Can Internet service providers and other secondary parties be held liable for deceptive online advertising

Can Internet service providers and other secondary parties be held liable for deceptive online advertising

Growing popularity of the World Wide Web has made the Internet a more attractive medium.


The growing popularity of the World Wide Web has made the Internet a more attractive medium for advertising to younger, more affluent, and better-educated consumers than more traditional media. Because of its ability to reach an attractive audience, and to perform the functions of both mass communication and interpersonal communication, the Internet is now considered a necessary element of any comprehensive integrated marketing communication campaign. Since many techniques of Internet promotion are similar to traditional marketing communication techniques, federal lawmakers and regulators subject Internet communication to the same statutes and regulations that govern unfair and deceptive practices in traditional communication. (1) In addition, advisory statements and papers for Internet advertising have been issued by the Federal Trade Commission (FTC). (2) The FTC has determined, through its consumer protection rules, that in “traditional” advertising, a material connection between an endorser and the company being endorsed must be disclosed. (3) This raises the questions of whether, in the case of Internet user-to-user promotion, and in advertising embedded in informational Web sites and search results, the endorser should be required to disclose his connection with the advertiser, and whether the endorser should be required to follow all the requirements set out by the FTC in its guidelines, case law, and consent agreements that govern the prominence, presentation, placement, and proximity of the connection.

Assuming answers in the affirmative to these questions, the further question arises as to who should bear liability when a Web site is determined to be non-compliant with FTC disclosure rules. Internet service providers (ISPs), the operators of the bulletin boards, chat rooms, and other online fora have been brought to court for contributory copyright infringement when a user of their services has infringed a copyright, (4) suggesting that a gatekeeper function should be attributed to such entities–a role in which they would serve as gatekeeper to investigate and police adherence to the FTC disclosure rules. Such entities have also been brought to court for defamatory statements posted by users on their Web sites, bulletin boards, and chat rooms. (5) In fact, several federal laws such as the Digital Millennium Copyright Act (6) and the safe harbor provisions of the Communications Decency Act (7) were passed within a relatively short time of these suits to protect these secondary parties from liability.


While the Internet can be used in the same manner as traditional marketing communication media, it has also facilitated the proliferation of powerful new forms of marketing communication that blur the distinction between mass-mediated communication and interpersonal communication. Database technology, marketer access to user cookies, and interactive capabilities such as instant messaging allow marketers to send personalized promotions to members of a mass audience and receive immediate feedback–capabilities, heretofore, inherent only in interpersonal communication. Resourceful marketers who use a technique known as “viral marketing” have exploited this capability. In viral marketing, virtual products, such as Web pages containing interesting cartoons, jokes, or games, are e-mailed to a mass audience of target consumers. (8) Recipients of these virtual products who find the products sufficiently appealing may forward the products to friends. These friends, referred to as second-generation recipients, may regard the virtual product as having the endorsement of the person from whom they received it. The phenomenon of friends telling friends is a form of interpersonal communication referred to as word-of-mouth communication, which, as marketing communications literature indicates, has a greater impact on consumer attitudes and behavior than mass-mediated communication. (9) If viral marketing techniques produce the same response in second-generation recipients as traditional word-of-mouth communication, the technological capabilities of the Internet will allow marketers to pull an interpersonal communication rabbit out of a mass communication hat. This may not be as miraculous as turning water into wine, but it is a powerful transubstantiation, and may allow the Internet to become a more influential promotional medium than are traditional media.


In addition to the blurring of the distinction between mass communication and interpersonal communication achieved with Internet promotion techniques such as viral marketing, a blurring of the distinction between commercial and noncommercial communication can be achieved with other forms of Internet promotion such as undercover promotion, embedded advertising, and purchased search engine results, creating the potential for new forms of false and deceptive advertising. (10)

The term undercover promotion will be used herein to describe an intentionally concealed connection between a person promoting a product and the product advertiser. (11) User-to-user Internet communication fora, such as usenet groups, chat rooms, and bulletin boards are particularly suited to the use of undercover promotion. Product promoters with a material connection to the product they promote exploit the anonymity permitted by user-to-user fora by posing as ordinary consumers, hoping to reap the enhanced credibility accorded to disinterested sources of product information. In children’s chat rooms and in instant messaging communication, for example, the “other child” praising a product may actually be an adult, paid by the product advertiser, who has adopted the fictitious persona of a child in order to be perceived as a peer, and, therefore, a more credible information source to the true children accessing the chat room or using instant messaging.

Embedded advertising occurs, as the name suggests, when product promotion information provided by a paying advertiser is embedded in what is or appears to be factual information contained in a purportedly fact-based informational Web site. (12) A consumer reading the disinterested factual information provided in the Web site may be unaware that some of the information about a product, activity, or interest, or a related product or service, was placed there and paid for by an advertiser. Embedded advertising may make it difficult or impossible for the consumer to distinguish disinterested fact from interested advertisement. As in the case of undercover promotion, embedded advertising is used in an attempt to endow paid advertising with the greater credibility accorded by consumers to sources of disinterested information.

Purchased search engine results occur when search engine operators accept payment from an advertiser in exchange for guaranteeing that the advertiser’s Web site will be listed among the results of searches using specified key words, regardless of whether the advertiser’s Web site would have turned up in the results of a pure search based on the specified key words. (13) For example, Iron Mountain Global Information Systems (IMGIS) “negotiated the right to have their advertising appear when users of a particular search engine (e.g., Yahoo!) run a search” using key words such as “democrat,” “republican,” “congress,” or “president”. (14) IMGIS’s banner ad, containing a link to IMGIS’s “Top Ten Political Sites,” appeared with the results of searches using the specified key words. (15) As in the case of undercover promotion and embedded advertisement, paid search engine results are used in an attempt to endow paid advertising with the greater credibility accorded by consumers to sources of disinterested information. In all three situations, there exists the possibility that “certain on-line information that consumers rely on and believe to be impartial may instead be marketing material that has been paid for by sellers of goods and services. (16) All three techniques involve an attempt to disguise advertising as non-advertising, implying that consumers regard advertising as less trustworthy than disinterested evaluations, that advertisers are aware of this mistrust on the part of consumers, and that the result of this mistrust may be evaded by obfuscating the nature of their communications to consumers. These implications alone would seem to justify the impulse to regulate.


An early case dealing with embedded advertising arose out of the actions of KidsCom, a Web site that described itself as an “Electronic Playground for Kids 4-15.” (17) The site contained several activity and information sections. One such section, headed “Who Do You Want To Be?” requested certain personal information from those who accessed the site. Other sections of the Web site were “Kids Kash,” where site visitors could win prizes, “Find a Key Pal,” where visitors could be matched up with other children for e-mail correspondence, and “New Stuff For Kids,” through which information about new products of interest to the site’s target age groups could be obtained. Visitors to the “New Stuff for Kids” section were invited to submit questions about any new product in which they might be interested. Product manufacturers who then “donated” at least $1,000 worth of product could have their press releases about the product in question embedded in the information provided by KidsCom in response to these questions. A complaint by the Center for Media Education prompted the FTC to investigate KidsCom for unfair and deceptive trade practices under section 5 of the Federal Trade Commission Act (FTCA) (18) The FTC found that the gathering of personal information through the “Who Do You Want To Be?” section violated a number of laws, and that the “New Stuff for Kids” section portrayed KidsCom as independently and objectively endorsing products, when in fact the “endorsements” were essentially disguised advertising. (19) The FTC said that this was a violation of section 5 of the FTCA because there was no disclosure that the information came from the manufacturer and was not objective and impartial. (20) Ultimately, as reported in a letter to the Center for Media Education from the FTC Bureau of Consumer Protection in 1997, the commission took no action because KidsCom fixed the Web site by eliminating the invitation for kids to ask for new product information and they clearly and conspicuously disclosed that the products’ descriptions were obtained from the manufacturer. (21) KidsCom also introduced “The Ad Bug,” a cartoon icon, which together with other textual material was designed to identify the presence of advertising in the “New Stuff for Kids” section and other site locations. (22) The FTC reported that it would continue to monitor KidsCom. (23)


FEDERAL REGULATION The First Amendment and the Interstate Commerce Clause

The First Amendment to the Constitution protects the right of individuals to speak, free from suppression by government or its agents. (24) The First Amendment applies explicitly to the federal government and its agents. (25) The U.S. Supreme Court has used the Due Process clause of the Fourteenth Amendment to the Constitution to extend the reach of the First Amendment to the states, thereby indirectly imposing upon the state governments a limitation on their ability to restrain speech, coextensive with the limitation directly imposed by the First Amendment upon the federal government. (26) The constitutional limitations on government’s ability to restrain speech are not, however, absolute. (27) Some forms of speech are subject to prohibition, while other forms are subjected to varying degrees of regulation. Examples of completely unprotected speech include fighting words, (28) obscenity, (29) publication of state secrets, (30) incitement to commit a crime (31) and defamation. (32) The rationale for holding that these forms of speech are outside the protection of the First Amendment is that they are too injurious to society in general, and the good of society outweighs an individual’s right to speak freely. (33) Such speech is considered “beneath the dignity of the first amendment,” (34) and given no protection. (35) Political and commercial speech, on the other hand, are subject to regulation, with political speech enjoying a greater degree of protection than commercial speech. (36) The Supreme Court has found that government may regulate commercial speech when it is misleading or concerns an illegal product. (37) or if there is a substantial government interest, the regulation directly advances the government interest, and the regulation is narrowly tailored to that interest. (38) In City of Cincinnati v. Discovery Network, Inc. (39) the Supreme Court suggested that there may be more constitutional protection of commercial speech in the future.


The authority of Congress to regulate commercial speech, coupled with its constitutional authority to regulate interstate commerce, (40) enabled Congress to enact the FTCA (41) in 1914, and to create the FTC to administer this statute. (42) Section 5 of the FTCA gives the FTC the right to regulate any “unfair methods of competition.” (43) An amendment to the FTCA expands FTC authority to include regulation of “unfair or deceptive acts or practices.” (44) It is under this authority that the FTC regulates deceptive advertising. The term “unfair or deceptive acts or practices” is implemented in the Code of Federal Regulations, (45) and these regulations have the force and effect of law. (46) Explication of these regulations is found in guidelines issued by the FTC. These guidelines do not have the force and effect of law, but instead constitute the FTC’s advice on what the commission intends the regulations to mean and how it intends to apply them in particular circumstances. Further guidance on interpretation can be found in speeches given by FTC personnel, and FTC policy statements, which are not law, but do provide insight into the Commission’s stance on the FTC and the regulations it has promulgated thereunder. (47)

FTC Procedure

The FTC does not directly monitor advertising. Instead, it investigates complaints from consumers, competitors, and consumer advocate groups, and responds to congressional inquiries about unfair or deceptive practices or acts. (48) The Commission investigates complaints, and if it finds merit in the complaint, it may issue a consent order in which the advertiser agrees to stop the complained of practice without having to admit guilt. (49) If the advertiser will not enter into the consent order, the case may proceed to an administrative law judge within the agency itself. (50) The enforcement technique available to the administrative law judges is a cease and desist order. (51) If a finding is entered against an advertiser by an administrative law judge, the advertiser may appeal to the full Commission, (52) which also may issue a cease and desist order that may be enforced in the proper district court, (53) require an affirmative disclosure of more information, (54) or agree to corrective advertising. (55) An advertiser has the right to appeal the decision of the Commission to a proper court of appeals (56) who may order redress for consumers or grant injunctions and then may petition for certiorari to the U.S. Supreme Court. (57)

Other Federal Laws That May Affect Advertising

The Mail or Telephone Order Merchandise Rule (58) and the Telemarketing and Consumer Fraud and Abuse Prevention Acts (59) are two other federal laws that affect advertising, as well as the trademark and copyright laws. The Federal Communications Commission has enacted regulations governing advertising, but few of these will be dealt with herein.


