Electronic Retailing Association Conference & Expo
October 14-17, 2001
Las Vegas, Nevada
USA

Introduction

This report is presented by the Global Advertising Lawyers Alliance ("GALA") to the Electronic Retailing Association ("ERA") in connection with its 2001 Conference held in Las Vegas, Nevada on October 14 - 17, 2001.

The purpose of the report is to present information from GALA members concerning laws and regulations applicable to direct response marketing in their home country which would be relevant to marketers in other countries. By "direct response marketing" we mean all forms of marketing involving a communication to a consumer that is designed to elicit a response from the consumer directly to the seller in the form of an order for that seller's products or services. Common forms of direct selling in the United States, e.g., include infomercials (generally thirty minutes in length), short form television commercials (generally two minutes in length), radio commercials, internet marketing, telemarketing, credit card syndication, direct mail, and product package inserts.

By necessity, this report can only touch on the broadest issues and concerns to the industry in any country. Clearly, this report cannot and is not intended to substitute for legal advice from an expert in the applicable laws and regulations. We believe that its value to marketers will derive from highlighting the issues that marketers should be aware of when considering whether to conduct a particular type of direct selling campaign in a given country. Nor is this report a substitution for local legal advice on specific marketing activities. Before engaging in any marketing campaign, a marketer should consult with legal counsel for advice on their proposed campaign.

Countries covered in this report include:

Australia Belgium Canada France

Germany Ireland Italy Singapore

Spain Sweden Switzerland United Kingdom

 

INTERNATIONAL LEGAL ISSUES IN DIRECT RESPONSE MARKETING: THE UNITED STATES Douglas J. Wood, Esq. Linda A. Goldstein, Esq. Reed Smith Hall Dickler 599 Lexington Avenue New York, NY 10022 Tel: 1.212.549.0377 Fax: 1.212.521.5450 Email: dwood@reedsmith.com

