When legalese is not enough

The Washington State Attorney General’s office has entered into a consent decree with Intelius to settle allegations of deceptive marketing tactics relating to post transaction marketing. The consent decree involves a $1.3 million payment by Intelius, and Intelius’ submitting to a series of permanent injunctions restricting its advertising practices.

“Intelius chose cash over candor” Attorney General Rob McKenna said. You can see the AG’s press release, with links to the complaint and consent decree here .

The complaint makes for interesting reading. Looking at it from a high level, the AG’s office had two primary concerns.

First, according to the complaint, Intelius deliberately designed its web pages so as to get customers to sign up for additional services, even though this may not have been the customer’s intention.

Second, Intelius shared its customers’ personal information with third party service providers, despite its privacy policy saying it wouldn’t do so without the customer’s consent.

In both respects, Intelius disclosed what was actually happening and set the customer up to provide its nominal assent, but it did so in ‘terms and conditions’ language that was considerably less prominent and easy to read than its ‘click to proceed’ language. In other words, although Intelius provided literal disclosure to the customer of what was happening, the AG’s office contended that most customers would focus on the proceed buttons, and not on the legalese. The AG’s office concluded that the relevant web pages were deceptive when taken as a whole.

This provides some useful pointers for businesses that use consumers’ personal information, or which sell products or services to consumers online, especially when put together with comments by FTC staff at recent privacy and advertising law conferences.

I remember the senior partner at the venerable London practice where I began my legal career sharing his golden rule for determining materiality: ‘The less management wants to disclose it, the more material it is.’ It has to be said that many lawyers have nonetheless developed an art form around making the most material disclosures seem bland.

What the FTC and many state AG’s seem to be indicating is that mere disclosure in terms and conditions may not be enough to satisfy them that consumers aren’t being deceived. If a consumer’s being asked to do something with a recognizable downside (e.g., sharing sensitive information with a third party, or surrendering a legal right), then it looks like best practice will be to create web pages that are designed to ensure the consumer provides their informed consent. I think this requires appropriately placed, simple, plain English statements, in an easily readable font size, even if these duplicate disclosures already made in generic terms and conditions. I think this requires exercising some judgment as to what will be material to a consumer; depending on the business model, the disclosures may not always be palatable to management.

According to the Washington AG’s complaint, Intelius’ revenues from its post transaction marketing were significant. At some stage, I’d assume that Intelius’ management had to balance changing its practices against losing a portion of those revenues. Once the Washington AG became involved, Intelius had little choice but to take the revenue hit. Intelius had filed for an IPO – that kind of change in revenue growth can’t have looked good.

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