internet. In addition, the paper discusses the circumstances in which businesses may use email to comply with a rule or guide requirement to provide or send required notices or documents to consumers.

The publication of this paper follows a public comment period and public workshop which was held to discuss the applicability of Commission rules and guides to Internet advertising. The paper does not set forth new rules for online advertising, but instead describes how existing consumer protection laws apply to the unique features of the medium.

The Commission vote approving the issuance of the staff working paper was 5-0.

DOT Com Disclosures

Overview

I. Introduction

II. The Applicability of FTC Law to Internet Advertising

III. Clear and Conspicuous Disclosures in Online Advertisements

IV. Specific Issues in Applying Certain Rules and Guides to Internet Activities

V. Conclusion

Endnotes

Overview

Although the number of companies advertising online—and the number of consumers shopping online—are soaring, fraud and deception may dampen consumer confidence in the e-marketplace. But cyberspace is not without boundaries, and fraud and deception are unlawful no matter what the medium. The FTC has enforced and will continue enforcing its consumer protection laws online to ensure that products and services are described truthfully in online ads and that consumers get what they pay for. These activities benefit consumers as well as sellers, who expect and deserve a fair marketplace.

Many of the general principles of advertising law apply to Internet ads, but new issues arise almost as fast as technology develops. This booklet describes the information businesses should consider as they develop online ads to ensure that they comply with the law. Briefly,

The same consumer protection laws that apply to commercial activities in other media apply online. The FTC Act’s prohibition on "unfair or deceptive acts or practices" encompasses Internet advertising, marketing and sales. In addition, many Commission rules and guides are not limited to any particular medium used to disseminate claims or advertising, and therefore, apply to online activities.
Disclosures that are required to prevent an ad from being misleading, to ensure that consumers receive material information about the terms of a transaction or to further public policy goals, must be clear and conspicuous. In evaluating whether disclosures are likely to be clear and conspicuous in online ads, advertisers should consider the placement of the disclosure in an ad and its proximity to the relevant claim. Additional considerations include: the prominence of the disclosure; whether items in other parts of the ad distract attention from the disclosure; whether the ad is so lengthy that the disclosure needs to be repeated; whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration; and, whether the language of the disclosure is understandable to the intended audience.
To make a disclosure clear and conspicuous, advertisers should:

Place disclosures near, and when possible, on the same screen as the triggering claim.
Use text or visual cues to encourage consumers to scroll down a Web page when it is necessary to view a disclosure.
When using hyperlinks to lead to disclosures,
- make the link obvious;
- label the hyperlink appropriately to convey the importance, nature and relevance of the information it leads to;
- use hyperlink styles consistently so that consumers know when a link is available;
- place the hyperlink near relevant information and make it noticeable;
- take consumers directly to the disclosure on the click-through page;
- assess the effectiveness of the hyperlink by monitoring click-through rates and make changes accordingly.
- Recognize and respond to any technological limitations or unique characteristics of high tech methods of making disclosures, such as frames or pop-ups.
- Display disclosures prior to purchase, but recognize that placement limited only to the order page may not always work.
- Creatively incorporate disclosures in banner ads or disclose them clearly and conspicuously on the page the banner ad links to.
- Prominently display disclosures so they are noticeable to consumers, and evaluate the size, color and graphic treatment of the disclosure in relation to other parts of the Web page.
- Review the entire ad to ensure that other elements—text, graphics, hyperlinks or sound—do not distract consumers’ attention from the disclosure.
- Repeat disclosures, as needed, on lengthy Web sites and in connection with repeated claims.
- Use audio disclosures when making audio claims, and present them in a volume and cadence so that consumers can hear and understand them.
- Display visual disclosures for a duration sufficient for consumers to notice, read and understand them.
- Use clear language and syntax so that consumers understand the disclosures.

Commission rules and guides that use specific terms—"written," "writing," "printed" or "direct mail"—are adaptable to new technologies.

Rules and guides that apply to written ads or printed materials also apply to visual text displayed on the Internet.
If a seller uses email to comply with Commission rule or guide notice requirements, the seller should ensure that consumers understand that they will receive such information by email and provide it in a form that consumers can retain.
"Direct mail" solicitations include email. If an email invites consumers to call the sender to purchase goods or services, that telephone call and subsequent sale must comply with the Telemarketing Sales Rule requirements.