1. Lobbying 1.1 How can an association like ERA successfully lobby in your country to maintain a friendly regulatory environment? Lobbying to directly effect legislation in the United States is generally done by professional organizations that specialize in lobbying. In addition to retaining such experts, trade associations can mount consumer education programs, membership codes, self-regulatory mechanisms to address consumer or competitor complaints, and some disciplinary process for members who repeatedly violate the association's code of ethical business practices. 2. Laws and Regulations 2.1 Are any forms of direct response marketing prohibited in your country? In general, most forms of direct response marketing are permitted, subject to applicable laws and regulations. However, the sending of unsolicited commercial e-mail ("spam") is prohibited in nineteen (19) states. In addition, the sending of unsolicited commercial advertisements via facsimile is prohibited under federal law and certain state statutes. 2.2 What are the major restrictions in your country on direct response marketing, which sellers should be aware of? The basic legal standard applicable to all advertising in the United States is that the advertising must be truthful, not deceptive and all claims - both express and implied - must be substantiated. The Federal Trade Commission (the "FTC") is the pivotal federal agency charged with the regulation of advertising. Pursuant to Section 5 of the Federal Trade Commission Act, the FTC has broad authority to prohibit "unfair or deceptive acts or practices". Section 12 of the FTC Act gives the FTC jurisdiction over false advertising of food, drugs, devices and cosmetics and empowers it to declare advertising in those categories to be unfair or deceptive. In addition, there are a host of federal and state laws that are applicable to various forms of direct selling. The laws which are most relevant to direct sellers are listed below. Federal Laws The Mail or Telephone Order Merchandise Rule: The FTC's Mail or Telephone Order Merchandise Rule (sometimes referred to as the "30 day rule") requires merchants to have a reasonable basis for stating that they can ship an order by a specified date. If, after taking the consumer's order, the merchant learns that he cannot ship by the stated shipping date, or, if no date is given, by 30 days after the date the order was taken, the merchant must obtain the consumer's consent to the delayed shipment, and if consent is not given, provide a prompt refund for the unshipped merchandise. The Telemarketing Sales Rule: The Federal Telemarketing Sales Rule imposes disclosure requirements, recordkeeping requirements, and other requirements on outbound telemarketing programs and on some inbound telemarketing programs. (Note: an outbound telemarketing program is a program in which the seller, or seller's telemarketing agent, calls the consumer to make a solicitation for a product or service. In an inbound program, the consumer places a call in response to advertising generated by the seller.) The Gramm-Leach-Bliley Act: The Gramm-Leach-Bliley Act, which became effective in 1999, seeks to protect the financial privacy of consumers. The Act primarily restricts the ability of "financial institutions" - a term that is broadly defined under the Act - to disclose to non-affiliated third parties nonpublic personal information about individuals to whom they provide financial products for personal, family or household purposes. The Fair Credit Reporting Act ("FCRA"): The FCRA regulates the compilation and dissemination of consumer reports by consumer reporting agencies. The FCRA places certain obligations on consumer reporting agencies which disseminate consumer reports and on users of those reports. Under the FCRA, a consumer reporting agency may only disseminate a consumer report for certain "permissible purposes" as defined in the statute. The FTC has stated that use of consumer reports for "target marketing" is not a permissable purpose and accordingly, is prohibited under the FCRA. The Deceptive Mail Prevention and Enforcement Act: This federal law, which became effective on April 13, 2000, imposes various restrictions on sweepstakes mailings, skill contest mailings, mailings containing facsimile checks and mailings made to look like government documents. It also requires mailers of sweepstakes and skill contests to establish a name removal notification system whereby individuals can request removal from mailing lists used for sweepstakes and contests. The Act establishes strong financial penalties on violators and provides the United States Postal Service with additional authority to investigate and stop deceptive mailings. The Unordered Merchandise Rule: Under this United States Postal Service regulation, the mailing of merchandise to a consumer without his or her express request or consent, (other than free samples clearly marked as such, and merchandise mailed by a charitable organization soliciting contributions) is considered an unfair method of competition and an unfair trade practice in violation of Section 5 of the FTC Act. All such merchandise may be treated as a free gift by the recipient. State Laws Direct sellers are also subject to various states laws, including: Various state consumer protection laws aimed at deceptive advertising practices. These state laws are sometimes referred to as "little FTC Acts." State telemarketing and home solicitation statutes which regulate telemarketing programs. Some of these laws may impose registration and other requirements far more onerous than the requirements of the federal Telemarketing Sales Rule. Approximately eighteen (18) states have enacted "Do Not Call" statutes, In general, these statutes provide for the creation of a statewide registry containing the telephone numbers of consumers in the state who have indicated that they do not want to be called by telemarketers. Direct sellers who are conducting an outbound telemarketing campaign which includes a state that has a Do Not Call statute should remove from their call list the name and telephone number of any consumer who is listed on such state's Do Not Call registry. Approximately nineteen (19) states have enacted legislation prohibiting the sending of unsolicited commercial e-mail (often referred to as "spam"). Marketers can adopt certain procedures to reduce the risk of a violation of these state spam laws including (a) sending commercial e-mail only to consumers who have "opted in" to receive commercial e-mail from the seller concerned, (b) using a subject line on the e-mail which clearly indicates the commercial nature of the communication, , (c) including a notice in each new commercial e-mail sent to consumers on the seller's e-mail list advising the recipient how to "opt-out" of future e-mail solicitations; and (d) disclosing the sender's name, valid e-mail address or valid toll-free telephone number, and the date and time the message was sent. Direct sellers conducting sweepstakes and premium promotions may be subject to various State Prize and Gift Notification statutes. In addition, recently enacted statutes in Colorado and Texas severely impact on the ability of direct sellers to conduct sweepstakes promotions in those states. 