The FTC s Operation Full Disclosure: What You Need to Know

Transcription

1 The FTC s Operation Full Disclosure: What You Need to Know ABA Antitrust Section Consumer Protection and Advertising Disputes & Litigation Committees December 1, 2014

2 Agenda The FTC Operation Full Disclosure: Background and Legal Foundation Questions I Practical Response and Tips Questions II

3 The FTC s Operation Full Disclosure: What You Need to Know

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5 An act or practice is deceptive if: It s likely to mislead consumers Acting reasonably under the circumstances And it would be material to their decision to buy or use the product

6 How Must Information be disclosed? No one-size-fits-all formula for making disclosures clear and conspicuous. FTC Act embodies a flexible performance standard. Significant guidance from the 1984 FTC Deception Statement and from cases.

7 FTC Deception Policy Statement Accurate information in the text may not remedy a false headline because reasonable consumers may glance only at the headline. Written disclosures or fine print may be insufficient to correct a misleading representations. Other practices of the company may direct consumers attention away from the qualifying disclosures.

8 FTC Deception Policy Statement Oral statements, label disclosures or point-ofsale material will not necessarily correct a deceptive representation or omission. Thus, when the first contact between a seller and a buyer occurs through a deceptive practice, the law may be violated even if the truth is subsequently made known to the purchaser. Pro forma statements or disclaimers may not cure otherwise deceptive messages or practices.

9 FTC Deception Policy Statement 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.

10 Fine print disclosures generally may not cure a misimpression created by the text of an advertisement. Giant Food, Inc., 61 F.T.C. 326, 348 (1962). Stouffer Foods Corp., 118 F.T.C 746 (1994)

11 We... find that the... disclosures were ineffective to dispel the net impression that Kraft Singles contain the same amount of calcium as five ounces of milk. For example, the superimposed caption in the television commercials appears briefly in a middle frame in conjunction with another caption..., and conveys a complicated quantitative message... Generally recognized marketing principles suggest that, given the distracting visual and audio elements and the brief appearance of the complex superscript in the middle of the commercial, it is unlikely that the visual disclosure is effective... The Commission in Kraft, Inc.

12 *frozen yogurt and sorbet combinations Haagen-Dazs (consent order)

13 "Palm Powered handhelds give you real-time access to information where it really matters--in the field. View and edit applications like MS Excel and Outlook. Check inventory, send an , place an order, and close the deal. Update account information and send it back to the office, along with your new updated handicap. Simply amazing.

14 An extremely fine print disclosure, in approximately 4-point type, running along the side of the ad begins: 2000 Palm, Inc. All rights reserved. Palm, Simply Palm... or registered trademarks of their respective owners. Partially through the second line of this disclosure, in poorly-contrasting, black text against a very dark background, the disclosure states: "Application software and hardware add-ons may be optional and sold separately. Applications may not be available on all Palm handhelds."

15 Compaq Presario 5304 System With rebates, including 15 monitor, speakers, color inkjet printer, keyboard, mouse, free shipping. Visit today for rebate details. $269 Buy.com (Consent Order)

16 ONE LINE OF 4-POINT TYPE BUY.COM, BUYCOMP.COM, BUYSOFT.COM, BUYBOOKS.COM, BUYVIDEOS.COM, BUYGAMES.COM, BUYMUSIC.COM, and BUYSURPLUS.COM are trademarks or service marks of BUY.COM, Inc. Prices subject to change. Quantities limited. Requires Compuserve activation. See site for details. Buy.com reserves the right to cancel this offer at any time. 36 months x $21.95 per month = $790.20

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19 Fictionalization. Do not attempt.

20 THE 4Ps

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22 PRESENTATION Is it worded in a way consumers will understand?

23 PLACEMENT Is it where consumers will look?

24 PROXIMITY

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27 If the disclosure of information is necessary to prevent deception or is required by an FTC Rule the disclosure must be clear and conspicuous. Hyperlinks should be clearly labelled. Some topics (e.g., cost, health, safety) may not be suitable for hyperlinks. Disclosures should be as close as possible to the claims they modify. If you need to disclose information, but a particular platform won t let you make the disclosure clearly and conspicuously, don t use that platform to disseminate your ad.

28 * Apple displayed the words Offers In-App Purchases in small print on the Info pages of apps with in-app charges. * It did not explain what In- App Purchases were (including that they cost real money or how much) or that entering the itunes password within the app would approve a charge and initiate a fifteenminute window during which children can incur charges without further action by the account holder. * The disclosure did not prevent Apple s process from being unfair.

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30 Operation Full Disclosure FTC staff reviewed numerous national print and television ads looking for inadequate necessary disclosures. Warning letters to more than 60 companies including 20 of the 100 largest national advertisers. A representative sample of advertisers from different industries and product types.