States also have the power to regulate advertising where the good of its citizens outweighs the individual’s right to speak freely. In states, which have adopted the Uniform Deceptive Practices Act (UDPA), state regulations mirror federal statutes, regulations, and guidelines. (60) In addition, common law remedies in fraud and tort provide private causes of action against deceptive advertisers. (61)


A number of nongovernmental groups have issued their own opinions and policies on deceptive advertising. For example, the Council of Better Business Bureaus (CBBB) has issued the Code of Advertising, which is enforced by Its National Advertising Division (NAD). (62) If an advertiser is ordered by the NAD to correct or change an ad and does not comply, the NAD may notify the FTC and the media. The CBBB also has a special unit called the Children’s Advertising Review Unit (CARU) that monitors children’s advertising. (63) This group has expressed concern over the need to distinguish between entertainment and advertising content in marketing to children and has stated that their guidelines apply to online advertising. (64) Consumers’ Union, another nongovernmental entity, has reportedly launched a Web Credibility Project intended to expose the potential conflicts of interest between commercial and noncommercial speech. (65) Commercial Alert, a consumer protection organization, has asked the FTC to investigate online search engines to ascertain if they are concealing commercial arrangements with businesses and thereby affecting the results of their searches. (66) The Electronic Retailing Association (ERA) put forth a set of self-regulatory guidelines for online marketers entitled “Online Marketing Guidelines.” (67) These guidelines speak to a “variety of issues, ranging from claims substantiation to customer service to the proper use of e-mail.” (68) The ERA has also issued “Guidelines for Marketing Children’s Products.” (69)



One Commissioner has characterized unfairness as “the set of general principles of which deception is a particularly well-established subset.” (70) Unfairness is defined in the FTCA as acts and practices which cause substantial injury to consumers, (71) while deception involves affirmative misrepresentations, including misrepresentations, which contain material omissions, leading to consumer injury. (72) The FTC promulgated its Statement of Policy on Unfairness in the early 1980s. (73) The policy includes within its ambit only those injuries that are substantial, not outweighed by countervailing benefits to consumers or competition in the marketplace that the practice otherwise produces, and that consumers themselves could not reasonably have avoided. (74)


In its 1983 Policy Statement on Deception (75) (Deception Policy), the FTC set forth criteria for what it considers to be deceptive advertising under section 5 of the FTCA. Advertising is considered to be deceptive if there is: (1) a material representation, omission, act, or practice that is (2) likely to mislead (3) consumers acting reasonably under the circumstances. (76)

Material Representation, Omission, Act or Practice

The FTC considers a misrepresentation, omission or act to be “material” if it is “important to a consumer’s decision to buy or use the product. Examples of material claims are representations about a product’s performance, features, safety, price, or effectiveness.” (77) Materiality is independent of whether the misrepresentation or omission is express or implied. (78) The reasoning behind this stance is that, if the advertiser did not think information or its omission was important, it would not have been a feature of the ad. In other words, by including or omitting information from an ad, the advertiser admits its materiality. (79)

Likely To Mislead Reasonably Acting Consumers

The FTC looks at the impression conveyed to the consumer, rather than what is actually written or spoken by the advertiser, in order to determine whether an advertisement is misleading, (80) It is the impression or the belief left with the consumer, rather than what is actually said by the advertiser. (81) In order to ascertain the impression created, it is necessary to get into the mind of the consumer. (82) The FTC uses various techniques to accomplish this, such as consumer surveys, expert witness reports, and market surveys. The FTC may hold an advertiser liable for implied claims discerned by as little as fourteen percent of a consumer audience. (83) It is the policy of the FTC to consider the entire advertisement, transaction, or course of dealing, rather than a single part, in judging whether the advertisement is misleading. (84)

The Deception Policy makes it clear that, to fall within the definition of deceptive, the practice, omission or representation must be likely to mislead “reasonable consumers under the circumstances.” (85) This means that when the advertisement is aimed at a specific audience, the reasonable consumer is the reasonable consumer in that particular audience. (86) Examples of specific, targeted audiences are children, the elderly, or the terminally ill. (87) In these cases, the FTC will determine the effect of the practice on a reasonable member of that group. (88) However, an advertisement will not be considered misleading if it will be misunderstood by an insignificant, unrepresentative segment of the class of persons to whom it is addressed. If a representation in an advertisement is susceptible of two interpretations by the reasonable consumer, one false and one true, the FTC will judge the representation on the basis of the interpretation that the advertiser meant to convey. (89)

Substantiation of Material Claims. The Deception Policy requires substantiation that the advertiser has a reasonable basis for objective product claims, prior to making such claims. (90) In this regard, the FTC set out, in its Policy on Substantiation, (91) that an advertiser must possess substantiation of the qualities possessed by a good before it advertises the product as having those qualities. (92) Substantiation gathered after the claim is made is insufficient, although in certain circumstances, the FTC will consider subsequent substantiation. (93) Puffery, such as “better than’ or “superior,” need not be substantiated. (94) Advertiser substantiation data are used by the FTC to determine a product’s attributes. (95) In 1996, for example, the FTC sued Exxon Corporation (96) charging that advertisements in which it was claimed that switching to Exxon gasoline would make engines cleaner and significantly reduce auto maintenance costs were unsubstantiated. (97) In In re Hayes Microcomputer Products, Inc., (98) the FTC charged that Hayes could not provide support for its claims that competitors’ products posed a substantial risk of data destruction and data transmission failure. (99) Charges were settled that Hayes had made unsubstantiated performance claims for its own modems. (100) The FTC has not hesitated to take action against advertisers who did not have proper substantiation or who failed to dearly disclose connections between endorsers and the advertiser. In suits against Weight Watchers (101) and Jenny Craig, (102) the FTC alleged that consumer endorsements were used in advertisements in which the amounts of lost weight portrayed in the advertisements were not typical of the experiences of ordinary consumers. (103) In In re Abflex U.S.A. Inc., (104) the FTC alleged the advertiser of exercise equipment through infomercials misrepresented weight loss capabilities of its products, (l05)

Disclosure of Material Information. The Deception Policy requires not only that claims of product quality be substantiated, but that material information that could have prevented a consumer from being misled also be disclosed. (106) The form of the disclosure can be as important as the disclosure itself. The FTC requires that disclosures conform to the Commission’s Statement of Enforcement Policy regarding clear and conspicuous disclosures, which applied to television advertising, (107) For instance, the FTC has found “failure to disclose” where disclosures were in print so small it was virtually unreadable and incomprehensible, (108) and has criticized disclosures made in fine print. (109) For example, in In re Microsoft Corp., (110) the FTC charged that the printed advertisements for Microsoft’s Windows CE computer operating system for the Pocket PC handheld computers failed to contain a disclosure that, in order to access the Internet and e-mail accounts, the consumer was required to purchase and carry a separate modem. (111) And in In re Palm, Inc., (112) the FTC charged that Palm Inc. failed to disclose material information, regarding the need for other equipment to perform common business functions, in printed advertisements about its Palm handheld computers. (113) The FTC warns that an initial deception often cannot be corrected by subsequent oral or label disclosures, (114) as in In re Nissan Motor Corp., (115) where the FTC charged that Nissan failed to disclose that there were significant restrictions on customers’ ability to obtain a $100 payment in exchange for test-driving a Nissan Stanza, but subsequently purchasing a Honda Accord or Toyota Camry. (116) More recently, the FTC brought suit against America Online, Inc. (AOL), (117) CompuServe, Inc., (118) and Prodigy Services Corporation (119) for their failure to disclose unexpected charges imposed on consumers who had enrolled in their free trial offers. (120)

Disclosure of Material Connection Between an Endorser and a Product: FTC’s Guidelines for Endorsements and Testimonials. Before the e-commerce explosion, the birth of infomercials on television quickly became of particular concern to the FTC because of the format of the advertisement. (121) A consumer could be deceived into thinking he was watching an informational program rather than a commercial, and, further, believe that the people who looked like ordinary consumers were independent of the advertiser, when, in fact, they were being paid by the advertiser. In response, the FTC issued “Guides Concerning Use of Endorsements and Testimonials in Advertising.” (122) These guidelines were published in 16 C.F.R. and in them, the FTC defined endorsements and testimonials as any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) which message consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser. (123)

In 1991, commentators Kertz and Ohanian analyzed the endorsement guidelines, pointing out that the principles in the FTC Policy Statement on Deception were applicable to endorsements and testimonials, including the standard that the FTC is looking at the impression left with the consumer in deciding whether the advertisement is deceptive or not. (124)

Regulation 255.1(a) calls for substantiation, stating that an endorsement “must always reflect the honest opinions, findings, beliefs, or experience of the endorser.” (125) Further, “they may not contain any representations which would be deceptive, or could not be substantiated if made directly by the advertiser.” (126) Regulation 255.2(a) states that an advertisement employing an endorsement reflecting the experience of an individual or a group of consumers on a central or key attribute of the product or service will be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve with the advertised product in actual, albeit variable, conditions of use. (127)

As to disclosure of material information, in gauging the deceptiveness of advertising, in general, the FTC looks for the impression conveyed to the consumer as to the identity of the endorser. (128) The FTC guidelines require that the consumer know who the endorser is because this would affect the impression left with the consumer as to the veracity of the endorsement.

