I recently gave a client an updated set of guidelines for running car commercials on its television stations. The guidelines recited the usual litany of disclosures required by the Truth in Lending Act, the Consumer Leasing Act, Federal Trade Commission regulations and state law. (You know the drill: If you say nothing, you don’t have to disclose anything, but the minute you say anything, you must disclose everything.) My client half-heartedly thanked me for the guidelines like an eight year-old thanks an aunt for the school clothes she gives him as a birthday gift. Then he asked me a question that struck me as both obvious and difficult to answer: How long do the disclosures need to stay on the screen?
Federal law, I replied, requires that disclosures in advertisements be “clear and conspicuous,” but doesn’t mandate any particular manner of presentation of the disclosures. I gathered from my client’s silence that he wasn’t satisfied with my answer, so I offered to look into the issue further.
FTC commentary, I found, doesn’t offer much more guidance. Disclosures must be “reasonably understandable,” says the FTC. “Very fine print” and “very rapidly stated” information don’t pass muster. A consumer must be able to read or hear, and comprehend, the information required to be disclosed.
How long would it take me, I wondered, to read and understand the fine print in a television commercial for a car? If the commercial included lease terms, the relevant Consumer Leasing Act disclosures (total amount due before or at consummation, the number, amounts, and due dates or periods of scheduled payments under the lease and a toll-free phone number for consumers to call for more information) would probably be about 50 words long. According to a number of studies, people read from television and computer screens significantly slower than they read from paper, and reported screen reading rates have been as slow as 151 words per minute. Assuming my math is correct, it would take me 20 seconds to read the 50-word lease disclosure. Since the majority of television commercials are either 15 or 30 seconds in length, it occurred to me that I probably have never fully understood a single car-lease commercial in my life.
Depressed but not defeated, I researched state-law requirements for auto ads. The majority of states require that disclosures in television commercials be easily read and understood by the average television viewer. This surprised me -- I’ve watched TV in many states and have yet to see any car commercials with 20-second financing disclosures. What surprised me more, though, were the peculiar requirements of a handful of states. Massachusetts and Illinois clearly believe that their citizens are fast readers. Advertising rules in those states consider the presentation of disclosure text for three seconds to be clear and conspicuous (subject to certain font size and color requirements).
There are also states that regulate how fast disclosures can scroll on and off your television screen. Kentucky requires five seconds of visibility for every three lines of text (although the text can be moving the whole time it’s on screen). Oklahoma requires 10 seconds of visibility for every 20 scan lines. Each frame of video generally contains 480 scan lines, but don’t ask me how to translate that to lines of text. Meanwhile, New Mexico employs a level of critical review: “Each advertisement shall be evaluated for its overall impression. The public should not have to weigh each word, hunt for the hidden meaning of each statement or search for inconspicuous disclaimers.” That makes me want to run a car commercial in New Mexico just to see if they like my work.
My research led me to two questions. First, should game shows like Jeopardy! ban people from Massachusetts and Illinois from competing because of their extraordinary reading-comprehension speed? Second, how should advertisers handle the inherent contradiction of making 20 seconds worth of disclosures in 15- or 30-second commercials?
The answer to the second question lies in the true purpose of the clear and conspicuous/reasonably understandable standard used in federal and state advertising laws. The standard isn’t focused on enabling television viewers to truly understand what they are watching. Instead, it has been invoked as a means of prohibiting advertisers from holding back relevant information and requiring them to show all information with equal prominence.
A seminal 1996 settlement between five automobile manufacturers and the FTC is evidence of the focus on disclosing all information, and disclosing it all equally. The FTC had charged GM, Mitsubishi, Honda, Isuzu and Mazda with, among other things, failure to disclose clearly and conspicuously all of the requisite terms and costs in television commercials promoting vehicle lease and credit offers. In the commercials at issue, the manufacturers disclosed all of the relevant information, but didn’t do so with equal prominence. For example, a Honda commercial promoting a zero-down lease disclosed in “unreadable fine print” more than $600 in fees and taxes due at signing. A GM commercial promoted a lease requiring a $1,260 down-payment, but disclosed “in two blocks of light-colored fine print that appear for approximately five seconds, over gray, moving water” that the actual amount due at signing is $1,883 plus tax, license and title fees. An Isuzu commercial prominently offered a $1,999 down lease, while at the same time indicating in obscured cost disclosures that the total due at signing was at least $2,688. The Isuzu cost disclosures were obscured “by flashing distracting images along with the quickly scrolling disclosures and by completely blocking portions of the disclosures with a large hand following along with the text.”
In its press release concerning the settlements, the FTC focused on requirements of equal prominence and proximity as the means to prevent misleading statements in television commercials. The FTC required that commercials highlighting a down-payment (or the lack thereof) must give “an equally prominent statement of the total amount due at lease inception.” Commercials stating the amount of any payment must “disclose prominently the amount of any balloon payment in close proximity to the most prominent of the payment statements.”
Current FTC guidance shows that the real issue for commercials isn’t whether an average television watcher could read and understand the requisite disclosures in the few seconds they are onscreen. Instead, advertisers should first consider whether the advertisement includes all of the disclosures required by the Truth in Lending Act, the Consumer Leasing Act or other applicable law. For example, if a car commercial includes an offer of a $350-per-month lease, the Consumer Leasing Act requires that the commercial also disclose the total amount due at the commencement of the lease, the number, amounts and due dates of scheduled payments and whether a security deposit is required.
Second, advertisers should consider whether those disclosures are displayed equally prominently with, and in close proximity to, the statements in the commercial that triggered the disclosures. The auto manufacturers’ 1996 FTC settlement provides a good road map for complying with this second requirement. Take, for example, the Honda commercial cited by the FTC. One of the most prominent visuals in the ad was an odometer scrolling backwards to $0000, in reference to the zero down-payment offered. Instead of burying the required lease disclosures in a mass of fine print, Honda should have broken the disclosures into bite-sized chunks and plugged them into the appropriate parts of the commercial. The odometer visual should have been paired with a similarly sized (or, at least, an equally apparent) statement of the fees and costs due at closing.
Advertisers should also avoid using fonts, graphics and backdrops that may obscure disclosures. If an advertiser wouldn’t use a particular font, graphic or backdrop because it would obscure the key message of a commercial, then they shouldn’t use that font, graphic or backdrop for required disclosures. In other words, advertisers should consider disclosures as part of a commercial and should make them as accessible as the rest of the commercial.
Advertisers should follow a conscientious approach to car advertisements not only to comply with current laws and regulations, but also to avoid creating the appearance of a need for more regulation. That’s the issue facing the pharmaceutical industry. In August 2007, the Food and Drug Administration announced a study to determine whether the use of “competing, compelling visual information” about potential drug benefits interferes with television viewers’ comprehension of risk disclosures about drugs in television ads. The mortgage industry is already under fire for potentially deceptive ads. In September 2007, the FTC warned mortgage brokers, advertisers and media outlets that some home mortgage advertisements may violate federal law. The FTC estimates that during the last 10 years, its 21 actions brought against companies in the mortgage lending industry have resulted in more than $320 million being returned to consumers. Think of it this way: Complying with the current rules, no matter how clumsy they are, is more cost-effective than dealing with an FTC enforcement action or a new set of rules.