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By Chip Cooper in Featured

The U.S. Congress will soon be voting on two separate bills, which if they become law will certainly increase the burden on webmasters for website legal compliance, including new disclosures and website legal forms.

Given the current mood in Congress for more and more regulation, it’s likely that the federal government will soon have increased regulatory authority over the advertising practices of Web business – both in terms of how they target consumers and with the advertising messages themselves.

Consumer Privacy Bill to Target Behavioral Ads

Congressman Rick Boucher (D-VA), chairman of the House Energy and Commerce Subcommittee on Technology and the Internet has been planning to introduce a consumer privacy bill since last year, and he most likely will introduce it in the near future.

Rep. Boucher’s primary target is how advertisers target consumers with behavioral advertising. Web marketers have long sought to use tracking technology to increase the relevance with online ads – the more relevant the ad, the more conversions increase.

Behavioral ads increase relevancy significantly. Behavioral technology tracks a user’s behavior on the Web, including sites visited, length of visits, content read, and searches made. This data is then used to create a behavioral pattern for a specific user which in turn is related to a specific online demographic. Ad networks then serve so-called behavioral ads that are targeted and relevant to that specific demographic.

Many Web advertisers fear that the new bill will require opt-in by consumers. However, Rep. Boucher says he’s leaning toward opt-out.

“Where I want to go with this is generally opt-out,” says Rep. Boucher. “If I were [a publisher or advertiser], I would want Internet users to have a sense that their experience is more secure, that they know what information is collected about them, and they be given much more control. They will be more trusting of electronic commerce. . . .it’s good for business.”

Even if the bill is proposed on an opt-out basis, there will likely be increased regulation in the form of new disclosures and website legal forms requirements indicating how data is tracked and used.

Proposed Expansion of FTC Enforcement Powers

In November, 2009, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009 which is now under consideration in the U.S. Senate. The bill if passed into law would enlarge the current the Federal Trade Commission’s (FTC) powers to levy civil penalties on “unfair” and “deceptive” advertising. Under existing law, congressional review and public testimony must take place before penalties can be imposed for “unfair” and “deceptive” advertising. These checks and balances were added by congress in 1975 and 1980 to curb the FTC’s then-broad powers stemming from the act that created the FTC in 1914.

Ad industry proponents fear that the proposed law would enable the FTC to have enforcement authority over anyone providing “substantial assistance” in a violation, including any website that publishes the ad and the creative people who produced it.

Conclusion

The proposed consumer privacy bill focuses on behavioral advertising – how consumers are targeted. The proposed expansion of FTC enforcement powers focuses on the advertising messages themselves. The combination of the two proposed laws will have a significant impact on webmasters seeking compliance with regulations on online advertising.

On January 20, 2010, the Direct Marketing Association joined twenty eight other trade and business associations in sending a letter to members of the U.S. Senate Committee on Commerce, Science & Transportation. The letter opposed the current proposed expansion of the FTC’s powers on the grounds that the FTC could act as an “unelected legislature” across the economy. This would be “like putting the FTC on steroids”, according to a former FTC chairman.

Leading Internet, IP and software lawyer Chip Cooper has automated the process of drafting website legal forms for website legal compliance. Use his free online tool – Website Documents Determinator — to determine which documents your website really needs for website legal compliance. Discover how quick, easy, and cost-effective it is to draft your website legal forms at DigiContracts.com.

By Chip Cooper in Featured

Web-DesignWe all make New Year’s resolutions – some are personal, some are business or professional in nature. Even if we don’t actually make New Year’s resolutions, we engage in formal and informal “planning” as we look ahead to the new year.

If you operate a website, you’re probably aware that your website operations are now highly regulated. And the pace of legal regulations continues to accelerate.

By Chip Cooper in Featured

If you’ve already read – and clearly understand – the 81-page Guides for the use of Endorsements and Testimonials in Advertising issued by the FTC on October 5, 2009, then read no further.

However, if you’re a blogger or other producer of consumer-generated online content, and you’re not quite sure about how to decipher the legaleze or how to comply with the Guides, then this article may be for you… particularly if you’re more than a little concerned about avoiding the $11,000 fine for non-compliance.

What’s This All About, Anyway?

I’ve read bloggers’ comments to the effect of “why is the Federal Trade Commission sticking its dad-gum nose into the blogosphere — how far will this go?” That’s one way to look at it – as an unnecessary intrusion by the government.