Under the guidelines, there is no endorsement when the consumer can tell the person speaking on behalf of the sponsor is a paid announcer, or the person or persons speaking are obviously actors acting out a scene in which they talk about the sponsor’s product, since the consumer’s impression of the product is not improved because of the identity of the person or persons speaking on behalf of the product. (129) In circumstances in which the consumer’s impression of the product is improved because greater veracity is attached to the information conveyed buy the advertisement due to the identity of the person speaking on behalf of a product or sponsor, however, the rules governing endorsements apply. (130) Insofar as consumer endorsers are concerned, because buyers may attach more validity to a statement made by an actual consumer than an actor, Regulation 225.2(b), dealing with consumer endorsements, states that “[a]dvertisements presenting endorsements by what are represented, directly or by implication, to be ‘actual consumers’ should utilize actual consumers, in both the audio and video or clearly and conspicuously disclose that the persons in such advertisements are not actual consumers of the advertised product. (131) In In re Cliffdale Associates, Inc., (132) a deceptive practice was found when testimonials in advertisements were given by individuals who were portrayed as consumers, but who were, in reality, friends of the manufacturer, and this connection between the manufacturer and the purported consumers was not disclosed. (133)

When a celebrity speaks about a product’s good attributes, even if she or he does not profess to be stating his own opinion, the celebrity’s statements are considered to be an endorsement because: (1) a consumer may think that the celebrity would not speak on behalf of a product unless the celebrity believed in the product, and (2) the speaker’s status as a celebrity may cause the consumer to attach more validity to the words the celebrity is speaking. (134)

When an expert acts as a spokesperson, Regulation 255.3 requires that the expert: (1) have the expertise that he or she is represented to have, and (2) have performed an evaluation of the product, because the consumer may believe such an evaluation has been performed. (135)

Regulation 255.5 dealing with a particular kind of disclosure, that of material connections, states that “[w]hen there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) such connection must be fully disclosed. (136) In addition, this regulation states that, if the consumer is being led to believe the endorser is an actual consumer, but the endorser is paid or in any other way compensated or expects to be compensated by the sponsor, there is deception. (137) The advertiser should clearly and conspicuously disclose either: (1) the payment or promise of compensation prior to and in exchange for the endorsement, or (2) the fact that the endorser knew or had reason to know or to believe that if the endorsement favored the advertised product, then some benefit, such as an appearance on television, would be extended to the endorser. (138)

In In re Cooga Mooga, Inc., (139) failure to disclose ownership was improper because consumers would not usually expect a celebrity endorser to be an owner. (140) In In re Cliffdale Associates, Inc., (141) it was found to be a deceptive practice to have testimonials in advertisements by “consumers” who were, in reality, friends of the advertiser. (142) In In re Tru-Vantage International, LLC, (143) it was alleged that the advertiser failed to disclose that a purported expert endorser featured in some of the infomercials for the product had an investment in Med Gen., Inc, giving him a financial interest in promoting sales of the product. (144) In Numex Corp., (145) it was alleged that endorser of product should have disclosed that he was a corporate officer. (146) And in In re TV, Inc., (147) and In re Wayne Phillips, (148) the FTC brought actions against advertisers whose infomercials did not make clear that the consumers commenting on the product were connected to the advertiser. (149)



In May 2000, the FTC issued a staff working paper entitled Dot Com Disclosures. (150) This paper followed FTC workshops and a great deal of public comment and confirmed that the FTC was enforcing and would continue to enforce its consumer protection laws online because the Act is “not limited to any particular medium.” (151) “Accordingly, the Commission’s role in protecting consumers from unfair or deceptive acts or practices encompasses advertising, marketing, and sales online, as well as the same activities in print, television, telephone and radio.” (152) The paper goes on to state that the words “written,” “writing,” or “printed” as those words are used in the FTC Rules and Guidelines, will apply online. (153) A fair amount of commentary on how the old rules will apply to new issues arising under this new technology is being generated. (154) The Dot Com Disclosures paper states that advertising must be truthful and not misleading, (155) it must be substantiated, (156) and it must not be unfair. (157) Again, as in other advertising, the FTC will judge the deceptiveness of an advertisement on the basis of the impression left with the consumer. (158) In a Staff Opinion Letter issued August 21, 1997, the Commission found that a Web site with the domain name (a domain name virtually identical to the official domain registration site of NSI) that offered nearly identical domain registration services as NSI, was likely to create the false impression that the site was owned and operated by NSI. (159) A disclaimer on the site was deemed inadequate to cure the false impression. (160)

Substantiation Requirements

The Commission “expects advertisers to have appropriate substantiation to support claims that an advertised product or service will produce the advertised benefits, even where the advertiser discloses that the extraordinary benefits of the type described in its testimonials are not typical.” (161) Numerous cases illustrate that the Commission does not hesitate to pursue what it considers to be noncompliant advertisers. (162)

The FTC has commenced numerous sweeps of Web sites for various commercial scams, get-rich-quick schemes, and other deceptive trade practices such as Internet Auction Fraud Sweep, Coupon Surf Day, Jewelry Guide Surf Day,, Scholarscam, Lice Treatment Internet Surf, Operation Cure.All, American Indian Arts and Crafts, Surf, and more. (163) In 2000, the FTC ran an international collaborative effort across national borders known as “Operation Top Ten Dot Cons.” (164) The Commission also pursues criminal acts on the Internet, including multi-level marketing and pyramid scams, Internet auctions, fraud in health care, travel, vacation, pest-control devices, scholarships, and more. (165) In April 2002, the Commission announced a nationwide scam sweep involving twelve law enforcement agencies, including State agencies and four Canadian agencies. (166) Enforcement actions were brought against sixty-three alleged scares, including David L. Walker, whom the FTC accused of using a Web site to market “`bioresonance therapy and molecular enhancer’ treatments” that were supposed to make conventional cancer treatments unnecessary, (167) and Sound City 2000, whom the FTC accused of marketing CDs and then failing to deliver, delivering late, or failing to make refunds promptly. (168)

Advertiser Must Disclose Material Information

In the Dot Com Disclosures guidelines, case law, and consent decrees, the FTC has set forth specific requirements for online advertising. Disclosures must be clear and conspicuous, judged on the basis of (1) placement and proximity of the disclosure, (169) (2) prominence, (170) (3) repetition, (171) and (4) clarity and simplicity of language. (172) When possible, the disclosure should be on the same screen as the advertisement. (173) If a scroll down is necessary, the page should be designed such that the consumer is encouraged to scroll down. (174) Hyperlinks that clearly indicate that more information may be obtained through the hyperlink may be used in proximity to the claim to direct the consumer quickly to the disclosure page

Warranties communicated through visual text on Web sites are considered to be no different from paper versions, (200) consequently, the same rules apply. (201) Clearly labeled hyperlinks, like “click here for warranty information,” are acceptable if the warranty information is capable of being preserved by being saved or printed. (202) The Dot Com Disclosures states that the use of e-mail is allowed to communicate disclosures if the consumers are plainly led to expect to be informed by e-mail. (203) Negative option plans, such as the book-of-the-month club, may use e-mail, but, once again, the consumer must expect the notice, to which they must respond or be liable for the book, by e-mail. (204) There are a number of online cases dealing with these criteria. (205)

Particular Disclosure: Advertiser Must Disclose Material Connection Between Endorser and Product: Guidelines for Endorsements and Testimonials Apply Online

The FTC has stated very clearly: “[T]he Guides Concerning the Use of Endorsements and Testimonials in advertising apply to endorsements, which are defined as `any advertising message … [that] consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.'” (206) Because the guidelines place no limit on the media in which advertising is disseminated, (207) they encompass online ads. (208) The FTC clearly intends to continue to apply Endorsements and Testimonials Guidelines to online advertising. With this policy in mind, advertisers using undercover promotion must be concerned as to how the FTC will apply the pertinent guidelines to this practice.

There are a number of online cases dealing with the issue of failure to disclose a material connection. In In re TrendMark Inc., (209) a consent order was entered stating that, in unsolicited e-mails sent to AOL users and on its Web site, the respondents who appeared in the Web site advertisements endorsing Neuro-Thin and Lipo-Thin had committed a deceptive practice by failing to disclose adequately that these endorsers had a material connection with individuals and entities marketing and profiting from the sale of the products. (210) In In re Sneed, (211) the FTC found that advertisements on the Internet, audiocassettes, and in print failed to disclose that Mr. Sneed, at the time of his endorsement, had a financial interest in Arthritis Pain Care Center and received a financial benefit from respondents’ sales of the product. (212) The FTC also sued National Vision International Ltd. and John App, alleging that a “consumer endorsement” of “pinhole” eyeglasses by a former Marine Corps fighter pilot misrepresented that he was independent of National Vision when, in fact, he was a part-owner. (213)



Online undercover promotion is being sponsored by both individuals and by organizations. At least one individual, known online as “Britt,” believes he can have a direct influence on purchase decisions by engaging in undercover promotion. Britt offers to use his expertise to mine chat rooms to promote a product or service, by posing as an objective consumer. (214) Companies also use this marketing technique. A compact disc by Christina Aguilera was recently promoted in Internet chat rooms by individuals hired to pose as teenage girls and to “chat up” the singer’s new recording to other teenage girls in the chat room. (215)


As noted earlier, the FTC considers the effect, not the intent, of communication in its findings regarding deceptive advertising. (216) That is, where deceptive practices are not blatant, the meaning attributed to the communication by the consumer is considered, rather than the content of the information or the intent of the source. (217) The perceptions of a reasonable consumer are used as evidence of deceptive advertising. (218) Therefore, in evaluating the deceptiveness of Web-based communication, one must first determine the perceptions of the Internet consumers, and investigate their expectations and understanding about the rules of engagement of the Internet communication. Especially with this new electronic medium, it would be important to learn about the new breed of electronic communicators and the ways in which they convey meaning via the Internet. For example, in Internet chat rooms, bulletin boards, for a, and instant messaging, gender switching is reportedly widespread. This raises the question of whether misrepresenting ones gender is deceptive, or whether it is acceptable fiction, and whether fiction is expected by the users of these media of Internet communication. It also raises the question of whether chat room participants have more or less credibility than a trusted friend, or whether messages delivered digitally are more trustworthy than those delivered through more traditional mass media. In applying the FTC’s policies on deception, specifically those on disclosure, one must first determine whether a misrepresentation has occurred, by posing the question of whether the reasonable user of these services is aware of the existence of gender-switching, or whether the reasonable user of chat rooms, bulletin boards, or for a expects the profiles of other users, including their self-identified gender, to be accurate and truthful. The second step in applying the policies is to determine whether any misrepresentation is material, by posing the question of whether a consumer’s purchase decision is likely to be influenced by such a consumer’s mistaken belief that the virtual identity of another chat room participant is that other participant’s true identity.

It is possible that Internet users view Web-based communication as entertainment rather than fact, due to an expectation of fantasy in communication in cyberspace. It would seem that the question in the online environment becomes whether disclosure need be made in all the same circumstances it would have to be made offline.

There seem to be three factors that must be considered in determining the expectations of the reasonable consumer: (1) the nature of consumer, (2) the Web site involved, and (3) the nature of the goods. As to the kind of consumer, if the standard for deception is “the eye of the beholder,” the FTC should take into account the fact that the beholder online is very often expecting that those with whom they are communicating online have hidden agendas and identities. On the one hand, FTC policy statements state that because children and the elderly are thought to take communication at face value and are more easily deceived, more complete disclosure would always be called for. (219) On the other hand, when children and the elderly are not the advertiser’s target, it would seem that the FTC and the courts will have to look at nondisclosure of a connection between the promoter and the advertiser on a case-by-case basis, and the particular Web site, bulletin board, chat room, or newsgroup involved would need to be viewed in the same light in which it is viewed by the consumers who visit it. The subject matter of the advertisement would also be relevant to a determination of whether the consumer should expect a connection between promoter and advertiser.


Other than section 5 of the FTC Act, other federal and state laws regulate advertising and, therefore, may, in turn, affect online advertising and the liability of secondary parties for deceptive advertising online.


