Regulating E-Business Breeds Confidence

Since long before there was an Internet, the Federal Trade Commission has had broad authority to protect consumers by regulating "unfair or deceptive acts or practices." The FTC now takes the common-sense position that consumer protection laws apply online as well.

Internet law being as new as it is, it wasn't too long ago that this position wasn't clear. I characterize the FTC's position as "common sense," but let's not forget the old cliche that law is "'common sense' as modified by the courts and legislature." It's good to see that the FTC has adopted a common-sense approach to regulating e-commerce.

It's the right position for e-businesses and consumers. Adding a dose of consumer protection to the online world breeds consumer confidence. Consumer confidence means more people will buy online. The last thing reputable e-businesses need is for the Internet to develop an unsavory reputation as a place that's less consumer-friendly than other marketplaces.

Let's put to bed the idea that the Internet is the wild West. It may have been several years ago, when the answer to the most basic questions about Internet law was often, "Nobody knows. The law is unclear in this area." Today, Internet law represents the most rapidly developing area of the law.

As recently as five years ago, I would have said that the body of law that represents Internet law couldn't fill a pamphlet. Today, it's multiple volumes.

It's now clear that the prohibition against ``unfair or deceptive acts or practices'' encompasses Internet advertising, marketing and sales. If you're responsible for an e-business, you need to be familiar with the FTC's rules and comply. If you're a consumer, you need to know what your rights are.

The devil is in the details. That summarizes the basic problem with taking old laws regulating Net advertising, marketing and sales, and applying them online.

How exactly do advertisers handle limitations and disclaimers in a banner ad that loudly proclaims a special offer if the offer is complex and cannot fit into a small banner ad?

The fact is that space constraints in a banner ad make it difficult to effectively make proper disclosure. The FTC recognizes this and therefore takes the position that disclosures may be more effective if they're made on the website to which the banner links.

The rule is that advertisers should place disclosures near, and when possible, on the same screen as the triggering claim. The law strongly discourages advertisers from being tricky.

Advertisers are required to use text or visual cues to encourage consumers to scroll down a Web page when it's necessary to see a disclosure. When using a hyperlink to lead to disclosures, the link needs to be obvious. The link should be labeled appropriately to convey the importance of the information that it's giving the consumer.

Consumers who find a website that makes it difficult to understand the ``fine print'' have a couple of remedies available. They can complain to the FTC. Just as important, they can show disapproval by taking their business to an honest and reputable e-business.

One of the benefits of the Net's rising popularity is that even mid-level and senior government people use it and are increasingly familiar with the way it really works on a practical level. This has often led to reasonable regulatory schemes.

The FTC's foray into clarifying online advertising rules is pleasantly marked by the increasing sophistication of those involved in the regulatory process. They've done an admirable job of making it easier for tech lawyers like me to give clients solid advice based on reasonable and clearer government regulations. Both e-businesses and consumers benefit.

E-businesses must learn the now clearer rules of the game and comply. It's not the wild West out there and they will have nobody to blame if the FTC makes them a project.