2.3 Are there any laws or regulations pending in your country that could have an impact on direct response marketing? The State of Minnesota has introduced legislation which would require telemarketers soliciting an order in any outbound telemarketing call or inbound upsell call to obtain authorization from the consumer before charging the consumer's credit card by asking the consumer to disclose the last four digits of his/her credit card and expressly stating in the script that the credit card number will be used to authorize the account charge in place of signature. A number of bills have been introduced into both houses of Congress addressing privacy on the Internet. These include bills aimed at the general practice of collecting personal information online (e.g., The Spyware Control and Privacy Protection Act of 2001, the Online Privacy Protection Act of 2001, and the Consumer Internet Privacy Enhancement Act, to name a few), as well as bills aimed at specific privacy concerns both online and off line, such as protection of financial information and social security numbers (e.g., the Social Security Online Privacy Protection Act, the Identity Theft Act of 2001, and the Social Security Number Protection Act of 2001). Legislators have proposed a federal law prohibiting the sending of unsolicited e-mail. A number of "anti-spam" bills have been introduced and are pending in both houses of Congress. 2.4 Identify any governmental or regulatory agencies charged with regulating the direct selling industry in your country and the business sector(s) they regulate. The Federal Trade Commission ("FTC"): The FTC is the pivotal federal government agency charged with regulating advertising. Pursuant to Section 5 of the FTC Act, the FTC is given broad investigatory and enforcement powers which are not limited to a specific industry. Other federal agencies also have jurisdiction over advertising in their particular industry. However, most agencies will defer to the FTC and the principles it has articulated in the area of advertising. The Food and Drug Administration ("FDA"): The FDA has jurisdiction over the advertising and marketing of food, drugs, cosmetics and medical devices. It shares this jurisdiction with the FTC. Pursuant to the FTC-FDA Liaison Agreement, the two agencies have agreed to allocate responsibilities between them, with each agency having primary jurisdiction over areas in which it has developed expertise. The FTC has primary responsibility to regulate advertising of non-prescription drugs and devices ("OTC drugs"), cosmetics and foods, while the FDA exercises authority over the advertising of prescription drugs and devices and the labeling of OTC drugs and devices, cosmetics and foods. Labeling includes the label on the product, all packaging and point of sale materials. The Bureau of Alcohol, Tobacco and Firearms ("BATF"): The BATF has jurisdiction over the advertising of alcoholic beverages , including beer, wine and distilled beverages. The Consumer Product Safety Commission: The Consumer Product Safety Commission has jurisdiction over products that might cause harm to consumers, particularly products for use by children. This can be particularly problematic in connection with premium offers. The United States Postal Service ("USPS"): The USPS has been given enforcement powers against schemes or devices to obtain money or property through the mail by means of false representations, and against the use of the mails to conduct lotteries. States' Attorneys General: State Attorneys General regulate at the state level, primarily under the supervision of the States' Attorneys General Departments of Consumer Protection. Such departmentsenforce a variety of consumer protection and other statutes which may be applicable to the direct selling industry. City Departments of Consumer Affairs: A number of the larger cities in the United States, e.g., New York, also regulate activities that may effect those living in those cities. While such Departments are involved in only a few cases a year, they can have a significant impact when they investigate marketing activities. 2.5 What are the current hot issues among regulators and enforcement agencies in your country that could have an impact on direct response marketers? Privacy continues to be a hot issue with the regulators. The new FTC Chairman, Timothy Muris, has announced that the FTC will be increasing the Commission's resources devoted to the enforcement of existing privacy laws by fifty percent (50%). Most importantly, however, Muris also announced that the FTC would not be seeking additional legislation from Congress, contrary to the FTC policy under its prior Chairman. Issues that are on the FTC's privacy agenda include creating a national Do No Call List, enforcing the Telemarketing Sales Rule, restricting the use of pre-acquired account information and increasing enforcement and outreach on children's privacy. Regulators continue to express concern about the practice of transferring consumer credit card information from one marketer to another unrelated marketer in connection with a sale. The practice is common in the telemarketing area, particularly in revenue enhancement programs (see Section 4.4 below). While regulators do not appear to be taking the position that the transfer of this information is per se illegal, the fundamental issue revolves around the type of consent that must be obtained from the consumer prior to transferring such consumer's credit card information. In the past