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NOVEMBER 19, 1999

BOOK EXCERPT

Liability without Borders: International Advertising on the Web
Excerpts from Clicking Through: A Survival Guide for Bringing Your Company Online


Liability without Borders: International Advertising on the Web^Excerpts from Clicking Through: A Survival Guide for Bringing Your Company Online^^Excerpts from Clicking Through: A Survival Guide for Bringing Your Company Online^Liability without Borders: International Advertising on the Web
Clicking Through


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Many people joke that there ought to be a law against running so many commercials during their favorite TV show; the fact is that there are many laws, regulations, and self-regulatory policies governing the content, presentation, and target for advertising.

In the U.S., most advertising is governed by the Federal Trade Commission, state legislation, attorneys general, and the courts. Advertiser-supported self-control groups include the National Advertising Division of the Council of Better Business Bureaus or the NAD, whose procedures can be found online at www.bbb.org/advertising/nadproc.html. Most advertisers and media outlets are aware of these bodies and their standards, and probably have internal guidelines to comply with the relevant standards bodies.

Unfortunately for companies that have until now been U.S. only, and have crafted their advertising accordingly, the Internet once again poses new and perhaps serious challenges. It opens the possibility that authorities all over the world will review and prosecute based upon advertising placed within a Web site. Remember that prohibitions on false or misleading advertising and other advertising-related laws, like many other consumer-protection efforts, are usually local, since the crime is deemed to occur where the victims are. As a result, prosecutors and legislators from Munich to Minsk could decide that your advertisement is illegal under local laws, and seek to penalize you for it.

What kind of advertising can run afoul of foreign law? Here are a few general examples:

-Comparative advertising of your products versus other named products is illegal in a number of countries, and sharply limited in others;

-For heavily regulated products and services from insurance to pharmaceuticals, you can anticipate disclosure requirements, limitations on claims, prohibitions on the sale of certain products, and similar issues;

-Laws, especially those related to intellectual property, and local artists' guild regulations can affect which photos, videos, and sounds are permissible in advertising, and whether compensation is due the artist, publisher, or talent for the use.

Obviously, if you put a banner ad or a reproduction of a print or broadcast advertisement on your Web site, advertising regulation will come into play. But advertising is in the eye of the beholder. Even if you have nothing you'd recognize as an ad on your site, the mere fact that you have created the site for your company might make it a very large ad in the opinion of a local law-enforcement or artists'-guild official. Either way, researching and navigating foreign jurisdictions' advertising laws can be costly and time-consuming.

Is it likely you'll unintentionally violate foreign law? If your business is entirely local, and you will never solicit or accept either suppliers or customers or establish offices outside the U.S, the power of foreign regulators is probably limited. Of course, criminal activity could subject you to an extradition effort, but few advertisements rise to that level. On the other hand, if you are international, or foresee establishing strong international ties in the future, you must pay attention to issues such as foreign advertising law. Your Web site could cause legal complications for your company, one of your affiliates, or customers.

What can you do to prevent international advertising-related problems? To some extent, the best approach is a conservative one, both in the elements you include in your Web site and the claims that you make within it. You may leave in a controversial element because you believe your target audience will respond positively, but make an informed decision.

Once you have identified your target audience, explicitly state it in your site's disclaimer language and other places likely to be read by users (and regulators). Many commercial sites created by U.S. companies state, "Information contained in this site concerning any products and services is meant for U.S. residents only." It's wise to add: "This site and its contents and any transactions taking place herein shall be governed by the substantive laws of the State of __________, United States of America, excluding principles of conflicts of laws, and the exclusive forum for any disputes arising out of this site shall be the state and federal courts located in the City of _________, State of _______." You may be familiar with provisions like these in contracts. The goal is to make your disclaimer as enforceable as a contract. There's no guarantee that a court or regulator would accept these provisions as binding, but having them on your site helps address foreign regulations.

What if you don't want your site to be considered advertising, as, for example, if you are building an industry resource or news site? Beyond the legal issues, there are many reasons to avoid classification as an advertisement, such as the increased cost for talent releases or copyright licenses when materials are used for commercial purposes.

To avoid your site's being characterized as advertising, spell out your intentions as clearly as possible, and hope regulators will agree. While a site's disclaimer can state that "this site is for informational purposes only," this will generally not be enough to convince an attorney general, prosecutor, or guild representative that you're a reporter rather than an advertiser. Instead, examine the impression that the site as a whole provides to an outside observer:

-Are many manufacturers' products/services described or just yours (or your sponsors')? How many of your articles are advertorials? Are they clearly labeled as such, and distinguished from the other content?

-Are the authors and editors of your site's content applying newspaper-like standards of source integrity, fact-checking, and proper attribution to their works?

-Does your site have a clear purpose other than to say: "buy this?" It's often helpful to get outsiders to give their impressions. Intellectual property attorneys, newspaper journalists or television producers can be good choices. Whatever the conclusion, though, always keep in mind that a foreign regulator may deem your site advertising and therefore subject to applicable consumer protection and intellectual property laws. You should have at least the bare bones of a contingency plan in the event this happens.



Jonathan Ezor is a corporate and new-media attorney with the Long Island (N.Y.) firm of Farrell Fritz. He has written on legal and computer topics for such publications as Business Week Online, @NY electronic weekly, Advertising Age, and Infoworld. For more information on Mr. Ezor, go to www.clickingthrough.com. From Clicking Through: A Survival Guide for Bringing Your Company Online. ©2000 by Jonathan Ezor.

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