I. Introduction

Day in and day out, businesses are going online to advertise and sell their products and services. The Internet combines aspects of print, television, and radio advertising in an interactive environment, and while it presents a new and fast-paced experience for consumers, it also raises interesting—and occasionally complex—questions about the applicability of laws that were developed long before "dot com" became a household phrase.

The Federal Trade Commission has examined how its own consumer protection rules and guides apply to advertising and sales made via the Internet. This staff working paper discusses FTC requirements that disclosures be presented clearly and conspicuously, in the context of Internet advertisements. It also discusses how certain rules and guides apply to online activities, when the rule or guide refers to "written" ads or "direct mail" solicitations or requires notices to be sent to consumers.

The publication of this staff working paper follows a public comment period and a public workshop which was held to discuss the applicability of FTC rules and guides to online activities.¹ In evaluating how disclosures can be displayed clearly and conspicuously in online ads, the comments and workshop discussion focused specifically on disclosures required by the rules and guides.² The same analysis that applies to rule and guide disclosures also applies to disclosures that are necessary to prevent deception under Section 5 of the FTC Act. They, too, must be clear and conspicuous. Therefore, this paper addresses both types of disclosures.³

II. The Applicability of FTC Law to Internet Advertising

The FTC Act’s prohibition on "unfair or deceptive acts or practices" broadly covers advertising claims, marketing and promotional activities, and sales practices in general.⁴ The Act is not limited to any particular medium. Accordingly, the Commission’s role in protecting consumers from unfair or deceptive acts or practices encompasses advertising, marketing, and sales online, as well as the same activities in print, television, telephone and radio. Indeed, since 1994, the Commission has brought over 100 law enforcement actions to stop fraud and deception online and is working to educate businesses about their legal obligations and consumers about their rights.

For certain industries or subject areas, the Commission issues rules and guides. Rules prohibit specific acts or practices that the Commission has found to be unfair or deceptive.⁵ Guides help businesses in their efforts to comply with the law by providing examples or direction on how to avoid unfair or deceptive acts or practices.⁶ Many rules and guides address claims about products or services or advertising in general and are not limited to any particular medium used to disseminate those claims or advertising.⁷ Therefore, the plain language of many rules and guides applies to claims made on the Internet.⁸ For example, the Mail or Telephone Order Merchandise Rule, which addresses the sale of merchandise that is ordered by mail, telephone, facsimile or computer, applies to those sales regardless of "the method used to solicit the order."⁹ Solicitations made in print, on the telephone, radio, TV or online naturally fall within the Rule’s scope. In addition, the Guides Concerning the Use of Endorsements and Testimonials in Advertising apply to endorsements, which are defined as "any advertising message . . . [that] consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser."¹⁰ The Guides refer to advertising without limiting the media in which it is disseminated, and therefore, encompass online ads.

III. Clear & Conspicuous Disclosures in Online Ads

When it comes to online ads, the basic principles of advertising law apply:

Advertising must be truthful and not misleading;¹¹
Advertisers must have evidence to back up their claims ("substantiation");¹² and
Advertisements cannot be unfair.¹³

Unique features in Internet ads also may affect how an ad and any required disclosures are evaluated.

A. Background on Disclosures

Advertisers must identify all express and implied claims that the ad conveys to consumers. When identifying claims, advertisers should not focus only on individual phrases or statements, but should consider the ad as a whole, including the text, product name and depictions.¹⁴ If an ad makes express or implied claims that are likely to be misleading without certain qualifying information, the information must be disclosed. Advertisers must determine which claims might need qualification and what information should be provided in a disclosure. If qualifying information is necessary to prevent an ad from being misleading, advertisers must present the information clearly and conspicuously.

A disclosure only qualifies or limits a claim, to avoid a misleading impression. It cannot cure a false claim. If a disclosure provides information that contradicts a claim, the disclosure will not be sufficient to prevent the ad from being deceptive. In that situation, the claim itself must be modified.