year, we have seen an increase in regulatory enforcement actions directed at companies involved in advance consent marketing. This is a method of direct marketing whereby the consumer is offered an initial free trial of a membership program or subscription with the understanding that the membership/subscription will automatically convert to a paid membership/subscription unless the consumer cancels by the end of the trial period. We expect to see continued regulatory enforcement action in this area. 2.6 Explain briefly what types of penalties may be imposed on marketers by these agencies for violating the laws. The FTC's investigative and enforcement powers include the power to commence an investigation and issue a complaint which could lead to a cease and desist order. For violations of a final order, the Commission can institute suit seeking civil penalties of up to $11,000 per day per violation. The Commission can also bring actions to recover civil penalties for violation of its Trade Regulation Rules (such as the Mail or Telephone Order Rule, the Telemarketing Sales Rule, and the Negative Option Rule). In reality, most cases against companies are settled through the entry of a Consent Order which, depending on the alleged violations, may include injunctive provisions, consumer redress and a monetary penalty. Such penalties can amount to hundreds of thousands, and sometimes millions, of dollars. Violations of the United States Postal Service Unordered Merchandise Rule constitute an unfair method of competition and an unfair trade practice in violation of Section 5 of the FTC Act, and can be prosecuted by the FTC. The United States Postal Service's powers include the issuance of administrative orders (1) to "cease and desist" from continuing the fraudulent scheme, and (2) directing postmasters to refuse to honor postal money order payable to cited advertisers. The Postal Service may also bring cases to the U.S. Attorney's office for criminal prosecution. State Attorneys General have the authority under state law to impose fines and penalties as well. In this connection, however, the resolution of controversies is most likely via settlement. Such settlements almost always include some sort of fine or consumer restitution, at times in the many millions of dollars. Similarly, some large municipalities, e.g., New York City, have their own consumer protection divisions. They also investigate consumer complaints regarding marketing practices and impose fines and penalties, although they are not generally large. 2.7 Can a company directly sue a competitor for false or deceptive advertising and, if so, what are the penalties if such a suit is successful? In the United State, a company can sue a competitor for false and deceptive advertising under Section 43(a) of the Lanham Act. In appropriate cases, the statute provides for actual and punitive damages. As a practical matter, most cases settle. States also have statutes that can be used by competitors against one another. More often, however, these statutes are used only in conjunction with Section 43(a) of the Lanham Act and ancillary claims. There are alternatives to a Sec. 43(a) action: challenges to the three major television networks if network television advertising is challenged, and the National Advertising Division of the Council of Better Business Bureaus (the NAD). The NAD and each of the networks have detailed challenge procedures that can be far less expensive and complicated than 43(a) actions. 2.8 Does your country recognize the concept of "class actions" whereby a law firm can represent all consumers within a particular "class" and sue a marketer for false or deceptive advertising? If so, what are the penalties if such a suit is successful? Most states have consumer protection acts that permit private actions by consumers who have suffered monetary damages as a proximate result of a deceptive act or practice, including a deceptive advertising or marketing practice. Such claims may potentially be brought as a class action on behalf of a class of similarly situated plaintiffs; however, the plaintiffs must overcome many hurdles in order to demonstrate that in a class action is appropriate. In addition to ordinary class action procedures, California statutorily authorizes individual citizens to bring action for deceptive trade practices on behalf of other Californians, even if the individual plaintiff has not suffered individual injury. In addition, the usual class action requirements do not apply. 3. Consumer Privacy Issues 3.1 What is the current law in your country relating to privacy of personal information? Although privacy is a hotly debated issue in the United States, there are currently very few laws regulating the use of personal information. The dissemination of consumer financial information is regulated by the Gramm-Leach-Bliley Act. The dissemination of consumer reports is regulated by the Fair Credit Reporting Act. The Children's Online Privacy Protection Act ("COPPA") regulates the collection of personal information from children under the age of 13 online. The FTC and the States' Attorneys General view the consumer privacy as a major concern and will rely on general deception laws to combat alleged abuses of consumer privacy. 3.2 Does the law distinguish between information collected on the Internet and information collected through other marketing methods, e.g., by telephone or by mail? Except for the Children's Online Privacy Protection Act of 1998 (discussed in 3.1 above), the law generally does not distinguish between information collected on the Internet and information collected through other marketing methods. Even so, because of concerns about the relative ease of collecting and disseminating personal information online without a consumer's knowledge, regulators and privacy advocates have expressed heightened concern about the issue of online privacy. Industry continues to lobby for self-regulation as a preferred alternative to legislation. With a number of privacy bills introduced in Congress, it is still unclear how the issue will be resolved. 