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FTC's Jurisdiction over Internet - News Brief.
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NOTE: Here is where you can find advertising law information based on news briefs that appeared in past issues of Advertising Compliance Service, "Your Single Essential Advertising Law Resource," during the month of May 1999.



On May 14, 1999, FTC opened its workshop on our consumer protection rules and guides. The workshop is designed to seal the deal on FTC's near total control of all Internet advertising regulation worldwide. In her remarks about the "workshop," Jodie Bernstein, Director of the Bureau of Consumer Protection, said FTC's goal "is to discuss how [FTC's rules] apply to newer forms of electronic media, with particular emphasis on the Internet, today's newest, and most dynamic, marketplace." She added that,

"Whether it's computers or handmade baskets from Africa, you can find it and buy it online."

More to the point, FTC believes it has jurisdiction in either case. And this workshop--whose outcome is a virtual certainty--will help complete their jurisdictional takeover in this area.

Internet Ads Are Actually Tiny Percentage
of Advertising Universe

Interestingly, Bernstein admitted that online advertising accounts for only $2 billion as of 1998. (Her source: Jupiter Communications). Bernstein conceded that "this constitutes a relatively small percentage of national advertising expenditures." In fact, it's somewhat less than 2% of national advertising expenditures. Has anyone thought to ask what percentage of FTC expenditures is devoted to Internet advertising compliance? Advertising Compliance Service has asked several FTC officials--none seem to know the answer. It certainly appears to be well in excess of 2% of FTC's budget. Instead, they state the apparently official FTC position, as did Bernstein, that "there is every indication that this trend [of increased Internet advertising] will continue to skyrocket." Thus if FTC now spends around 2% of its consumer protection budget on Internet advertising compliance, one could say that their budget has skyrocketed to such a lofty height. But what if FTC spends more than around 2%--we'll have to use superlatives beyond the "skyrocket" variety.

FTC Builds Lavish State-of-the-Art Internet Lab

FTC is also fond of the word "burgeoning" in reference to the Internet advertising area. Bernstein announced that the Bureau of Consumer Protection "now has an Internet Advertising group within our Division of Advertising Practices. It is a one year project that is staffed by experienced FTC attorneys and computer specialists who are helping us build a state-of-the-art Internet lab." Certainly, this state-of-the-art Internet lab must have been funded within the "burgeoning" 2% portion of its budget devoted to the Internet.

Systematic Governmental Web Site Monitoring

FTC's state-of-the-art Internet lab will "provide hardware and software to enhance [this federal regulator's] ability to monitor web advertising and marketing practices in a systematic way," Bernstein warned.

Bernstein said this workshop is "part of our overall mission to apply existing FTC law to the electronic marketplace." She added that FTC's rules and guides cover some 40 subjects ranging from environmental marketing claims to textile labeling.

Bernstein noted that it's prepared to show participants "some wonderful mock ads to illustrate" the agency's regulatory points.

(Remarks by Jodie Bernstein, Workshop on Application of Rules and Guides to Electronic Commerce, May 14, 1999.)


In another effort to regulate children's online privacy, FTC reached a settlement with Liberty Financial Companies, Inc., the operator of the Young Investor website. The Young Investor website is directed to children and teens, and focuses on issues relating to money and investing, according to FTC. FTC charged that the site falsely represented that personal information collected from children in a survey would be maintained anonymously, and that participants would be sent an e-mail newsletter as well as prizes. In fact, the personal information about the child and the family's finances was maintained in an identifiable manner, the Commission claimed.

The consent agreement bars such alleged misrepresentations in the future and would require Liberty Financial to post a privacy notice on its children's sites and obtain verifiable parental consent before collecting personal identifying information from children. The website's address is

FTC Chairman Robert Pitofsky warned that,

"We will continue to monitor how websites collect information from children and are committed to pursuing law enforcement actions in appropriate cases."

Among other requirements, the proposed order would require Liberty Financial to obtain "verifiable parental consent" before collecting and using personal identifying information from children under 13. These requirements are in line with FTC's proposed implementing regulations for the recently enacted Children's Online Privacy Protection Act of 1998. On April 20, 1999, the Commission proposed for public comment rules implementing the statute. (The proposed rules may be found at

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

(Liberty Financial Companies, Inc., FTC File No. 982 3522, May 6, 1999.)

INTERNET MATERIALS: Materials relating to these FTC matters are available on the Internet at FTC's World Wide Web site at:



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