United States: Looking For A Mind At Work: The FTC Presents A Staff Summary Of Its September 2016 Workshop On Disclosure Effectiveness

Last Updated: December 10 2016
Article by John P. Feldman

Quietly, the Federal Trade Commission staff published a summary of the workshop it convened on September 15, 2016 ("Putting Disclosures to the Test"). The summary goes into detail and generally presents an accurate and objective recounting of the full-day workshop.

Understanding how the Commission thinks about disclosures is critical because the FTC's Enforcement Policy on Deception depends on whether all material terms are disclosed to consumers prior to purchase in order to make claims truthful and non-misleading. Disclosure in turn rests on the "clear and conspicuous" standard, which as the FTC staff has stated, is a "performance standard." That means it is effective when, um, it's effective. Despite this circularity, advertisers generally prefer a standard that leaves it up to them as to how to communicate claims and disclosures rather than suffer the mandates of bureaucrats.

At the core of the FTC's long-standing understanding of the "rules of the road" in the area of "clear and conspicuous disclosure" is the psychological, linguistic, and cognitive scientific endeavor of estimating the perception and comprehension of the average consumer among the target audience of an advertisement. The FTC and the advertising industry are both well aware of the vast interest throughout legal and academic circles in this exercise of judgment as to consumer perception of meaning and the impact on human behavior. Indeed, over the last decade, there has been an increasingly robust discussion, especially surrounding financial consumer protection, about behavioral economics. This is not lost on the FTC, and the scientific aspects of perception as well as the practical implications of those aspects are of great interest to the FTC staff, especially in light of the increasingly sophisticated way in which marketers can analyze data to target advertising. The "average" consumer among the "target audience" is becoming a more narrow range of consumers because marketers are able to target specific messages to specific populations in some cases. The Putting Disclosures to the Test workshop is the latest attempt by the FTC to glean insight into how the scientific community – involving various interrelated disciplines – can help one to test the subjective assessments made by advertisers and the Commission staff every day when they approach advertising copy.

The FTC staff highlights a few aspects, and by highlighting them, those aspects may take on more meaning for those interested in the Commission's approach to clear and conspicuous disclosure in advertising.

  • Those who study the effectiveness of disclosures seem to approach it from a number of perspectives and draw upon multiple disciplines: marketing, economics, psychology, computer science, communications, and law.
  • Disclosure effectiveness can be enhanced.

    • Panelists recommended using simple, unambiguous language wherever possible, and an organized structure.
    • Some panelists emphasized that disclosures should be designed with the most important or unexpected information first. Layered disclosures can show essential information on a top layer, with links to more detailed information.
    • Some panelists cautioned that if people see the same disclosure repeatedly they may become habituated and ignore it. Others noted that the timing and context of disclosures can have significant impact on disclosure effectiveness.
    • Some panelists suggested that when presenting numerical information and risks, it may be useful to put numbers in perspective and express probabilities as frequencies.
  • Panelists described disclosure evaluation as an "iterative activity," suggesting that evaluations may need to be repeated over time as technology, public attitudes, or other circumstances change.
  • Panelists discussed various methods of evaluation, some of which can be inexpensive (though often those studies do not involve representative samples), described eye tracking, recall, and recognition tests, and noted that self-reports of attention may not be accurate. When evaluating comprehension, panelists said it is important to evaluate whether participants can apply the information from a disclosure, not just whether they understand all of the words.
  • Focusing on the cost of testing, some panelists said that recent developments such as crowd-sourcing platforms, mouse tracking, and eye tracking via web cams, offer opportunities to conduct larger studies more quickly and less expensively than was previously possible.
  • Some panelists discussed potential use of machine-readable disclosures that can be read automatically by software running on each user's device and displayed or acted upon according to each user's context and preferences, essentially customizing disclosures to individual users. They noted legal and ethical issues, but said such an approach could reduce the burden on users to read and manage disclosures and choices, and increase the likelihood that users will pay attention to the information that is most relevant or important to their situation.
  • Finally, the FTC's Chief Technologist, Lorrie Cranor, stated in a "reflection" that disclosure evaluation is an area that could benefit from more interdisciplinary collaboration. She was also particularly interested in the future-looking comments at the end of the workshop which "presented data-driven approaches to determining what information to highlight for consumers in disclosures."
  • The full implications of the FTC's disclosure workshop are still unclear. What is clear is that the FTC staff is interested in how new and emerging technology can be used to assist in providing consumers adequate information about products and services. Those who are able to approach this task in a multidisciplinary way are likely to be more in tune with contemporary thinking about effective disclosures.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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