3.3 Does the law distinguish between different types of personal information, e.g., name and address vs. financial information such as consumer credit card numbers? If so, how are they distinguished? What restrictions exist on the transfer of credit card or bank account information for marketing purposes? While privacy in general is a concern of regulators and privacy advocates, the unauthorized use of consumer credit card information has been one of the central complaints alleged in a number of recent enforcement actions against telemarketers involved in revenue enhancement programs. Regulators are requiring that a consumer give affirmative consent to the transfer of their credit card information and affirmative consent to the charge by the company acquiring that credit card information. While these regulatory guidelines do not have the force of law, they serve as notice of the type of practices that the regulators are willing to prosecute under general deception and under applicable laws. 3.4 Does your country require "opt in" or "opt out" as the method for the consumer to grant consent to disclosure of their personal information? The FTC's policy is that consumers be provided with a choice as to whether their information may be collected and/or used for certain purposes, although there is no law that requires such a procedure. Nonetheless, most marketers do allow a consumer to "opt-out". Either way, as long as the choice is clearly disclosed and easily effectuated, a company has the option of using either an "opt in" or "opt out" method. There are exceptions, however. Both the Children's Online Privacy Protection Act and the Gramm-Leach-Bliley Act, the first privacy legislation enacted after the "opt in" versus "opt out" debate began, require the use of the "opt out" method, offering consumers the right to prohibit the marketer from collecting or disseminating certain information about such consumer. 4. Specific Marketing Methods The following marketing methods are currently under scrutiny in some countries, e.g., the United States. The discussion below indicates the extent to which such marketing methods are scrutinized in the reporting country, and if so, what legal restrictions apply: 4.1 Free Trial Offers and Free to Pay Conversion Offers. A marketing plan whereby the consumer accepts an offer to try a product or service free of charge for a specified time period, e.g., 30 days, prior to purchasing. At the end of the trial period, the consumer is automatically charged or billed for the product or service (usually on a credit card), unless he or she takes affirmative action to cancel. The major issue from a regulatory standpoint is that there must be adequate disclosures about the terms of the offer, and specifically, that the free trial will automatically convert to a paid subscription unless cancelled. The seller must disclose to the consumer the length of the trial period, that the consumer must cancel by a specified time to avoid being charged, the amount that the consumer will be charged and the frequency of charges (e.g., monthly or annually) if he or she does not cancel, and any automatic renewal feature. The seller should also provide a toll free telephone number or address that the consumer can use to cancel. All such disclosures should be made before the consumer is asked to accept the offer. In this kind of offer, as in all offers, the consumer must affirmatively consent to the offer before being enrolled. 4.2 Continuity Plan Offers. A marketing plan whereby the consumer agrees to receive periodic shipments of products or services unless and until the consumer affirmatively declines a periodic shipment or cancels his participation in the plan. The consumer is billed for each shipment of product or service. The FTC regulates continuity plan offers through its Trade Regulation Rule governing the Use of Negative Options Plans by Sellers in Commerce (the "Negative Option Rule") and through Section 5 of the FTC Act. Again, the issue is disclosure. In general, the consumer must be informed about the nature of the product and the cost, (including any shipping and handling charges), the manner in which the consumer will be charged, how often announcements and shipments will be sent, the number of products in the series, any obligation to purchase a minimum number of products, the seller's return policy, and the consumer's right to cancel membership. If the program falls within the definition of a "negative option plan" as set forth in the Negative Option Rule, then the seller must comply with the specific disclosure requirements set forth in the Rule, including disclosing to the consumer the aspect of the plan under which the subscriber must notify the seller, in the manner provided by the seller, if he does not wish to purchase the selection. 4.3 Automatic Renewal Offers. Generally a feature in a subscription or club membership offer whereby the subscription or membership is automatically renewed at the end of the initial term and each subsequent term unless the consumer affirmatively cancels. Regulators consider an automatic renewal feature to be a material part of a subscription offer which must be adequately disclosed to the consumer at the time the consumer is asked to accept the offer. Thus, before being asked to accept any subscription offer that contains an automatic renewal feature, the consumer should be informed that the subscription will be automatically renewed at the end of the current term and each subsequent term, and that they will be billed or their credit card charged at the then current rate unless they cancel. While not legally required, it is recommended that marketers send a reminder notice, sometimes referred to as a "link letter", to each subscriber a few months before the end of the term, reminding the subscriber that their subscription will automatically renew at a stated price unless they cancel, and providing a free method for the consumer to cancel and avoid being charged. 