What is “Conspicuous?”: Guidance From the Federal Trade Commission
With respect to certain types of consumer contracts and various types of notices, California statutes and case law often impose the requirement of “conspicuousness.” As an example, if you have a provision in your website Terms of Service that requires mandatory arbitration, California courts require that the link to those terms and provisions be conspicuously located on the webpage. If the link and the arbitration are not conspicuous, then courts have held that the terms are not enforceable. With respect to these sorts of contract issues, this is a matter of contract formation. In general, contracts are enforceable only if the parties have agreed to the contract. If one party — the website user — is not aware of the contract, then the user cannot be said to have agreed to the contract. Thus, the courts impose the requirement of conspicuousness.
However, what is considered “conspicuous” can be confusing. With issues like this, it is useful to seek advice and counsel from an experienced San Diego corporate attorney. Among other sources, your trusted counsel will look for guidance from regulatory agencies like the Federal Trade Commission (“FTC”). The FTC is a federal agency tasked with enforcing federal consumer protection laws. Under many federal laws, disclosure of various information is required. Examples include disclosures required on packaging and labels. To comply, the disclosures must be conspicuous. The FTC has provided some guidance as to what constituted “conspicuous.” See here. For the FTC, conspicuous can be summarized in four words:
The first — prominence — can be thought of as font-size, bolding, and other methods of making sure the disclosure or the information “jumps out” to the intended recipient of the information. As the FTC Guidance says: “Consumers shouldn’t have to scan an ad with a magnifying glass to pick up on material details of the deal.” Part of the idea of prominence is contrast. A contract provision or a hyperlink that is colored off-white against a white background is not going to be considered “prominent.”
The second characteristic of conspicuousness — presentation — is about how the information is worded. Is the information easily understood or is it phrased in complex legal technical jargon? Is the information bullet-pointed or is the key information buried in a dense block of text? Is the font easy to read or is it intricately embellished that requires full attention to comprehend?
The next characteristic — placement — is about where the information is located and what is near the key information. As the FTC Guidance stated, “[g]eography matters.” Key information should on the front page, not the last. For web pages, key information should be near the top; users should not have to scroll down several pages to get to the important terms. Studies show that most consumers do not usually go to the end and are not likely to scroll to the bottom of every page. The information should be where consumers are likely to look.
The final characteristic — proximity — is about how difficult it is for the consumer to find the follow-up information or the details. If there is a hyperlink on your webpage, to be conspicuous, the hyperlink should be right next to the information. If there is a footnote or an asterisk, the consumer should not have to look far to find the text of the footnote.
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For more information, call corporate attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters and he proudly provides legal services to business owners in San Diego and the surrounding communities. Call Mr. Leonard at (858) 483-9200 or contact him via email. Like us on Facebook.