Another way to look at is that the Guides represent an “official” recognition that blogging has passed its adolescent stage. Blogging has grown up, and the FTC is the so-called new sheriff in town.

Now, any producer of consumer-generated online content – bloggers, podcasters and video producers – is being treated to the same truth in advertising rules that other businesses in the brick and mortar world have been living with for a long time.

When Do Bloggers Become Endorsers?

This is the key threshold question. If a blogger is not an endorser, then the Guides do not apply. However, if the blogger is an endorser, then the Guides apply and with them, potential liability.

If you want to actually read the Guides to find the answer, go to new Example 8 (pp. 50-51). Example 8 provides 3 scenarios where a consumer reviews a product or service on a blog:

  • no endorsement – a consumer purchases a product with his/her own money, and posts a review or opinion on a blog (result: Guides do not apply do not apply because there is no relationship at all with the advertiser; no worries);
  • no endorsement – same scenario, except that a coupon for a free trial of the product is generated by the store’s computer, based on his/her purchases (result: Guides do not apply because there is no relationship with the advertiser indicating “sponsorship”; no worries); and
  • endorsement – the consumer is part of a network marketing program where he/she periodically reviews products and receives a free product for which he/she writes reviews (result: Guides apply because there is a relationship with the advertiser based on the stream of free products indicating “sponsorship”; there are legitimate worries about how to comply with the Guides).

Suggestions For Bloggers Who Act as Endorsers

If you’re a blogger who acts as an endorser, then you should take care to understand and comply with the Guides to avoid a $11,000 fine by the FTC.

In simple terms, the basic rules are these:

  • disclose “material connections” you receive for promoting someone else’s product or service, and
  • disclose typical results that should reasonably be expected from a product or service (“results not typical” disclaimers won’t work anymore).

The real trick is understanding how to comply with these basic rules. The following is a list of examples and suggestions to assist you:

  • if you purchase a product and pay for it with your own money, then blog about it, you’re not regulated by the Guides – no worries;
  • if you are paid for product review, you should disclose who paid you that you were paid for the review (you’re clearly regulated by the Guides);
  • if you regularly get free products and blog about them (e.g. a book reviewer), you should disclose who sent you the product and that it was free (you’re clearly regulated by the Guides);
  • however, if you don’t routinely blog about products, or you don’t routinely receive free products, but you receive a free product that’s not very valuable and you blog about it, you’re probably not regulated by the Guides;
  • even if you write a negative review of a product or service you’re not off the hook — if you’re required by the Guides to make disclosures, the disclosure rules still apply, even to negative reviews;
  • if you’re an endorser, you should be a bona fide user of the product or service at the time the endorsement is given – fake endorsements are deceptive, and won’t comply with the Guides;
  • disclosures should not be after-the-fact; they should be made at the time of the endorsement and live with it;
  • disclosures should be clear and conspicuous – it’s not required that the disclosure be in ALL CAPS, but all caps disclosures would go a long way toward satisfying the clear and conspicuous requirement; * example disclosure: FTC GUIDES NOTICE: I RECEIVED THIS PRODUCT FROM XYZ, INC. FREE OF CHARGE, or FTC GUIDES NOTICE: THIS PRODUCT WAS PROVIDED FREE OF CHARGE BY XYZ COMPANY; and
  • if you regularly get free products and blog about them (e.g. a book reviewer), you might consider adding a clause to your website’s Terms of Use regarding this business practice.

Conclusion

Prior to the issuance of the Guides by the FTC – which go into effect on December 1, 2009 – the blogosphere was sort of like the wild, wild west. Few if any rules, anything goes… and that sadly included fake endorsements and material relationships that weren’t disclosed.

The Guides were intended to address some of these abuses. Despite the good intentions motivating the Guides, there are legitimate concerns that the Guides may have gone too far. Critics argue that they are overbroad, and that they may create as many problems as they solve. Legal scholars debate whether they are contrary to established legal precedent.

Despite the misgivings of some and debate among legal scholars, the new FTC Guides are here to stay. They represent not only a win for consumers, but also a wake-up call to bloggers. The blogosphere has now come of age, and this requires a much greater sense of responsibility in a highly regulated environment.