Prevention of Consumer Fraud and Abuse by Telemarketers

The Telemarketing and Consumer Fraud and Abuse Prevention Act (220) became effective in 1995, and required the FTC to issue regulations prohibiting deceptive and abusive telemarketing acts and practices, which could include facilitating such an activity. (221) These regulations apply only to telemarketing “which is conducted to induce the purchase of goods or services by use of one or more telephones and which involves more than one interstate telephone call.” (222) The Commission, at first, concluded that it did not have the necessary information available to it to support coverage of online services under the regulation. (223) The FTC then published a new regulation, on August 23, 1995, exempting online telemarketers. (224) This new regulation eventually became the final regulation. (225) “On February 23, 2000, the FTC announced that it was initiating a five-year review of its Telemarketing Sales Rule, including whether to expand the current rule to interactive sales media on the Internet.” (226) In May 2000, the FTC’s DotCom Disclosures stated that “[a]lthough the telemarketing sales rule applies largely to telemarketing calls from business-to-consumer, it also applies to telephone calls the consumer places in response to a `direct mail’ advertisement.” (227) The Dot Com Disclosures went on to state that e-mail, like direct mail, and unlike general media advertisements, makes the recipient feel as if he or she has been specially selected for an offer that is not available to the general public, (228) “[t]herefore, if the e-mail invites consumers to telephone the sender to purchase goods or services, the phone call is subject to the Telemarketing Sales Rule–as is the subsequent sale.” (229) Regardless of the use of e-mail, because the Telemarketing Sales Rule applies to general media advertising of credit repair, advance fee loans, or investment opportunities, it would always apply in this kind of advertising online. (230) The question arises as to whether this rule applies to spamming. Although this law has not yet been found to apply to spamming, (231) or viral e-mail, there is sufficient analogy among these activities that application of the law would be indicated.

Mail or Telephone Order Merchandise Rules

The FTC rules governing mail and telephone orders require retailers who receive orders or payments through the mail, or by telephone, to have a reasonable basis to claim, at the time an order is placed, that they can ship merchandise within the advertised time stated, or if no time is stated, within thirty days of receiving a completed order. (232) For retailers who are unable to meet these requirements, the buyer must be given the option to agree to a shipping delay or to cancel the order and receive a prompt refund. (233) The FTC has said that the Mail or Telephone Order Merchandise Rule applies to merchandise orders placed on the Internet. (234) In 2000, in In re Value America, Inc., (235) the FTC alleged that Value America had violated the Mail Order Rule in regard to its Toshiba Satellite 2100 CDS laptop, and various other products by not shipping some or all of the ordered merchandise to the buyer within the time stated in the solicitation, or if no time was stated, within thirty days as required by section 435.1(a)(1) of the Mail Order Rule. (236) In 1998, Dell Computer settled various charged infractions with the FTC, which included failing to provide consumers with the option of agreeing to a delay or canceling their orders. (237) Toys R Us and many other online merchants have been fined for failing to send notification of late delivery to the consumer. (238) The FTC alleged that the Mail or Telephone Order Merchandise Rule was violated by,, and CDnow, Inc. for failure to provide buyers with adequate notice of shipping delays, or continued promises of specific delivery dates when timely fulfillment was impossible. (239)


Trademark statutes (240) and copyright laws (241) have been widely used to Prevent infringement of intellectual property rights in online advertising activities. There has been a proliferation of cases concerning use of domain names which infringe trademarks and the infringement of copyrights in linking, framing, and with the use of Metatags. (242)


UDPA, Fraud

States have advertising laws in most of the areas covered by the federal laws including those on consumer protection and unfair competition, false advertising, unlawful practices such as passing off goods, and misrepresenting the source of goods or services. (243) Many have adopted and enforced unfair and deceptive acts and practices statutes modeled after section 5 of the FTC Act, the Uniform Consumer Sales Practices Act, or the Uniform Deceptive Trade Practices Act. (244) State common law actions for innocent misrepresentation and fraud are also used. Both of these causes of action require justifiable reliance, which calls for a determination of the level of sophistication required of the consumer. (245) The states appear to follow the FTC rule that an advertisement is deceptive if it is deceptive to less sophisticated consumer rather than the average consumer. (246) The state law of fraud requires intent, while the UDPA, as adopted in most states, does not. (247) Therefore, if a state has adopted the UDPA, it might find prosecution of deceptive advertising easier under the UDPA. (248) The Illinois Attorney General sued companies for fraud alleging that they marketed useless anthrax detectors, (249) the New York Attorney General sued an Internet “art gallery” for selling forged paintings, (250) and the Texas Attorney General sued for deceptive claims concerning “quick divorces.” (251)

Intentional or Negligent Tort

An advertiser can be liable in tort for advertising that is injurious under State law. (252) For instance, invasion of privacy has been claimed by celebrities for violation of their rights of publicity in ads where their likenesses are used without their permission or outside the scope of the contract in which they gave permission for usage. (253) In Hoffman v. Capital Cities/ABC, Inc., (254) Dustin Hoffman sued because his likeness had been used by Los Angeles magazine in its March 1997 issue. (255) His head was depicted, by computer imaging, over the bodies of models sporting spring fashions, and the court found the use unauthorized invasion of privacy, defeating the magazine’s claim that the spread was an editorial comment and therefore protected by the First Amendment. (256) In Cyber Promotion, Inc. v. America Online, Inc., (257) the court concluded that an ISP can police spam distribution on their systems using traditional legal principles including trespass. (258) Some states, such as California, Colorado, Connecticut, Delaware, and Idaho already have anti-spam laws in place, (259) but the constitutionality of these state laws prohibiting spam is unclear. (260) While Congress has proposed a number of laws to prohibit spare, (261) none have become law.

Defamation. Publication of untrue information about a competitor’s product may result in a suit for defamation. (262) Defamation is the intentional, unprivileged publication, to a third party, of a false and defamatory statement concerning another, without the consent of the subject of the statement. (263) In the case of public figures or public officials, the additional element of malice must be shown. (264) Malice includes the reckless disregard for the truth. (265) However, defamation does not encompass either an expression of opinion, or statements intended as humor or parody. (266) Many cases have been brought for defamation in the online environment. (267)

Obscenity. The Supreme Court, in Miller v. California, (268) held that the state has a legitimate interest in regulating obscene material “when the mode of dissemination carries with it a significant danger of offending the sensibilities of unwilling recipients or of exposure to juveniles.” (269) In Miller, the Supreme Court defined as obscene, material that (1) arouses prurient interest that does not conform to “contemporary community standards,” (2) is “patently offensive,” and (3) lacks serious literary, artistic, political, or scientific value. In online cases, the problem became one of defining the “contemporary community standards” on the Internet. In United States v Thomas, (270) the court stated that the applicable standards Were those of the community “where the material is downloaded.” (271)


Enforced by the FTC

In a speech before the Minnesota Institute of Legal Education in 1997, “The ABC’s at the ET.C.: Marketing and Advertising to Children,” Commissioner Starek said that the FTC will judge the advertisements directed at children by the reasonable child, not the reasonable adult. The advertisement is said to be directed at children if fifty percent of the audience is composed of that age group and, if such evidence is not available, other criteria include placement of the ad on a program directed to that age group, the nature of the programming in which the ad appears, and whether the ad, regardless of its location, is directed primarily at the relevant age group in terms of its subject matter, content, tone, or the like. (272)

The FTC can, and will, pursue deceptive and unfair practices based on the Likelihood of serious harm to children.

Enforced by the FCC

The Children’s Television Act of 1990 (273) became effective in 1992 (274) and Gives some protection to children twelve and under, limiting commercial matter to a particular number of minutes per hour, and regulating program-long commercials and commercials where a character from the program delivers the advertisement, especially cartoon-type commercials. (275) This law requires record-keeping of commercial time during children’s programming and filing of these records for the entire license renewal term. (276)


Online marketing to children is subject to the special rules and guidelines of the Children’s Advertising Review Unit (CARU) of the Better Business Bureau. (277) The guidelines recommend, among other things, that bulletin boards and chat rooms be monitored and that parental consent be required in certain instances. (278) In 1999, CARU reported to the FTC that Talk City Web site was not in compliance with CARU guidelines. (279) Also, in 1999, CARU investigated the ChuckECheese Web site and found that the site had violated several guidelines. (280) ChuckECheese subsequently complied with the CARU guidelines. (281) In its “U.S. Perspective on Consumer Protection in the Global Marketplace,” the Electronic Retailing Association has stated that any material connection “between an online advertiser and an endorser that is not reasonably expected by the audience and that would have a significant effect on the weight or credibility given to the endorsement by the audience–e.g., a family or business relationship–must be disclosed.” (282) This association has also issued “Guidelines for Marketing Children’s Products.” (283) In 2001, CARU’s guidelines were approved by the FTC as meeting safe harbor requirements. (284)


It is well settled that, offline, parties beyond the primary advertiser can be held liable for deceptive trade practices and other illegal acts related to advertising, such as copyright infringement and defamation. (285) These secondary parties include advertising agencies and catalog publishers. (286) The advent of online advertising, however, has raised the question of whether the rules imposing liability on secondary parties in offline contexts apply to such parties in the online context, and if so, how will this set of liable secondary parties be defined. This second element of the question may prove problematic because new types of secondary parties, such as online service providers, and chat room, newsgroup, and bulletin board operators, have come into being along with the Internet, and these new entities may be shown to bear new and subtler degrees of relationship to the primary offender than were understood to exist between the parties in traditional offline relationships.


Section 5–Offline

Advertising agencies have been found liable when they actively participate in the preparation of false or deceptive advertisements, and know or should know that the advertisement is deceptive or unsubstantiated. (287) Kertz and Ohanian summarized the change made by FTC in the 1980s as follows: The FTC’s original position was that an advertising agency was not liable if it simply took information furnished by the client and created advertising copy from it. (288) Now, however, two new requirements must be met by the advertising agency in order to avoid liability. First, the agency must be critical of the information given it by the advertiser, and actually has a duty to investigate the claims. (289) The more scientific and technical the claims, however, the lower the duty of investigation. (290) Second, the agency must be careful not to use correct information to create an incorrect impression in the consumer’s mind. (291) The greater the degree of agency participation in the creation of a misleading advertisement, the greater the likelihood that the agency will be found liable. (292) One Commissioner, in a concurring opinion in J. Walter Thompson USA., Inc., (293) noted that the agency “relied on a clearly flawed study in making its deceptive claims, and it continued to make claims based on this flawed study even after it had received contradictory results from a more reliable study that it had commissioned.” (294) In such cases, the imposition of liability does not depend upon proof that the agency intended to commit the deception. (295)

Catalog publishers have been found liable for deception in regard to the products sold under section 5. (296) Although catalog publishers do not have to procure their own substantiation for each product claim in the catalog, most companies that have run into trouble with the FTC have done so because they embellished the manufacturer’s claims: (297) “made claims directly contrary to the manufacturer’s claims,” (298) “ignored the manufacturer’s warnings regarding the product involved,” (299) or “could not demonstrate that they had reasonably relied on the manufacturer’s substantiation.” (300)

Section 5–Online

It would seem that advertising agencies, catalog publishers, and others who aid and abet deception would have the same liability for online activities that they have because of their offline activities. In determining whether an ad agency should be held liable offline, the FTC looks at the extent of the agency participation in the preparation of the challenged ad, and whether the agency knew or should have known that the ad included false or deceptive claims. (301) Catalog marketers are warned to ask for proof of claims. (302) By analogy, and, based on the FTC’s insistence that the rules and regulations governing deceptive advertising offline apply online, (303) it would seem that ISPs, bulletin board operators, chat room operators, and newsgroup operators should be found liable if they take part in the manufacture of the deceptive content or if they know or had reason to know of the deceptive content. Online operators of bulletin boards, chat rooms, newsgroups, and fora would seem to seem to have this same responsibility. If they do, perhaps Congress should enact a law to protect them. The safe harbors of the Communications Decency Act apply to immunity of ISPs from state law liability, but not federal law. (304) Congress had to act to expressly protect ISPs from state law defamation and obscenity liability based on the content provided by others by enacting section 230 of the Communications Decency Act. (305) Section 230 states that “no cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” (306) Congress quickly passed the Digital Millennium Copyright Act of 1998 (307) to provide limitations on liability of service providers for copyright infringement online. (308) It would seem to follow then, that federal lawmakers might have to act to provide complete immunity for secondary parties for deceptive advertising.

