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| The FCC/FTC Crack Down on Deceptive Advertising for Long Distance Telephone Services On March 1, the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) issued a Joint Policy Statement for the advertising of dial-around and other long-distance services to consumers. The policy statement is intended to protect consumers from unfair and deceptive advertising of long-distance services by providing guidelines to carriers to ensure their advertising is truthful, complete and non-misleading. The FCC/FTC issued the statement in response to the recent explosion of innovation in the telecommunications industry, as well as the escalating number of complaints regarding how long distance services are advertised. According to FCC chairman William Kennard, "[the] policy statement is a critical step in protecting the core rights of consumers in the competitive market - it ensures that consumers will have the knowledge they need to select the carrier of their choice and be fairly charged for the services they use." The policy statement sets forth certain general criteria for long distance advertisements and cites multiple examples of the types of advertisements that the commissions consider to be misleading. In general, to comply with the FCC/FTC guidelines, advertisers must: (1) refrain from making any misrepresentations about long-distance services; (2) disclose material information necessary to prevent true yet misleading price claims from deceiving customers; and (3) disclose this information in a clear and conspicuous manner. This article discusses these requirements, examples of deceptive advertising, and suggests methods for complying with the policy guidelines. The guidelines require that all claims for long-distance service, including cost, must be truthful, non-misleading and substantiated. The FCC/FTC caution advertisers that, once an advertisement makes an implied or express objective claim that conveys a material representation to reasonable consumers, the advertiser is responsible for the truthfulness of the representation and for substantiating the representation, regardless of whether the advertiser intended to convey those messages to consumers. Moreover, where a material claim in the advertisement is false, a disclosure providing contradictory information is unlikely to cure the misrepresentation. The guidelines cite as an example of a misrepresentation the claim that telephone calls cost 10¢ a minute "[a]ll day - [a]ll night," when, in fact, that rate is applicable only for state-to-state calls after 7:00 p.m. and on weekends. In this instance, qualifying language would not remedy the inaccuracy of the claim. Where an advertisement makes claims that are not directly false but might be misleading in the absence of qualifying or limiting information, advertisers are responsible both for making all necessary disclosures. By way of example, the guidelines indicate that such disclosure may be necessary in connection with cost-related information, comparative price claims, time restrictions, and geographic restrictions. The guidelines further specify that material information concerning both the use of the phrase "Basic Rates" and toll-free numbers must be disclosed. Among the many examples cited involving necessary disclosures are the following: • An advertisement claiming that long-distance calls cost 10¢ a minute must disclose the additional fact that all calls are subject to a 50¢ minimum charge. The guidelines require the disclosure of qualifying information that is necessary to prevent an advertisement from being deceptive to be presented clearly and conspicuously so that it is actually noticed and understood by consumers. To ensure that disclosures are effective, advertisers should use clear and unambiguous language, avoid small type, place any qualifying information close to the claim being qualified, and avoid making inconsistent statements or using distracting elements that could undercut or contradict the disclosure. Factors used in determining whether a disclosure is clear and conspicuous are: a) Prominence. Disclosures that are large, emphasized through a sharply contrasting color, and, in the case of television advertisements, remain visible and/or audible for a sufficiently long duration are likely to be more effective than those lacking such prominence. According to the FCC/FTC, the use of fine-print footnotes and brief video superscripts are often overlooked; disclosures should be prominent enough so that typical consumers will actually read and understand it in the context of an actual advertisement. b) Proximity and Placement. Disclosures are ordinarily more effective when placed proximate to the representation they qualify. Placement of qualifying information away from the triggering representation, such as in footnotes, margins, or on a separate page of a multi-page promotion, reduces the effectiveness of the disclosure. Moreover, the use of an asterisk will generally be considered insufficient to draw a consumer's attention to a disclosure placed elsewhere in an advertisement. c) Absence of Distracting Elements. The guidelines indicate that, even if a disclosure is large and long in duration, other elements of an advertisement may distract consumers so that they may fail to notice the disclosure. Accordingly, advertisers avoid undercutting the effectiveness of disclosures by placing them in competition with other arresting elements of the advertisement. d) Factors Relating Specifically to Television Advertisements. Considerations specific to television advertisements include volume, cadence, and placement of any audio disclosures. According to the FCC/FTC, disclosures generally are more effective when they are made in the same mode (visual or oral) in which the claim necessitating the disclosure is presented. Moreover, in television advertisements, a disclosure with both a sufficiently large superscript and a voice-over statement is likely to be more effective than a superscript alone. Among the many examples of advertisements cited in the policy statement as containing inadequately clear and/or conspicuous disclosures are the following: • The appearance of the phrase "10¢ a minute" in 70 point-type at the top of the page, qualified by a disclaimer "with a $3.95 monthly fee" in 12-point type either in the body or at the bottom of the advertisement would most likely be insufficient to avoid consumer deception. This policy statement was enacted in the wake of MCI WorldCom, Inc.'s agreement to pay considerable fines for deceptive advertising in some long-distance phone services. MCI WorldCom, Inc. was being investigated by the FCC for advertisements omitting material details about time and geographic restrictions. According to an FCC spokesperson, the commission is currently investigating other companies for deception. Stay tuned for more information concerning FCC/FTC efforts to sanction misleading long-distance service advertisers and to quell the growing number of consumer complaints. © 2000 Davis & Gilbert LLP |
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