Leading Internet, IP and software lawyer Chip Cooper has automated the process of drafting website documents for small websites with his MyLegalFirewall website documents drafting service. Discover how quick, easy, and cost-effective it is to determine which legal documents you need, draft them online, and claim your FREE Special Report, Determine Which Legal Documents Your Website Really Needs, at ==> http://digicontracts.com/kits/firewall.aspx

By Chip Cooper in Featured

In recognition of the increasing influence of social media online, the Federal Trade Commission (FTC) on October 5, 2009, for the first time since 1980, issued new regulations governing online testimonials and endorsements by bloggers.

If you operate a blog site, your exposure to legal liability may have increased exponentially. Violators could be fined up to $11,000. And you face new liability associated with statements made by your endorsers, such as affiliates.

It’s critical that you understand how these regulations affect your website business.

A Quick Summary

In a nutshell, the new regulations are aimed at protection of online consumers. The FTC wants to regulate blogs to see if they’re trading testimonials and favorable reviews for some kind of financial reward. That’s a good thing.

The not-so-good-thing is that the new regulations may be overbroad and even in conflict with existing legal precedent. As a result, they may subject harmless, every-day activities to potential liability. Serious liability.

A good way to see how the regulations affect you is to consider 3 basic questions discussed below.

No. 1 – Threshold Question: Are You Even Covered By The New Regulations?

If you have a blog on your site, or if a blog is essentially your site, and all you do is publish creative content about your areas of interest, you’re not even covered by the new regulations.

No worries.

No. 2 – Are You Promoting Someone Else’s Products or Services?

If you promote or pitch someone else’s products or services on your blog, there are 2 key requirements under the new regulations:

  • disclose “material connections” — you must disclose all incentives you receive — cash, gifts, benefits, etc. – for promoting or pitching the product or service, and
  • disclose typical results — you can’t get away any more with small print disclaimers such as “results not typical”; you’re now required to provide a more complete and forthright picture of what can be reasonably expected from a product or service.

If you’re a violator, you could be fined up to $11,000. In addition, you could be held liable for false, misleading, and unsubstantiated statements.

This all sounds like a great win for consumers; however, It doesn’t take much creativity to imagine horror stories with the “material connections” requirement.

Example: suppose you’re a book reviewer. Book publishers routinely send you free books to review. If you fail to disclose that the book was free in your review, will you be fined $11,000? Technically, your failure to disclose the free book would be a violation, but would you be fined? That’s anyone’s guess. If you’re not fined, and someone else in a similar position is fined, is that selective enforcement? As you can see, there’re a lot of potential problems with well-intentioned, but overbroad regulation.

No. 3 – Do You Recruit Other Bloggers To Pitch Your Products or Services?

If you recruit other bloggers to pitch your products or services, such as affiliates, you’re an “advertiser” under the regulations. As an advertiser that sponsors endorsers, under the new regulations you’re required to:

  • provide guidance and training to ensure that statements made by your affiliate-bloggers are truthful, not misleading, and substantiated, and
  • monitor your affiliate-bloggers and take steps necessary to stop the publication of deceptive representations when they are discovered.

The new regulations apparently embody the concept that advertisers can be held liable for the endorsement-related sins of their affiliate-bloggers. The FTC stated: “It is foreseeable that an endorser may exaggerate the benefits of a free product or fail to disclose a material relationship where one exists. In employing this means of marketing, the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk”.

Legal scholars are now debating whether this new liability exposure for advertisers is in conflict with a well-established legal defense provided by a federal statute (47 USC 230(c)(1)), which reads: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” In simple terms, this statute has been interpreted to mean that Party A is not liable for Party B’s online content.

Has the FTC overlooked 47 USC 230 in its haste to regulate? The courts will have to sort this out. Only time will tell.

Conclusion

The FTC was well-intentioned in its new blog-related regulations. Protection of online consumers is a worthy undertaking.

However, overbroad regulations, particularly if they are in part contrary to well established legal precedent may create as many problems as they solve.

One thing is clear, however — if you fall under No.s 2 or 3 above, protecting yourself from unexpected legal liability should be a high priority.