Many Commission rules and guides spell out the information that must be disclosed in connection with certain claims. In many cases, these disclosures prevent a claim from being misleading or deceptive.¹⁵ Other rules and guides require disclosures to ensure that consumers receive material information about the terms of a transaction,¹⁶ or to further public policy goals.¹⁷ These disclosures also must be clear and conspicuous.

B. The Clear and Conspicuous Requirement

Disclosures that are required to prevent deception—or to provide consumers material information about a transaction—must be presented "clearly and conspicuously."¹⁸ Whether a disclosure meets this standard is measured by its performance—that is, how consumers actually perceive and understand the disclosure within the context of the entire ad. The key is the overall net impression of the ad—that is, whether the claims consumers take from the ad are truthful and substantiated.¹⁹

In reviewing their online ads, advertisers should adopt the perspective of a reasonable consumer.²⁰ They also should assume that consumers don’t read an entire Web site, just as they don’t read every word on a printed page.²¹ In addition, it is important for advertisers to draw attention to the disclosure. Making the disclosure available somewhere in the ad so that consumers who are looking for the information might find it doesn’t meet the clear and conspicuous standard.

Even though consumers have control over what and how much information they view on Web sites, they may not be looking for—or expecting to find—disclosures. Advertisers are responsible for ensuring that their messages are truthful and not deceptive. Accordingly, disclosures must be communicated effectively so that consumers are likely to notice and understand them.

C. What are Clear and Conspicuous Disclosures?

There is no set formula for a clear and conspicuous disclosure. In all media, the best way to disclose information depends on what information must be provided and the nature of the advertisement. Some disclosures are quite short, while others are more detailed. Some ads use only text, while others use graphics, video and audio. Advertisers have the flexibility to be creative in designing their ads, so long as necessary disclosures are communicated effectively and the overall message conveyed to consumers is not misleading.

To evaluate whether a particular disclosure is clear and conspicuous, consider:

the placement of the disclosure in an advertisement and its proximity to the claim it is qualifying,
the prominence of the disclosure,
whether items in other parts of the advertisement distract attention from the disclosure,
whether the advertisement is so lengthy that the disclosure needs to be repeated,
whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration, and
whether the language of the disclosure is understandable to the intended audience.

The following discussion uses these traditional factors to evaluate whether disclosures are likely to be clear and conspicuous in the context of online ads. In the online version of this booklet, the underlined hyperlinks link to mock ads. In the printed booklet, the circles in the margin correspond to mock ads in the appendix. Each mock ad presents a scenario to illustrate one or more particular factors. Advertisers must consider all of the factors, however, and evaluate an actual disclosure in the context of the ad as a whole.

1. Proximity and Placement

A disclosure is more effective if it is placed near the claim it qualifies or other relevant information. Proximity increases the likelihood that consumers will see the disclosure and relate it to the relevant claim or product. For print ads, an advertiser might measure proximity in terms of whether the disclosure is placed adjacent to the claim, or whether it is separated from the claim by text or graphics. The same approach can be used for Internet ads. Web sites, however, are interactive and have a certain depth—with multiple pages linked together and pop-up screens, for example—that may affect how proximity is evaluated.

a. Evaluating Proximity in the Context of a Web Page

Some disclosures must be made when an ad contains a certain claim (often referred to as a "triggering claim"). On a Web page, the disclosure is more likely to be effective if consumers view the claim and disclosure together on the same screen. Example 1. Even if a disclosure is not tied to a particular word or phrase, it is more likely that consumers will notice it if it is placed next to the information, product, or service to which it relates.

In some circumstances, it may be difficult to ensure that a disclosure appears on the "same screen" as a claim or product information. Some disclosures are long and difficult to place next to the claims they qualify. In addition, computers and other information "appliances" have varying screen sizes that display Web sites differently.²² In these situations, consumers may need to scroll to view a disclosure. If scrolling is necessary, advertisers should ask whether consumers are likely to do it. If consumers don’t scroll, they may miss important qualifying information and be misled.

This article is divided into three parts. See Part 2 and Part 3.

The above article was reprinted from an announcement on the Federal Trade Commission web site dated May 3, 2000. Check the FTC web site for any changes to the article.

This page was last modified on July 22, 2007.

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