Telemarketing and Consumer Fraud and Abuse Prevention Act (309) and the Mail or Telephone Order Merchandise Rule (310)–Offline

The FTC has also pursued a theory known as the Dandelion or Root Theory of Liability (311) for secondary parties under the telemarketing rules. “Aiders and abettors” and “facilitators” have been defined as those who “do not deal directly with consumers, but whose behind-the-scenes participation in deceptive schemes is essential to their success.” (312) Advertisers are “supported, supplied, and sometimes shielded by a sophisticated network of `roots’–list brokers, credit card `factors,’ telephone service bureaus … and the like.” (313) “The Commission has shifted its focus [from the actions against telemarketers, to include] the `roots’ that nourish telemarketers by providing them with the essential tools and services that make it possible for them [to operate].” (314) For instance, the Commission alleged that a non-bank financial services subsidiary of a national bank was aware of various factors indicating fraud by a travel club telemarketer, yet continued to aid and abet the telemarketer. (315) The financial subsidiary was ordered to institute a system that would allow them to monitor merchant chargeback rates (316) in order to determine whether the chargebacks were due to unfair or deceptive practices. (317) In 1994 Congress included a call for regulations governing “acts or practices of entities or individuals that assist or facilitate deceptive telemarketing, including credit card laundering” in the Telemarketing and Consumer Fraud and Abuse Prevention Act. (318)

Telemarketing and Consumer Fraud and Abuse Prevention Act and the Mail or Telephone Order Merchandise Rule–Online

Under the Telemarketing and Consumer Fraud Abuse Prevention Act, liability attaches to an aider or abettor if the aider or abettor knew or should have known that the advertisement was deceptive, (319) raising the question of whether the Dandelion Theory should apply online to ISPs, Web site designers, bulletin board, newsgroup, forum, and chat room operators and owners. It would seem logical to apply the same criteria online. The FTC has, as yet, declined to apply the Telemarketing Sales Rule to the Internet, therefore it would seem that there could be no aiders or abettors on the Internet when there exists no primarily liable party As for the Mail and Telephone Order Merchandise Rule, there is a relevant and important distinction made in Dot Com Disclosures that may relieve these secondary parties from liability. In Dot Com Disclosures, the FTC states that the Telemarketing Sales Rule applies when an e-mail is sent because the consumer may think the Web site personally selected him or her to receive a special offer not made to the general public. In such cases the e-mail is treated exactly like a telemarketers call. (320) On the other hand, Web sites, newsgroups, or electronic bulletin board postings are understood by consumers to be like television and newspaper advertisements made to the general public, which would generally be exempt from the Telemarketing Sales Rule. (321) Secondary parties might be able to exploit this distinction to escape liability because the public perceives these secondary parties as mass media and not as publishers of content. In that case, the result would seem to depend on the proximity of the secondary party to the primary seller and would require an investigation on a case-by case basis.


The Copyright Act of 1976 (The Lanham Act)–Offline

Copyright law provides for liability of parties beyond the primary party if such secondary parties commit contributory infringement by being aware of the infringement and inducing or contributing to it by helping the direct infringer, (322) or if they commit vicarious infringement by being in a position of control and derive financial benefit from the infringement. (323)

The Copyright Act of 1976 (The Lanham Act) and the Digital Millennium Copyright Act–Online

Early in the e-commerce explosion, online service providers, bulletin board operators, and newsgroup operators were sued for copyright infringement, contributory infringement, (324) and vicarious infringement. (325) In a critical case, Religious Technology Center v. Netcom On-line Communication Services, Inc., (326) the court found that Netcom, a bulletin board operator, was not liable for direct copyright infringement because some element of volition was lacking. (327) Congress immediately passed the Digital Millennium Copyright Act (328) to codify this ruling, thereby giving online service providers protection against this type of direct copyright infringement liability if they followed certain requirements such as adopting policies that would result in the termination of users who repeatedly infringed upon the right of others, and if they did not interfere with the technological measures used by copyright owners to protect their property. (329) The Digital Millennium Copyright Act, however, deals only with Internet and online service providers, (330) and it affords such service providers immunity to direct copyright infringement or contributory or vicarious infringement unless the service providers knew or had reason to know of the infringing activity, were given notice, and failed to remove the material. (331) Web site operators have also used this law to protect themselves from violations of copyright law. (332) However, in order to avail themselves of this protection, they must meet the provision of the statute, which requires them to take down or block access to infringing material upon receipt of appropriate notification. (333) Additionally, such operators must register an agent for service of process with the Copyright Office. (334) This statute and its case law could, it seems, be applied by analogy to the question of the liability of forum, newsgroup, and chat room operators for deceptive advertising. Such an application would raise practical issues such as: (1) how a competitor or the FTC will be able to notify the Web site operator, with certainty, that there exists deceptive advertising, and (2) whether a practical number of entities would have to register an agent for service of process. (335)


UDPA, Misrepresentation, Fraud–Offline

Some states provide statutes that implicate a person who aids another in the commission of fraud. For example, in Minnesota, persons who assist, including ISPs and credit card companies who continue to provide services, are prosecuted under the accomplice statute. (336) Iowa’s statute forbids aid in making or establishing, or advertising or making public a scheme for a lottery. (337) Under Kansas law, a person is responsible for a crime committed by another “if such person intentionally aids, abets, advises, hires, counsels or procures the other to commit the crime.” (338)

UDPA, Misrepresentation, Fraud–Online

States have readily pursued Internet scams involving fraudulent offers and unsafe products advertised online. (339) Many states have joined the FTC in its “surf days” to root out consumer fraud. (340) It would seem reasonable that accomplices in the online environment would also be liable if they had the requisite intent or gross negligence to meet the elements of the state statute.

Negligent and Intentional Torts–Offline

Traditionally, state courts have held that the publisher of advertisements is not liable for the deceptiveness of the advertisement unless the way in which the advertisement is presented gives the consumer the impression that the publisher is certifying the accuracy of the ad or “standing behind” the ad in some way. (341) In Hanberry v. Hearst Corp., (342) the court found Good Housekeeping magazine liable for a deceptive ad because the ad attached the Good Housekeeping “Consumers Guarantee Seal” to the product with the consent of Good Housekeeping. (343) In Eimann v. Soldier of Fortune Magazine, (344) the magazine was held liable for publishing an advertisement for mercenaries where a husband had his wife killed by a mercenary he contacted via the advertisement, but the Fifth Circuit overturned the verdict. (345) In Walters v. Seventeen Magazine, (346) however, the magazine was found not liable in a case involving toxic shock syndrome attributed to defective tampons, because the magazine did not endorse the product, and because readers could easily distinguish between the advertisement and the magazine’s regular copy. (347) In Yanase v. Automobile Club, (348) in which an auto club’s tour book ratings were treated as an endorsement, the court found that the automobile club was not liable because it did not receive compensation for the listings of motels and therefore owed no duty to investigate the safety or any other factor about the motels listed. (349)

Negligent and Intentional Torts–Online

It would seem logical that the rules for offline liability would apply online. If an ISP or Web site developer, or the operator of a forum, bulletin board, newsgroup or chat room in any way leads consumers to believe that it stands behind a deceptive advertisement or has investigated it and gives it any kind of approval or certification, these secondary parties would be liable. A children’s Web site, perceived to be informational, that embeds advertising within informational data, could be liable as endorsing and standing behind the advertisement. Even revealing in the advertisement that it is an advertisement, might, depending on the focus of the Web site and what the Web site holds itself out to be, still be thought to be an endorsement of the advertisement. The same would seem to apply to the operators of bulletin boards, newsgroups, fora, and chat rooms.

Tort of Defamation–Offline. Under the common law and statutes of most states, courts have held that common carriers such as a telephone or telegraph companies, and other distributors of defamatory material have no liability because they have no control over the content of the material. (350) On the other hand, because publishers have control over content, they would be liable for publishing defamatory material. (351)

Tort of Defamation—Online. Early on, in the online environment, the courts had to decide if the online service providers, bulletin board operators, and newsgroup operators were to be likened to common carriers, distributors, sellers, or publishers of the material. If they are likened to publishers, they should bear liability for defamation, because they would have been found to have control over the content. In Cubby, Inc. v. CompuServe Inc., (352) the court granted summary judgment in favor of the defendant, upon a finding that the plaintiff had not presented sufficient evidence to demonstrate that the service provider had exerted sufficient control over, or had had knowledge of or reason to have known that the contents of statements posted on one of its bulletin boards were defamatory. (353) In Oakmont, Inc. v. Prodigy Services Co., (354) the court found that Prodigy was “in control of the illegal content” on its bulletin board, and imposed liability for defamatory statements posted there by a third party, despite the fact that the control noted by the court arose out of Prodigy’s attempt to eliminate defamatory information from its bulletin board by exercising its editorial and self-regulatory functions in policing the bulletin board for defamatory and other illegal material. (355) Even though Prodigy was attempting to be a responsible service provider, by trying to control illegal content, the court imposed liability because Prodigy imposed control, but failed to do it effectively In essence, Prodigy was punished for trying to do the right thing. Fearing that such a ruling would have a chilling effect on the efforts of service providers to attempt to act responsibly, Congress enacted section 230 of the Communications Decency Act of 1996, which states that a provider or a user of an interactive computer service is not to be treated as the publisher or speaker of any information provided by another information content provider. (356) Further, Congress removed the judicially erected disincentives to control one’s own Web site, by disallowing publisher liability for a service provider trying to eliminate illegal content from the site by adding the “Good Samaritan” provision:

No provider or user of an interactive computer service shall be held liable on account of (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected

information content providers or others the technical means to restrict

access to material described in paragraph (1). (357)

This provision also defines “interactive computer service” as “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions.” (358) While this provision defining ISPs does not explicitly include bulletin board operators and the operators of sites such as newsgroups, fora, and chat rooms within the ambit of the protections afforded by section 230, these parties may be included by implication by virtue of the fact that they, functionally, fit within the definition of interactive computer service set forth in section 230(c)(1). An “information content provider” is defined as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.” (359)

The courts have used section 230 of the Communications Decency Act to find online access providers not liable, even as distributors. In Ben Ezra, Weinstein & Co. v. America Online Inc., (360) the court held that AOL did not have publisher liability for defamation when an allegedly defamatory inaccurate stock quote was posted on its electronic bulletin board, even though it performed editorial and self-regulatory functions on the bulletin board. (361) It may be, however, that AOL was found not liable because it was a service provider, as well as a bulletin board operator. In Zeran v. America Online, Inc., (362) AOL was found not liable retroactively


As in state liability for defamation, parties, beyond the primary party, who help disseminate obscene material, could be liable if they had control over the content of the material as a publisher. (365) This would be in contradistinction to the status of common carriers, distributors, and sellers of the material who normally do not have any control over the content.


