Summary of the Joint FCC/FTC Policy Statement for the Advertising of Dial-Around and Other Long-Distance Services to Consumers

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SUMMARY OF THE JOINT FCC/FTC POLICY STATEMENT
FOR THE ADVERTISING OF DIAL-AROUND
AND OTHER LONG-DISTANCE SERVICES TO CONSUMERS

In recent years there has been an explosion in competition and innovation in the telecommunications industry. Long-distance customers have reaped substantial benefits in the form of greater choice in deciding which carrier to use and a greater diversity in the prices charged for those calls.

Numerous carriers, both large and small, promote their services through national television, print, and direct mail advertising campaigns. Because no one plan is right for everyone, advertising plays a critical role in informing consumers about the myriad choices in long-distance calling and, in the case of dial-around services, advertising is generally the only source of information consumers typically have before incurring charges. With accurate information, consumers benefit from being able to choose the particular carrier that meets their long-distance calling needs at the most economical price. However, if consumers are deceived by the advertising claims, they cannot make informed purchasing decisions and ultimately the growth of competition in the long-distance market will be stifled.

The proliferation of advertisements as well as an increase in the number of complaints regarding how these services are promoted, have raised questions about how the principles of truthful advertising apply in this dynamic marketplace.

Section 201(b) of the Communications Act requires that practices in connection with communications service shall be just and reasonable, and any practice that is unjust or unreasonable is unlawful. The FCC has found that unfair and deceptive marketing practices by common carriers constitute unjust and unreasonable practices.

This Policy Statement, based on the principles of truth in advertising developed by the FTC under the FTC Act, provides specific guidance for long distance advertising. Its essential elements are listed below.

1. Once an advertisement makes a claim, the advertiser is responsible for the truthfulness of the representation and for substantiating the representation, regardless of whether the advertiser intended to convey those messages to consumers.

2. In situations where an advertisement makes claims that are not directly false but might be misleading in the absence of qualifying or limiting information, advertisers are responsible both for making any necessary disclosures and for ensuring that they are clear and conspicuous.

3. Any significant conditions or limitations on the availability of the advertised rates should be clearly and conspicuously disclosed. Examples of such restrictions would include limitations on the time of day or day of the week that the rate applies or the fact that the rate is good only during a limited promotional or sale period.

4. The advertiser should clearly and conspicuously disclose whether the advertised service includes in-state calls, and the fact that such calls are charged at a higher rate, if such is the case. Many long-distance services and plans are limited to state-to-state calls. The disclosure of this information is particularly important because in-state long-distance rates are often substantially more expensive than state-to-state rates, a fact that may be surprising and significant to reasonable consumers.

5. Advertisers should also exercise care to adequately explain phrases such as "basic rates" in their ads. A telecommunications professional may understand the term "basic rate" to refer to a specific class of tariffed service, which may be billed at the most expensive rates. However, the typical consumer would likely interpret the phrase differently. When making claims using such terms as "basic rates" or "regular rates," advertisers should be mindful that those terms will be evaluated from the point of view of the reasonable consumer, and may be deceptive.

6. An advertiser must have a reasonable basis for any representations comparing the advertiser’s price to the prices of its competitors. By representing a competitor’s rates, an advertiser is making an implied claim that these rates are reasonably current.

7. The fact that information about significant limitations or restrictions on advertised prices may be available by calling a toll-free number or a clicking on a Web site is generally insufficient to cure an otherwise deceptive price claim in advertising. Advertisers are encouraged to use customer service numbers and Internet sites to offer consumers more information, but these sources cannot cure misleading information in the ad itself.

8. When the disclosure of qualifying information is necessary to prevent an ad from being deceptive, that information should be presented clearly and conspicuously so that it is actually noticed and understood by consumers. Disclosures should be effectively communicated to consumers. A fine-print disclosure at the bottom of a print ad, a disclaimer buried in a body of text unrelated to the claim being qualified, a brief video superscript in a television ad, or a disclaimer that is easily missed on an Internet Web site is not likely to be effective. To ensure that disclosures are effective, advertisers should use clear and unambiguous language, avoid small type, place any qualifying information close to the claim being qualified, and avoid making inconsistent statements or using distracting elements that could undercut or contradict the disclosure. Factors used in determining whether a disclosure is clear and conspicuous are:

Prominence Disclosures that are large in size, are emphasized through a sharply contrasting color, and, in the case of television advertisements, remain visible and/or audible for a sufficiently long duration are likely to be more effective than those lacking such prominence. The FTC’s experience consistently demonstrates that fine-print footnotes and brief video superscripts are often overlooked. The disclosure should also be prominent enough so that typical consumers will actually read and understand it in the context of an actual ad.

Proximity and Placement The effectiveness of disclosures is ordinarily enhanced by their proximity to the representation they qualify. Placement of qualifying information away from the triggering representation -- for example, in footnotes, in margins, or on a separate page of a multi-page promotion -- reduces the effectiveness of the disclosure. The use of an asterisk will generally be considered insufficient to draw a consumer’s attention to a disclosure placed elsewhere in an ad.

Absence of Distracting Elements Even if a disclosure is large in size and long in duration, other elements of an advertisement may distract consumers so that they may fail to notice the disclosure. Advertisers should take care not to undercut the effectiveness of disclosures by placing them in competition with other arresting elements of the ad.

Factors Relating Specifically to Television Ads Other considerations specific to television ads include volume, cadence, and placement of any audio disclosures. Disclosures generally are more effective when they are made in the same mode (visual or oral) in which the claim necessitating the disclosure is presented. Research suggests that disclosures that are made simultaneously in both visual and audio modes generally are more effectively communicated than disclosures made in either mode alone., In television ads, a disclosure that includes both a sufficiently large superscript and a voice-over statement is likely to be more effective than a superscript alone.