31 Types of Disclosure Issues Addressed In Warning Letters Claim Try a risk-free or worry free trial The price of a product or service The price of a product or service Endorsers lost specified amounts of weight What was not adequately disclosed Consumers not satisfied had to pay for initial and/or return shipping That there was an automatic billing feature The conditions for obtaining that price, such as entering a service agreement, applying for a mail-in rebate, or four persons sharing one hotel room The results that consumers could generally expect

32 Claim Consumers endorsed a product or service That a product was unique, unsurpassed, or superior in a product category This is a demonstration of the product A product or service had a capability or an accessory was included What was not adequately disclosed That the endorsers had been paid or otherwise compensated That the comparison was limited to a certain subgroup of the category, such as to leading brands or to only certain non-drowsy OTC products That the demonstration was altered, such as that 20 minutes had elapsed The need to have or purchase an additional or alternative product or service, such as having high-speed Internet, buying a higher capacity version of the product, or buying software or an accessory that was not included

33 Claim That a product is effective for symptoms or a condition That a product or service is better or faster Claims about jewelry Broad general statement What was not adequately disclosed A safety risk, such as that the product does not treat a much more serious condition which causes similar symptoms What product or service is being compared to what other product or service, such as that the comparison is to the advertiser s previous service (not to its competitors ), or that a comparison is to not using any product at all Disclosures required by the Jewelry Guides Exceptions or limitations

34 Examples of Broad General Statements Needing Qualification Claim Buy certain products and get a certain free product That a product works for 24 hours x% savings on all items in a product category Certain customers will get a pass for x% savings on all items That a product has the strength to provide prolonged relief from a condition Satisfaction guaranteed What was not adequately disclosed The offer is limited to the first several hundred purchasers That it requires reuse Certain items in the category are excluded The pass was not valid in several major states where the ads might have aired The relief is only for minor forms of the condition The extremely limited nature of the guaranty

35 Claim That a product comes with free services That the cost of a service was just $x per minute A product killed almost all germs and bacteria How well a product performs That a product or service was legal The ability to choose any service provider What was not adequately disclosed Significant limitations on the services including how long they are free That price was only for the first so many minutes Doing so requires time-consuming special measures That the specified performance is only after an expensive pre-treatment The illegality of the product or service in certain places That the featured product would not work with a leading service provider

36 Ways That Disclosures Were Not Small Print Poorly contrasting print Clear and Conspicuous Appearing for too short a time Appearing away from claims which they seek to qualify At bottom of ad Not appearing on screen at the same time as the claim Part of a longer disclosure, sometimes in the middle or end of such a disclosure Distracting elements Ambiguous

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38 So what is clear and conspicuous? It s a performance standard, not a font size or a minimum number of seconds.

39 Consumers should be able to notice the disclosure easily; they should not have to look for it. In general, disclosures should be:* Close to the claims they relate to and not hidden or buried in footnotes or in blocks of text people are not likely to read; In a font that is easy to read; In a shade that stands out against the background; For video ads, on the screen long enough to be noticed, read, and understood; and In words consumers will understand. If disclosures are hard to find, tough to understand, or buried in unrelated details, or if other elements in the ad obscure or distract from the disclosures, they do not meet the clear and conspicuous standard. *This is a boring looking slide with a lot of text, but it s important!

40 Compliance with network clearance standards for disclosure size and duration is NOT necessarily sufficient to make a disclosure clear and conspicuous under the FTC Act. FTC staff has confirmed with the network ad clearance departments that they share our view. Many of the TV ads that were the subjects of our warning letters likely appeared on network television and all had seriously inadequate disclosures.

41 Question Break I

42 On the Receiving End First reaction Uh oh.

43 Response Examined every claim and execution referenced in the letter Examined the approval process Identified internal team that would be responsible for reexamination of approval flow Revised and augmented existing disclosure guidelines

44 Response (cont.) Response to FTC staff Addressed the specific disclosure issues raised briefly Outlined the affirmative steps that we were taking to address disclosures internally, with vendors, and on an enterprise level

45 Internal Reaction From recipients and non-recipients, the general reaction was

46 Internal Reaction (cont.) Opportunity to address something that may not have been given a lot of attention Evaluation of how disclosures are presented across an enterprise and across various media More training and re-education to dispel some preconceived notions about what is the role of disclosure

47 Practical Tips Not every super is a disclosure The focus should not be on information that you need to add because of contractual relationships or statements that are unrelated to the claims presented expressly or implicitly by the advertising Copyright information Corporate relationships Boilerplate language that is not likely to affect how consumers understand the claims in the ad

48 Practical Tips The focus is on material information without which the advertisement is rendered false or misleading. Imagine that the disclosure is missing; what would be the consumer s likely reaction? Would it affect his or her purchasing decision at all? Would it affect the weight he or she puts on the claim to which the disclosure relates?

49 Practical Tips Things that clients have found to be useful and we believe have a beneficial impact on the enterprise s position if questioned about a disclosure: Re-educate and reinforce basic rules of the road Reexamine internal structures to ensure that appropriate points in the approval process (perhaps at a quality assurance or proofreader stage) have proper authority to provide sticking feedback on disclosures

50 Practical Tips Reevaluate internal guidelines Confirm schedule for internal reeducation Double-check whether your guidelines are provided to your outside agencies/vendors Reexamine internal flow charts. Be able to explain where the legal decision as to the materiality of the disclosure at issue is made Be able to explain where the conspicuousness is assessed

51 Practical Tips A perfect disclosure in one execution may be insufficient in another It is essential to consider how a linked claimsdisclosure lives in each execution of a campaign Do an internal chart that keeps an inventory of the same disclosure but in various versions and forms The disclosure on a mailer may be fine, but that same disclosure might be completely insufficient for in-store signage

52 Practical Tips Document your reevaluation, reeducation, and reassessment efforts Create templates based on recent campaigns particularly if there are various executions of the same claims (Internet, TV, print) Use them as part of your reeducation efforts, which can involve required lunch and learn sessions

53 Questions II

54 Thank you John P. Feldman, Partner, Reed Smith LLP Michael Ostheimer, Staff Attorney, Division of Advertising Practices, Federal Trade Commission Shahin Rothermel, Venable LLP