The Communications Decency Act, which was meant to prevent the dissemination of pornography online, (366) has relevance here because, as in defamation cases, section 230(c)(1) protects service providers from liability as publishers. (367)

Again, because bulletin board, newsgroup, fora, and chat room operators impliedly fit within the protected class as defined by section 230, these secondary parties may suffer no liability in an obscenity case. Consequently, the distinction between distributor and publisher appears to have been erased for purposes of liability even when certain secondary parties have knowledge of or reason to know that the material distributed was illegal. (368)


While every detail and nuance of the liability of secondary parties for deceptive advertising in endorsements and testimonials, carried out by undercover promoters in chat rooms, has yet to emerge, the general picture appears to be taking shape along more or less traditional lines. At least one commentator has noted that “[l]egislation and judicial decisions have always followed the concept that an advertising medium should not bear the responsibility for claims arising out of advertising carried by the medium unless the medium knowingly or recklessly published false advertising.” (369) It also bears noting that courts have found traditional media liable where they took part in the deceptive advertising by allowing the format of the ad to look like an editorial comment. (370)

Because deceptive promoters or endorsers in a chat room are dependent upon the existence of the chat room, which exists because of the efforts of the service provider, Web page designer, and/or the chat room operator, it seems that if there were evidence that any of these secondary parties knew or should have known about the deception, then they could be held liable under the aider and/or abettor theory of section 5.

These secondary parties might, however, use the defense discussed above, (371) which arises out of the observation put forth by the FTC in Dot Com Disclosures regarding the application of the Mail or Telephone Order Merchandise Rule when Web page, bulletin board, and newsgroup owners and operators are perceived, by members of the public, to be like the owners of newspapers and television stations and, therefore, are not subject to the Mail or Telephone Order Merchandise Rule. (372) It would seem that Web page, bulletin board, and newsgroup owners and operators could use the FTC’s recognition of this public perception as the basis of a defense against liability for nondisclosure in e-mail, postings, news articles, and discussions put online by third parties with the help of their services. A further distinction can be made, however, between service providers and Web page, bulletin board, newsgroup, and chat room owners and operators, because the operators and owners may have more control over and more knowledge of the e-mail sender, especially on children’s Web sites. Consequently, one could make the case that chat room operators are secondary parties who have or should have knowledge of the deception. The possibility of scrutiny by the FTC increases if CARU guidelines are violated, because, under these guidelines, owners and operators of chat rooms, bulletin boards, and newsgroups directed at child audiences are required to monitor and obtain parental consent. (373) Similarly, in the case of Web sites devoted to adult content, undercover promoters detectable by a “reasonable man” but not by the targeted audience could trigger secondary-party legal liability for owners and operators of such sites under section 5 and other laws regulating advertising, regardless of whether the owners or operators actually monitored or knew of the deception. In these instances, Congress will have to decide if another law should be enacted in order to protect ISPs, and owners and operators from liability.

Search engine operators that include purchased search engine results among their search engine results, when such results would not have been produced by a pure search, would seem to be exposing themselves to liability for nondisclosure under the theory that a consumer conducting a search might be misled, by the presence of the purchased results, into believing that the results are comprised entirely of impartial information, when, in fact, the results are contaminated by the opinions of advertisers. This would especially be so if the search were for information unrelated to commerce, such as children’s education sites, and the results included a marketer’s Web site that contained embedded advertisements. The same rationale would seem to apply when an informational Web site allows advertisers to embed their own advertising amidst noncommercial information. The consumer might believe that he is getting impartial information and is not, while the search engine operator is not only aware of the potential for deception, but has actually entered into a contract that creates the opportunity for this deception.

Since the safe harbors of the Communications Decency Act only insulate ISPs and other secondary parties from liability from state law violations committed by content providers, and since Congress had to enact the Digital Millennium Copyright Act in order to insulate ISPs from federal copyright infringement claims, perhaps it will be necessary to enact legislation to protect the ISPs and various other secondary parties who aid and assist the advertiser on the Internet from liability under FTC section 5 and the other federal laws that regulate advertising online.

(1.) See JANE K. WINN & BENJAMIN WRIGHT, THE LAW OF ELECTRONIC COMMERCE [section] 15.05, at 15-10 (4th ed. Supp. 2002).

(2.) See FEDERAL TRADE COMMISSION, DOT COM DISCLOSURES (2000) [hereinafter DOT COM DISCLOSURES], available at (last visited Oct. 23, 2002)

(3.) FTC Guidelines for Endorsements and Testimonials, 16 C.F.R. [section] 255.2 (2001).

(4.) See, e.g., Hendrickson v. Ebay, Inc., 165 F. Supp. 2d 1082 (C.D. Cal. 2001).

(5.) See, e.g., Cubby, Inc. v. Compuserve Inc., 776 F. Supp. 135 (S.D.N.Y. 1991)

(6.) 17 U.S.C. [section] 512 (2000).

(7.) Communications Decency Act of 1996, 47 U.S.C. [section] 223 (2000).

(8.) Dr. Ralph E Wilson, The Six Principles of Viral Marketing, WEB MARKETING TODAY, Feb. 1, 2000, available at

(9.) See Richard W. Easley, Virtual Communities … The Power of Word-of-Mouth Transmission Via the Internet, J. INTERNET MARKETING, Mar. 2002, available at

(10.) See generally Felix H. Kent, Blurring Commercial, Editorial Distinctions, N.Y. L.J., June 18, 1999, at 3.

(11.) See infra text accompanying notes 12, 13, and 14 (explaining “undercover promotion”).

(12.) GEORGE B. DELTA & JEFFREY H. MATSURA, LAW OF THE INTERNET [section] 11.10[A], at 11-68 (2d ed. Supp. 2002) [hereinafter LAW OF THE INTERNET] (explaining the use of informational Web sites to market goods causing confusion in the mind of the consumer as to what is fact and what is advertising).

(13.) Tessa Wegert, Search Engine Results You Can Control, CLICKZ TODAY, Aug. 29, 2002, available at

(14.) LAW OF THE INTERNET, supra note 12, [section] 11.10[Al, at 11-68 (citing David Corn, Anatomy of a Netscam, WASH. POST, July 7, 1996, at C5)

(15.) LAW OF THE INTERNET, supra note 12, [section] 11.10[A], at 11-68.

(16.) Id. at 11-70.

(17.) KidsCom Privacy Policy, at (last visited Sept. 21, 2002).

(18.) Letter from Jodie Bernstein, Director, Bureau of Consumer Affairs, to Kathryn C. Montgomery, President and Jeffrey A. Chester, Executive Director of the Center for Media Education (July 15, 1997) (responding to its petition requesting investigation of and enforcement action against SpectraCom, for nondisclosures on SpectraCom’s Web site KidsCom), available at

(19.) Id.

(20.) Id.

(21.) Id.

(22.) Id.

(23.) Id.

(24.) U.S. CONST. amend. I.

(25.) See HARVEY L. ZUCKMAN ET AL., MODERN COMMUNICATION LAW [section] 1.4, 32 n.2 (1999).

(26.) See id. at 33.

(27.) See id. [section] 1.6, at 58.

(28.) See id. [section] 1.6(A), at 58.

(29.) See id. [section] 1.6(B), at 63.

(30.) See id. [section] 1.6(C), at 64.

(31.) Id. [section] 1.6(D), at 69.

(32.) Id. [section] 1.6(E), at 73.

(33.) See Chaplinsky v. New Hampshire, 315 U.S. 568, 572 (1942) (finding “fighting words” were not an essential part of any exposition of ideas, and were of such slight social value that any benefit was outweighed by social interest in order and morality).

(34.) See ZUCKMAN ET AL., supra note 25, [section] 1.6, at 58 (quoting RODNEY A. SMOLKA, LAW OF DEFAMATION, [section] 4.80[4][C][i](1991)).

(35.) Id.

(36.) Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 561-66 (1980).

(37.) Id.

(38.) Id.

(39.) 507 U.S. 410 (1993).

(40.) U.S. CONST. art I, [section] 8, cl. 2.

(41.) 15 U.S.C. [section] 45(a)(2) (2000).

(42.) Id. [section] 41.

(43.) Id. [section] 45.

(44.) Id. [section] 45(a)(1).

(45.) 16 C.F.R. [section] 1.8 (2001).

(46.) See 15 U.S.C. [section] 57(a) (2000)

(47.) 16 C.F.R. [section] 1.5 (2001).

(48.) 16 C.F.R. ch. 1, pt. 2

(49.) 16 C.F.R. [section] 2.31 (2002).

(50.) Id. [section] 2.13.

(51.) Id. [section] 2.33.

(52.) Id. [section] 3.52.

(53.) 15 U.S.C. [section] 57(b) (2000)

(54.) See, e.g., Am. Home Prods. Corp. v. FTC, 695 F.2d 681, 699-701 (3d Cir. 1982)

(55.) Warner-Lambert Co. v. FTC, 562 F.2d 749, 753 (D.C. Cir. 1977)

(56.) 15 U.S.C. [section] 45(c) (2000).

(57.) Id. [section] 45(h).

(58.) 16 C.F.R. [section] 435 (2002).

(59.) 15 U.S.C. [subsection] 6101-6108 (2000).

(60.) Bruce S. Meyer, F.T.C. Issues Guidelines on Internet Advertising, N.Y. L.J., June 30, 2000, at 1-1

(61.) ZUCKMAN ET AL., supra note 25, [section] 3.15, at 324 (citing Braun v. Soldier of Fortune Magazine, Inc., 968 F.2d 1110, 1113-16 (11th Cir. 1992)).

(62.) See ARENT FOX, ATTORNEYS AT LAW, ALERTS, DISCLOSURE EXPOSURE: EFFECTIVE DISCLOSURES IN ADVERTISING [hereinafter DISCLOSURE EXPOSURE], at alert2001-06-01kaminski/alert2001-06-01kaminski.html (last visited Oct. 28, 2002).

(63.) Deborah K. Owen, Legal Issues in Internet Advertising, 520 PLI/Pat 643, 678-79 (1998).

(64.) Karren M. Shorofsky, Advertising and Promotions Online, 623 PLI/Pat 97, 104 (2002).

(65.) LAW OF THE INTERNET, supra note 12, [section] 11.10[A], at 11-70.

(66.) Id.

(67.) See Electronic Retailing Association, U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace, Comment Before the FTC, FTC File No. P994312, available at (last visited Oct. 24, 2002).

(68.) Id.

(69.) Id.

(70.) See ZUCKMAN ET AL., supra note 25, [section] 3.13, at 316 (citing the opinion of Commissioner Douglas in In re Int’l Harvestor Co., 104 F.T.C. 949, 1060 (1984)).

(71.) See Int’l Harvestor Co., 104 F.T.C. at 1062-63 (concerning a tractor manufacturer that failed to notify its customers of a dangerous condition involving the gas-filler pipe cap that could prove deadly to unwary users, but made no affirmative representations in this regard)

(72.) See Int’l Harvestor Co., 104 F.T.C. at 1056.

