FTC Disclosure Obligations Of Media Stepping Into E-Commerce Arena

By October 15, 2013Advertising Law

Mastercards’ ShopThis technology turns online magazines, starting with Wired, into online retailers. But with that additional retailer dimension comes additional responsibilities vis-à-vis consumers in the form of disclosures requirements.

ShopThis In Action

Although many popular online magazines currently provide links to retailers’ websites, ShopThis, MasterCard’s new e-commerce technology, is unique as it facilitates the online purchasing process by removing intermediaries. ShopThis allows consumers to buy items featured in digital publications, without ever leaving the magazine pages. It is a new way to shop digitally.

Starting today (October 15), with Wired’s Ipad edition, readers will be able to simply select products within the magazine’s content and dump them into a single shopping cart, “allowing for a streamlined checkout experience.”

“The ShopThis […] technology allows us to experiment with how readers can go from product discovery to ownership, without ever putting the issue down,” said Howard Mittman, VP and Publisher of WIRED.

Garry Lyons, Mastercard’s chief innovation officer, also described how the technology could be utilized in the future. “There is no reason why ShopThis couldn’t be rolled out when watching a movie or video. You see an actor who has a nice shirt on, you activate ShopThis,” Mr. Lyons said.

With the technology’s potential for displacing at least some of Amazon’s sales, one can wonder if this type of technology is not the reason Jeff Bezos bought himself the Washington Post.

The FTC Polices And Protect Against Consumer Deception And Unfairness

The FTC (Federal Trade Commission), which has the power to file civil charges against businesses that mislead or treat consumers unfairly, put out new advertising and promotion guidelines when it updated the “.com Disclosure” this year. The 2013 update reaffirms that some disclosures are necessary to qualify or limit an advertising claim so as to prevent an advertising message from being deceptive or unfair, and that such disclosures must be displayed in such a way that a reasonable consumer would easily notice them – in legalese, disclosures must be displayed “clearly and conspicuously.”

Where Do the Disclosures Belong?

It will be interesting to follow how Wired adapts to its online retailer role. Specifically, Wired is facing the arduous task of deciding how to disclose enough about items so as to not mislead consumers, while a the same time, not miss on the immediacy effect ShopThis has to offer or compromise on the editorial look-and-feel and voice of the magazine.

Indeed, burdensome disclosure obligations could threaten the potential for instant gratification, which after all, is the whole point of such technology, as described by New York Times’ Hilary Stout.  “Our goal is to deliver the ability to purchase from WIRED seamlessly […]” said, Howard Mittman.

And, a disclosure laundry list sitting in the middle of an editorial piece may weaken both the pleasure of the reader and the credibility of its author.

Disclosures Belong On the Article Page Itself

The FTC recommends locating disclosures early on in the purchasing process, to allow consumers to make meaningful purchasing decisions. Thus, disclosures belongs well before consumers make decisions to buy. Further, the “.com disclosure” generally disfavors the use of hyperlinks as a mean to disclose material information, despite some major actors’ unrelenting practice to the contrary.

Hyperlinks are particularly inadequate for key information about a product, such as certain health and safety disclosures or cost-related information, which should almost never be disclosed through hyperlinks. In other instances, hyperlinked may be appropriate, depending on the circumstances, provided that, among other things, the hyperlinks aptly convey the nature and importance of the information in question.

In the e-commerce world, this generally means that disclosures are displayed on the same web page as the product page. In Wired’s case this would put the disclosures on the same page as the articles. In some cases, this may hinder the technology’s benefit of instant gratification and quite possibly the editorial quality, voice, and look-and-feel of the magazine. This is especially true because content-providers have to work within a constrained space: the Ipad, and other tablets, screen size, which further diminishes Wired’s creative decision.

But displaying disclosures after the reader made a purchasing decision (after the consumer tapped on a shopping cart icon to add the item to the Wired shopping cart) would go against specific “.com disclosure” language, namely: disclosures must be displayed “before consumers make a decision to buy – e.g., before they add to shopping cart.” But at that point, the consumer has already made a purchasing decision.

Note that displaying the required disclosures after the customers made a purchasing decision is not necessarily better because such disclosures would then introduce an intermediary step in a process that strives for immediacy. The immediacy effect would be lost, especially if the step was utilized to give new information requiring the consumers to do some heavy thinking.

Thinking Outside The Box

One alternative would be to inform readers from the get-go that no disclosures are ever provided on the site. After all, consumer deception is the key to the analysis and even without such message, reasonable consumers probably understand, when making this kind of on-the-spot purchasing decision, that they obviously not possess all the relevant information. In this specific context, because less is expected, consumer deception is less likely. So crafting an ex ante notification may do the trick, provided, however, that disclosure requirements are disclaimable, which is uncertain.

Summing Up

While the disclosures obligations have the potential of complicated the promise of immediate consumer gratification, its serves some important function: avoiding consumer deception. That said, it is important to remember that disclosures are only necessary to prevent an advertising message from being deceptive or unfair. So, if the underlying article does not give a reasonable reader a misleading impression, no disclosure is needed. Accordingly, if diligent journalists with editorial independence are the writers of these articles, all the bases could be seamlessly covered within the articles themselves, rendering further disclosures unnecessary.  The question then becomes whether this breed of independent journalism will remain possible when the magazine is both judge, like any good magazine is, but also party, standing to directly benefit from the sale of items displayed within its pages.

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