Leading Internet, IP and software lawyer Chip Cooper has automated the process of drafting website documents for small websites with his MyLegalFirewall website documents drafting service. Discover how quick, easy, and cost-effective it is to determine which legal documents you need, draft them online, and claim your FREE Special Report, Determine Which Legal Documents Your Website Really Needs, at ==> http://digicontracts.com/kits/firewall.aspx

By Chip Cooper in Featured

I talk to a lot of owners of small websites — entrepreneurs getting started with new businesses or re-doing existing sites on the Web — and most of them have a profound lack of understanding regarding the scope of legal regulation they face.

What’s worse, most don’t have any idea of their exposure to legal liability.

Why Aren’t Website Owners Aware of Website Legal Compliance Requirements?

I believe the lack of awareness and understanding is due to several factors:

  • most small website owners don’t have an Internet attorney; most don’t even feel the need for one, and the ones who do, don’t know how to find one they can trust;
  • most website developers don’t inform their clients of the need for website legal compliance;
  • website regulation developed without fanfare; to date, there is no federal privacy statute of general application that would have been highly publicized at the time of passage;
  • privacy and data security regulation has developed in piecemeal fashion in the form of state statutes (with California leading the way); federal jurisdiction was not created by any Internet-specific statute – the Federal Trade Commission (FTC) assumed jurisdiction for enforcement of privacy and data security violations by claiming jurisdiction (successfully) resulting from its authority to regulate false and misleading claims under Section 5 of the FTC Act; and
  • despite press releases by the FTC regarding claims filed against websites, the message is just not getting through to entrepreneurs; for example, in the last 3 years, the FTC has settled with fourteen businesses over inadequate data security for personal information with substantial fines levied in some cases, and the FTC’s aggressive enforcement has continued into 2009 with two new actions filed in the first two months of 2009.

So, given the factors listed above, it’s understandable why most entrepreneurial website owners aren’t aware of the need for website legal compliance. However, website owners won’t be able to plead ignorance. The cliche you’ve heard before is true – “ignorance is no excuse”.

16 High Risk Activities That Indicate The Need For Website Legal Compliance

There are certain website activities that are now very high risk – and indicate the need for legal compliance measures. They include:

  1. collection of any single element of personal information; for example, if you collect merely an email address for a sign-up form for product information, a newsletter, or a downloadable report, you have entered an area that is highly regulated – and which presents a very significant exposure to legal liability;
  2. collection of credit card information;
  3. failure to operate a secure server that stores personal information;
  4. failure to identify and assess internal and external risks to the security of personal information;
  5. failure to monitor the effectiveness of security of personal information and update security measures as indicated by changes in website operations;
  6. offering monthly subscription or membership payment models, or any payment scheme where payment is made over time after the delivery of the product or service;
  7. sharing of personal information with others for purposes of direct marketing;
  8. permitting third party service providers such as website maintenance and SEO service providers or hosting service providers to have access to the internals of your server;
  9. transmission of personal information outside the website’s secure system or across public networks; Nevada and Massachusetts both have statutes regulating these activities;
  10. operation of a blog or forum that permits users to upload text or files;
  11. operating a website that targets children or at least by virtue of graphics, text, and products or services would be attractive to children under 13;
  12. serving third party cookies (e.g. Google Analytics);
  13. serving behavioral ads (e.g. Google’s AdSense);
  14. appointment of online resellers or affiliates;
  15. use of a competitor’s trademark in keyword-triggered ads; and
  16. “borrowing” someone else’s privacy policy without detailed analysis of how it fits your own specific business and marketing practices.

Make Website Legal Compliance a Top Priority

If your website engages in any of the risk factors listed above, website legal compliance measures are required — and compliance should become a top priority ASAP.

The legal liability for failure to comply can be significant.

Leading Internet, IP and software lawyer Chip Cooper has automated the process of drafting website documents for small websites with his MyLegalFirewall website documents drafting service. Discover how quick, easy, and cost-effective it is to determine which legal compliance documents you need and to draft them online, and claim your FREE Special Report, Determine Which Legal Documents Your Website Really Needs, at ==> http://digicontracts.com/

By Chip Cooper in Featured

se-optimizationSafire’s New Political Dictionary defines “hot-button” as follows: word or issue that ignites anger, fear, enthusiasm, or other passionate response.

Safire’s definition fits two Internet advertising issues – behavioral and keyword ads – perfectly. Two developments in the first few months of 2009 show how these hot-button issues are developing, and how they may ultimately impact Internet advertising in a fundamental way.

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