(73.) See Letter from the FTC Commissioners, to Senators Wendell H. Ford and John C. Danforth (Dec. 17, 1980), reprinted in Int’l Harvester Co., 104 F.T.C. at 1071-74.

(74.) Id.

(75.) Letter from James C. Miller III, to Rep. John D. Dingell (Oct. 14, 1983), reprinted in In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 174-84 (1984) [hereinafter Deception Policy].

(76.) Id. at 176-83.

(77.) F.T.C. Facts for Businesses, Frequently Asked Advertising Questions: A Guide for Small Business, available at (last visited Oct. 24, 2002).

(78.) Id.

(79.) See Deception Policy, supra note 75, at 175 n.5.

(80.) Id. at 176 nn. 6-9.

(81.) Id. at 176.

(82.) Lesley Anne Fair, Federal Trade Commission Advertising Enforcement, 808 PLI/Comm 267, 285 (2002).

(83.) See Owen, supra note 63, at 647.

(84.) Deception Policy, supra note 75, at pt. II.

(85.) Id. at 177.

(86.) Id. at 177-78.

(87.) Id. at 179.

(88.) Id.

(89.) See id. at 178.

(90.) Id. at 175 n.5.

(91.) FTC Policy Statement Regarding Advertising Substantiation, reprinted in In re Thompson Med. Co., 104 F.T.C. 648, 839 (1984), aff’d 791 F.2d 189 (D.C. Cir. 1986) [hereinafter Substantiation Policy].

(92.) Id.

(93.) Id. at 840-41.

(94.) Deception Policy, supra note 75, at 181 n.42.

(95.) See generally id.

(96.) In re Exxon Corp., FTC File No. 932-3022 (Sept. 11 1996), available at

(97.) Id. at 4.

(98.) 118 F.T.C. 1159 (1994).

(99.) Id. at 1160-62.

(100.) Id. at 1168–70.

(101.) In re Weight Watchers Int’l, Inc., 124 F.T.C. 610 (1997).

(102.) In re Jenny Craig, Inc., 125 F.T.C. 333 (1998).

(103.) See Weight Watchers Intl, Inc., 124 F.T.C. at 614

(104.) FTC File No. 962-3041, available at (last visited Oct. 29, 2002).

(105.) Id.

(106.) Deception Policy, supra note 75, at 176 n.9 and accompanying text.

(107.) Television Commercials, 3 Trade Reg. Rep. (CCH) [paragraph] 7569.09, at 10,961 (Oct. 21, 1970).

(108.) See, e.g., In re Herb Gordon Auto World, FTC File No. 942-3114 (Jan. 23, 1997), available at http:/

(109.) See Deception Policy, supra note 75, at 180 n.34 and accompanying text.

(110.) See Microsoft Corp., Proposed Consent Agreement, 66 Fed. Reg. 18639 (Apr. 10, 2001).

(111.) Id.

(112.) FTC File No. 002-3332 (Mar. 6, 2002), available at

(113.) Id.

(114.) See Deception Policy, supra note 75, at 180 n.37 and accompanying text.

(115.) In re Nissan Motor Corp., 117 F.T.C. 1075 (1994).

(116.) Id. at 1076.

(117.) In re Am. Online, Inc., FTC File No. 952-3331 (May 1, 1997), available at

(118.) In re CompuServe, Inc., FTC File No. 962-3096 (May 1,1997), available at

(119.) In re Prodigy Serv. Corp., FTC File No. 952-3332 (May 1, 1997), available at

(120.) See Owen, supra note 63, at 652.

(121.) See, e.g., In re TV Inc., 5 Fed. Trade Reg. Rep. (CCH) [paragraph] 22,827 (July 25, 1990).

(122.) 16 C.F.R. [section] 225 (2002).

(123.) Id. (emphasis added).

(124.) See generally Kertz & Ohanion, supra note 48, at 615-23 (describing the FTC’s stance against deceptive endorsements and testimonials in informercials).

(125.) 16 C.F.R. [section] 255.1(a) (2002).

(126.) Id.

(127.) Id. [section] 255.2(a).

(128.) See id. [section] 255.1.

(129.) See id. [section] 255.2(a).

(130.) See id. [section] 255.2(b).

(131.) 16 C.F.R. [section] 255.2(b) (2002) (emphasis added).

(132.) 103 F.T.C. at 110.

(133.) Id. at 171-73.

(134.) See, e.g., 16 C.F.R. 255.5 cmt. 2 (2002).

(135.) Id. [section] 255.3.

(136.) Id. [section] 225.5.

(137.) Id.

(138.) Id.

(139.) 98 F.T.C. 814 (1981).

(140.) See id. at 815.

(141.) Cliffdale Assoc., 103 F.T.C. at 110.

(142.) Id. at 172.

(143.) Tru-Vantage Int’l, L.L.C., Proposed Consent Agreement, 66 Fed. Reg. 17,898 (Apr. 4, 2001).

(144.) Id.

(145.) 116 F.T.C. 1078 (1993).

(146.) Id. at 1083.

(147.) 5 Fed. Trade Reg. Rep. (CCH) [paragraph] 22,827 (July 25, 1990).

(148.) 5 Fed. Trade Reg. Rep. (CCH) [paragraph] 23,029 (July 31, 1991).

(149.) See Kertz & Ohanian, supra note 48, at 622-23.

(150.) DOT COM DISCLOSURES, supra note 2.

(151.) Id.

(152.) Id.

(153.) See id.

(154.) See generally id. See also William M. Heberer, Website Content and Other Online Advertising Must Comply With Traditional Advertising Rules, at (last visited Oct. 28, 2002)

(155.) DOT COM DISCLOSURES, supra note 2, at pt. III (accompanying notes refer the advertiser to the FTC Policy Statements on Deception and Substantiation).

(156.) Id.

(157.) Id.

(158.) Id. at pts. III A, B.

(159.) Shorofsky, supra note 64, at 106 (citing Letter from David Medine, Assistant Director, FTC, to David M. Graves, Internet Business Manager, Network Solutions, Inc. (Aug. 21, 1997), available at http://www,

(160.) Id.

(161.) See ARENT FOX, ATTORNEYS AT LAW, ALERTS, ABSENT A DISCLOSURE TO THE CONTRARY, ONLINE PRIVACY POLICIES WILL BE DEEMED TO APPLY TO OFFLINE INFORMATION COLLECTION AND USE, FTC STATES (2002) (announcing that the 2002 consumer protection agenda would place a priority on issues of privacy, dietary supplement claims, testimonials, and mail order rule violations), at /alert2002-01-151upo/alert2002-01-15lupo.html (last visited Oct. 28, 2002).

(162.) See, e.g., In re Panda Herbal Int’l, Inc., Docket No. C-4018 (July 30, 2001) (finding that Panda Herbal International did not have sufficient substantiation or sufficient disclosures in the advertisements of its product Herbal Outlook, and HerbVeil 8), available at

(163.) See Owen, supra note 63, at 649

(164.) See Goldstein, supra note 163, at 874.

(165.) Id. at 875.

(166.) Id.

(167.) Scott Hovanyetz, FTC Announces Cross-Border Scum Sweep, IMARKETING NEWS, Apr. 3, 2002.

(168.) Id.

(169.) DOT COM DISCLOSURES, supra note 2, at text accompanying n.18 & pt. III B.

(170.) Id. at pt. III C.

(171.) Id.

(172.) Id.

(173.) Id. at pt. III C(1)(a).

(174.) Id.

(175.) Id. at pt. III C(1)(b).

(176.) Id.

(177.) Id. at pt. III C(2).

(178.) Id. at pt. III C(4).

(179.) Id. at pt. III C(6).

(180.) Id. at pt. III B.

(181.) Id. at pt. III B.

(182.) Id.

(183.) Id. at pt. III C(1)(e).

(184.) Id.

(185.) Id.

(186.) Id. at pt. III C(1)(b).

(187.) Id. at pt. III C(1)(b).

(188.) Id.

(189.) Id.

(190.) Id. at pt. III C(1)(c).

(191.) Id.

(192.) Id.

(193.) Id. at pt. III C(1)(c).

(194.) Id.

(195.) Id. at pt. III C(1)(e).

(196.) Id. at pt. III C(1)(d).

(197.) Id. at pt. III C(5).

(198.) Id.

(199.) Id.

(200.) Id. at pt. IV A(2).

(201.) Id.

(202.) Id.

(203.) Id.

(204.) Id.

(205.) See, e.g., FTC v. Audiotex Connection, Inc., FTC File No. 972-3079 (E.D.N.Y. 1997) (finding that disclosures were insufficient because they did not indicate that an international telephone connection would be maintained and that consumer would continue to have to pay long distance telephone charges), available at (last visited Oct. 28, 2002)

(206.) DOT COM DISCLOSURES, supra note 2, at pt. II (citing 16 C.ER. [section] 255 (b) (2002)).

(207.) Id. at “Overview.”

(208.) Id.

(209.) FTC File No. 972-3255 (June 25, 1998), available at (last visited Oct. 28, 2002).

(210.) Id.

(211.) FTC File No. 982-3182 (June 24, 1999), available at (last visited Oct. 28, 2002).

(212.) Id.

(213.) See Press Release, Federal Trade Commission, Marketers of “Pinhole” Eyeglasses Settle FTC Charges that They Made False and Unsubstantiated Claims that the Glasses Could Correct or Cure Vision Disorders (Oct. 21, 1993), available at

(214.) See

(215.) Erin White, `Chatting’ a Singer Up the Pop Charts, WALL ST. J., Oct. 5, 1999, at B1

(216.) Deception Policy, supra note 75, at nn.6-9 and accompanying text.

(217.) Id.

(218.) Owen, supra note 63, at 647.

(219.) Deception Policy, supra note 75, at pt. III

(220.) 15 U.S.C. [subsection] 6101-6108 (2000).

(221.) Id. [section] 6101(5).

(222.) 16 C.F.R. [section] 310.2(u) (2002).

(223.) See Owen, supra note 63, at 664.

(224.) Prohibition of Deceptive and Abusive Telemarketing Acts, 60 Fed. Reg. 43,842 (Aug. 23, 1995) (codified at 16 C.F.R. pt. 310).

(225.) 16 C.F.R. [section] 310.6(g) (2002).

(226.) Wong et al., supra note 154, at 713.

(227.) DOT COM DISCLOSURES, supra note 2, at pt. IV B.

(228.) Id.

(229.) Id.

(230.) 16 C.F.R. [section] 310.6 (2002).


(232.) 16 C.F.R. [section] 435.1 (2002).

(233.) Id.

(234.) Press Release, Federal Trade Commission, Internet Advertiser Settles FTC Charges: Agency’s Online Fraud Enforcement Continues (Sept. 24, 1996), available at

(235.) 2000 WL 899219 (F.T.C.).

(236.) Id.

(237.) WINN & WRIGHT, supra note 1, [section] 15.05, at 5-11 (citing Kirk Ladendorf, Dell Agrees to $800,000 Penalty, Austin-American Statesman, Apr. 3, 1998, at D1)

(238.) Shorofsky, supra note 64, at 110.

