Disclosure Effectiveness: Practical Tips from Researchers and the FTC

Published On September 21, 2016 | By Kelsey Harclerode | FTC & State AG
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Prominence, presentation, placement, and proximity. The FTC encourages companies engaged in advertising or information collection to adopt these “4 Ps” to ensure compliance with their “clear and conspicuous” standard. While FTC enforcement actions and guides are available to anyone who would like to better understand this standard, a select few have actually studied how effective the 4 Ps are. To better assess this issue, the FTC hosted a public workshop, “Putting Disclosures to the Test,” to discuss these independent studies.

All of the presented research is available on the FTC’s event website. In the meantime, here is a quick rundown of some of the most helpful take-aways:

  1. Adults are much more receptive to text disclosures (single modality) than text and sound disclosures (dual modality), especially in the context of advergames, because the auditory disclosures often compete with the sounds of the game. Based on these results, developers of children’s games should avoid competing modality to increase parents’ understanding of the game’s persuasive intent.
  2. In regards to consumer recall, it is significantly less effective to show privacy policy notices during the installation of an app rather than during in-app use. While privacy policies should be readily available for users at the time of installation, this research is consistent with the FTC’s support of non-repetitive just-in-time disclosures for the collection of sensitive information.
  3. Because consumers often experience “notification fatigue” and pay less attention to each subsequent permission prompt, future models should (1) seek to minimize the number of prompts sent and (2) prioritize sending prompts when user information will be collected in unexpected ways (e.g. when a background app collects location data). In fact, the researchers on the “Future of Disclosures” panel emphasized the benefit of a more contextualized approach to disclosures, such as the implementation of systems that gradually acquire personal privacy preferences in order to most effectively gauge when the individual user would find the data collection to be unexpected.
  4. Privacy policies that include complicated and vague terms prevent consumers from understanding how their information is being treated. Terms that all companies should avoid include: “mostly,” “from time to time,” and “possibly.”
  5. While the majority of consumers remain loyal to a company after a breach, the top three recommendations for breached companies from consumers are: (1) take measures to prevent future breaches, (2) notify consumers immediately, and (3) offer free credit monitoring services. All three of these actions ranked higher than compensating for financial loss, apologizing, and donating money to a cybersecurity organization.

Ultimately, staying up to date with disclosure research is becoming as important as constantly reviewing the FTC’s own guidance. One researcher even commented that merely following FTC guidance does not ensure that your company’s disclosures are working. This perspective is consistent with FTC Chairwoman Edith Ramirez’s opening comments that emphasized how this research in addition to the FTC’s actions and publications are the best resources for companies that want to stay on the right side of the law. We will provide an update if the FTC releases a report that includes the suggestions from this workshop.

 

About The Author

Kelsey Harclerode’s practice focuses on representing clients in complex litigation matters in federal and state court and counseling clients on privacy, security, and consumer protection matters. She helps companies from a wide range of industries, including the software, telecommunications, and social media industries.

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