(239.) WINN & WRIGHT, supra note 1, [section] 15.05, at 5-12 (citing FTC press release, available at

(240.) Lanham Act, 15 U.S.C. [section] 1114(1)(a) (2000)

(241.) U.S. CONST. art. 1, [section] 8, cl. 8

(242.) See, e.g., Plaintiff’s Preliminary Statement, Wash. Post Co. v. Total News, Inc., No. 97 Civ. 1190 (S.D.N.Y. 1997) (where several news organizations sued TotalNews for copyright and trademark infringement based on TotalNews providing links to the plaintiffs’ Web sites, but “framed with Totalnews” logo and advertising), available at (last visited Oct. 29, 2002)

(243.) Owen, supra note 233, at 756-57.

(244.) See Kertz & Ohanian, supra note 48, at 631-32

(245.) Kertz & Ohanian, supra note 48, at 635-36.

(246.) See Richard A. Kurnit, Advertising and Unfair Competition Issues, ALI-ABA, Mar. 2001, at 474.

(247.) Kertz & Ohanian, supra note 48, at 635.

(248.) See id. at 630-39 (discussing common law remedies)

(249.) Goldstein, supra note 154, at 1203.

(250.) Id. at 1204.

(251.) Id. at 1205.

(252.) ZUCKMAN ET AL., supra note 25, [section] 3.15 (citing N.Y. Times v. Sullivan, 144 So. 2d 25 (1962)).

(253.) Kent, supra note 10.

(254.) 33 F. Supp. 2d 867 (C.D. Cal. 1999), rev’d, 255 E3d 1180 (9th Cir. 2001).

(255.) Id. at 870.

(256.) Id. at 873-76.

(257.) 948 F. Supp. 436 (E.D. Pa. 1996).

(258.) Id.

(259.) Goldstein, supra note 154, at 1310-13.

(260.) Ferguson v. Friendfinders, Inc., 115 Cal. Rptr. 2d 258 (Cal. App. 2002) (finding that California’s anti-spam statute violates the U.S. Constitution by restricting interstate commerce)

(261.) See Unsolicited Commercial Electronic Mail Act of 2001, H.R. 718, 107th Cong. (2001)

(262.) LAW OF THE INTERNET, supra note 12, [section] 8.03A[3].

(263.) RESTATEMENT (SECOND) OF TORTS [section] 559 (1977).

(264.) Gertz v. Robert Welch, Inc., 418 U.S. 323, 352 (1974) (defining “public figure”).

(265.) N.Y. Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964).

(266.) RESTATEMENT (SECOND) OF TORTS [section] 566 (1976).

(267.) Ben Ezra, Weinstein, & Co. v. Am. Online, Inc., 206 F.3d 980 (10th Cir. 2000)

(268.) 413 U.S. 15 (1973).

(269.) Id. at 19.

(270.) 74 F.3d 701 (6th Cir. 1996).

(271.) Id. at 711.

(272.) ABCs at the FTC, supra note 219

(273.) Pub. L. No. 101-437, [subsection] 102-103, 104 Stat. 996-97 (1990) (codified at 47 U.S.C. [section] 303a-b (1991)).

(274.) Id.

(275.) See In re Children’s Television Programming, 6 F.C.C.R. 2111, 2118 (June 14, 1991).

(276.) 47 C.F.R. [section] 73.3526(a)(iii) (1997).

(277.) See generally Children’s Advertising Review Unit, Self Regulatory Guidelines for Children’s Advertising, at (last visited Oct. 28, 2002). See also Wong et al., supra note 154, at 713.

(278.) Id.

(279.) Goldstein, supra note 154, at 1260.

(280.) Id. at 1260-61.

(281.) Id.

(282.) Electronic Retailing Association, U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace, Comment Before the FTC, FTC File No. P994312 (response to the FTC’s June 7, 1999, Federal Register notice requesting public comment on its public workshop entitled “U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace,” held on June 8-9, 1999), available at (last visited Oct. 24, 2002).

(283.) For additional cases, see Goldstein, supra note 154, at 1258-64.

(284.) Id. at 1264.

(285.) Rice v. Paladin Enters., Inc., 128 F.3d 233 (4th Cir. 1997) (stating that a publisher was sued by representatives of several murder victims for wrongful death after the publisher printed a book with instructions on how to commit murder)

(286.) Goldstein, supra note 163, at 891

(287.) In re J. Walter Thompson USA, Inc., 120 F.T.C. 829 (1995) (illustrating a Commission action against an advertising agency because the agency knew or should have known that the claim of a diet program, that a great number of its users would recommend the program to others, was false)

(288.) Kertz & Ohanian, supra note 48, at 624 (citing In re Bristol Myers Co., 46 F.T.C. 162, 176 (1949), aff’d 185 F.2d 58 (4th Cir. 1950)) (illustrating a situation in which an advertising agency was found not liable because it followed the directions of the client).

(289.) Id. at 624 (citing In re Am. Home Prods. Corp., 98 F.T.C. 136 (1981), aff’d and modified on other grounds, 695 F.2d 681 (3d Cir. 1982)) (finding an advertising agency liable because it knew or should have known of the deception).

(290.) Id. at 626 (citing Am. Home Prods. Corp., 98 F.T.C. 136), aff’d and modified on other grounds, 695 F.2d 681 (3d Cir. 1982)).

(291.) Id. at 627-28 (citing Standard Oil Co. v. FTC, 577 F2d 653, 660 (9th Cir. 1978)).

(292.) Id. at 627 (citing Standard Oil, 577 F.2d at 659).

(293.) In re J. Walter Thompson USA, Inc., 120 F.T.C. 829 (1995).

(294.) Id. at 842 (statement of Commissioner Mary L. Azcuenaga concurring in part and dissenting in part).

(295.) Kertz & Ohanian, supra note 48, at 625 (citing Porter & Dietsch, Inc. v. FTC, 605 F.2d 294 (7th Cir. 1979), cert. denied, 445 U.S. 950 (1990))

(296.) Owen, supra note 233, at 741-42.

(297.) Id. at 742 (referring to a speech by Deborah Owen delivered to the Direct Marketing Association in 1990 wherein factors for catalog companies’ avoidance of liability are set forth).

(298.) Id.

(299.) Id.

(300.) Id.

(301.) See supra text accompanying notes 276-97.

(302.) Id.

(303.) DOT COM DISCLOSURES, supra note 2, at “Overview.”

(304.) Communications Decency Act, 47 U.S.C [section] 230(e)(3) (2000).

(305.) Id. [section] 230.

(306.) Id. [section] 230(e)(3).

(307.) 17 U.S.C. [section] 512 (Supp. 2000).

(308.) Id. [section] 512(b)(1).

(309.) 15 U.S.C. [section] 6101-6108 (2000).

(310.) 16 C.F.R. pt. 310 (2002).

(311.) Owen, supra note 63, at 684.

(312.) Id.

(313.) Id.

(314.) Id.

(315.) Id. at 685 (citing Citicorp Credit Servs., Inc., FTC Docket No. C-3413, [1987-1993 Transfer Binder] Fed. Trade Reg. Rep. (CCH) [paragraph] 23,280, at 22,953 (Jan. 29, 1993)).

(316.) Owen, supra note 63, at 685.

(317.) Id.

(318.) 15 U.S.C. [section] 6102(a)(2) (2000).

(319.) See Owen, supra note 63, at 688-89.

(320.) DOT COM DISCLOSURES, supra note 2, at pt. IV(B).

(321.) Id.

(322.) See Wong et al., supra note 154, at 659-60 (discussing contributory and vicarious infringement)

(323.) See supra note 322.

(324.) See, e.g., Sega Enters. Ltd. v. Maphia, 948 F. Supp. 923, 933 (N.D. Cal. 1996) (holding a bulletin board operator liable for contributory infringement).

(325.) See, e.g., A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) (affirming the district court’s ruling that plaintiffs had demonstrated a likelihood of success on a claim for contributory copyright infringement and that Napster had the financial interest and degree of control necessary to justify an imposition of vicarious infringement).

(326.) 907 F. Supp. 1361 (N.D. Cal. 1995).

(327.) Id. at 1381-82.

(328.) Pub. L. No. 105-304, Title II, 112 Stat. 2877 (1998) (codified at 17 U.S.C. [section] 512).

(329.) See generally 17 U.S.C. [section] 512 (Supp. 2000).

(330.) Id. [section] 512(c).

(331.) Wong et al., supra note 154, at 668-74.

(332.) See, e.g., Marobie-FL, Inc. v. Nat’l Assoc. of Fire Equip. Distribs., 983 F. Supp. 1167 (N.D. Ill.1997) (denying summary judgment on the issue of contributory liability, and finding that the Web host was not vicariously liable). Id. 1178-80.

(333.) See 17 U.S.C. [section] 512 (Supp. 2000).

(334.) Id. [section] 512(c)(2).

(335.) See Shorofsky, supra note 64, at 113

(336.) MINN. STAT. ANN. [section] 609.05 (West 1987 & Supp. 2002).

(337.) IOWA CODE ANN. [section] 725.12 (West 2002).

(338.) KAN. STAT. ANN. [section] 21-3205 (1995 & Supp. 2001).

(339.) Goldstein, supra note 154, at 1203-04.

(340.) Id.

(341.) See Kertz & Ohanian, supra note 48, at 640.

(342.) 81 Cal. Rptr. 519 (Cal. Ct. App. 1969).

(343.) Id.

(344.) 680 F. Supp. 863 (S.D. Tex. 1988), rev’d, 880 F.2d 830 (5th Cir. 1989).

(345.) Id. at 1120.

(346.) 195 Cal. App. 3d 1119 (1987).

(347.) Id.

(348.) 212 Cal. App. 3d 468 (1989).

(349.) Id.

(350.) See, e.g., Lewis v. Time Inc., 83 F.R.D. 455, 463 (E.D. Cal. 1979), aff’d, 710 F.2d 549 (9th Cir. 1983).

(351.) Id.

(352.) 776 F. Supp. 135 (S.D.N.Y. 1991).

(353.) Id.

(354.) 56 F.3d 62 (4th Cir. 1995).

(355.) Id.

(356.) 47 U.S.C. [section] 230(c)(1) (2000).

(357.) Id. [section] 230(c)(2)

(358.) 47 U.S.C. [section] 230(f)(2) (2000).

(359.) Id. [section] 230(f)(3)

(360.) 206 F.3d 980 (10th Cir. 2000).

(361.) Id. at 985.

(362.) 129 F.3d 327 (4th Cir. 1997).

(363.) Id. at 335.

(364.) Id. at 333-34.

(365.) See, e.g., Cubby, Inc. v. Compuserve Inc., 776 F. Supp. 135, 139 (S.D.N.Y. 1991).

(366.) See generally 47 U.S.C. [section] 223 (2000).

(367.) 47 U.S.C. [sections] 230(c)(1) (2000).

(368.) See id.

(369.) See Kent, supra note 10.

(370.) Id.

(371.) See supra notes 309-12 and accompanying text.

(372.) Id.

(373.) See id.

Anne Keaty, J.D., Roger J. Johns, J.D., LL.M., and Lucy L. Henke, Ph.D. Anne Keaty is a Professor of Legal Studies, University of Louisiana at Lafayette. Roger J. Johns is a Lecturer in Marketing and Logistics, University of North Texas. Lucy L. Henke is an Associate Professor of Marketing, University of Louisiana at Lafayette.