4.4 Revenue Enhancement Programs. Also known as an "up-sell" offer, this marketing method presents to a consumer multiple product offers from different marketers on one telemarketing call. Typically, the consumer agrees to the first offer and provides their credit card number. The telemarketer then "up-sell" the consumer with additional offers. If the consumer accepts the additional offers, the consumer's credit card number is provided to the other marketers. A substantial increase in the number of consumer complaints both at the federal and state level has led to an increase in investigations and enforcement activity in the area of revenue enhancement programs, especially related to membership club marketing. Regulators have cited several reasons for consumer confusion about this form of direct selling. First, they are concerned that there is inadequate disclosure and consent by the consumer to have the consumer's credit card information transferred from the original marketer to the upsell marketer. Second, regulators claims that consumers do not fully understand that the offers are from different and unrelated marketers. Third, because the consumer does not provide their credit information to the upsell marketer, many consumers do not believe that they have authorized the sale. Last, because many upsell offers are offered with a free trial, many consumers do not understand that their trial membership will convert to a paid subscription unless they cancel. 5. Specific Product Categories 5.1 What special laws or regulations apply in your country to the direct marketing of products or services in the following categories: 5.1.1 Dietary supplements Dietary supplements are regulated by the Dietary Supplement Health and Education Act of 1994 ("DSHEA"). Dietary supplements are products which are intended for ingestion and contain any of the following ingredients: vitamins, minerals, proteins, herbs, botanical and other plant-derived metabolites, constituents, and extracts of these supplements. Under DSHEA, a marketer is permitted to make structure and function claims about the product provided that it notifies the FDA and includes a disclaimer that the claim has not been evaluated by the FDA and that the product is not intended to diagnose, mitigate, treat, cure, or prevent disease. As usual, all claims made about the product must be truthful, not deceptive, and substantiated. The FTC and the FDA share jurisdiction over enforcing this statute. 5.1.2 Diet/Weight Loss products The marketing and advertising of diet and weight loss products are subject to regulation by the FTC. In 1997, the FTC launched "Operation Waistline", an ongoing consumer education and law enforcement campaign against misleading and deceptive claims made by the diet and weight loss industry. Under this campaign, the FTC has investigated and taken action against hundreds of companies and individuals for allegedly making unsubstantiated claims about their diet and weight loss products. 5.1.3 Drugs Pursuant to the FTC-FDA Liaison Agreement, the two agencies have agreed that the FDA is responsible for regulating the advertising and labeling of prescription drugs and devices and the labeling of OTC drugs. The FTC is responsible for regulating the advertising of OTC drugs. Under regulations pertaining to prescription drug advertising, any advertisement for a prescription drug must include information relating to side effects, contraindications, and effectiveness. 5.1.4 Electro-muscle stimulators An electro-muscle stimulator is a device which uses electrical currents for a variety of functions, including pain relief and wrinkle reduction. Electro-muscle stimulators typically fall under FDA regulation as "medical devices," which are instruments or machines intended for use in the cure, mitigation, treatment or prevention of disease in man or animals. Like other medical devices, electro-muscle stimulators must be approved by the FDA before they can be marketed to the general public. 5.1.5 Health and fitness products Advertising and marketing of health and fitness products, such as exercise regimens and equipment, are regulated by the FTC. In 1997, the FTC announced "Project Workout," a consumer education and law enforcement campaign aimed at curtailing misleading and deceptive advertising practices by members of the fitness industry. In recent years, the FTC has taken action against marketers of abdominal exercisers and treadmill machines for making allegedly unsubstantiated weight-loss success, rate-of-weight-loss, spot-reduction and calorie-burning claims. 5.1.6 Beauty products Cosmetics marketed in the United States, whether manufactured in the U.S. or imported, must comply with labeling and other regulations published by the FDA under the authority of the Food, Drug, and Cosmetics Act, as well as the Fair Packaging and Labeling Act. Cosmetics companies are not required to conduct pre-market safety testing on their products, but if the safety of a product has not been substantiated, then the FDA can require the company to include a safety disclaimer on the product label. The FDA's principle thrust in the area of cosmetics is to scrutinize any therapeutic or curative claims. In certain cases, beauty products can become subject to the FDA's drug regulations if they are marketed as having the ability to treat or prevent disease. (Examples include anti-dandruff shampoo, toothpastes containing fluoride, and moisturizers) 5.1.7 Travel offers Like all advertising, travel offers must comply with the basic FTC advertising rules requiring that the advertising be truthful, not misleading and that all claims are substantiated. In addition, there are currently eight (8) states which have "seller of travel" or travel statutes which apply generally to companies that provide or sell air, sea, or land transportation, vacation tours and packages or other travel-related services. 5.1.8 Magazine subscriptions Magazine publishers who market magazine subscriptions in the United States should make certain that their offers comply with regulatory standards applied by the FTC and various state Attorneys General to continuity programs, free trial offers and automatic renewal programs. All material terms and conditions of the offer must be disclosed in the initial solicitation, including, if true, the length of any trial period; that the trial subscription automatically converts to a paid prescription at a particular price at the end of the trial period, unless cancelled; that the subscription automatically renews at the end of each term; a toll free telephone number or address that the consumer can use to cancel the subscription; and the publisher's cancellation/refund policy. Magazines which are also sold via telemarketing are subject to the federal Telemarketing Sales Rule and state telemarketing statutes. 6. Extended Liability 6.1 If direct response advertising is found to be false or misleading, what parties, in addition to the marketer making the offer, are liable? In actions for false or misleading direct response advertising, regulatory agencies have held not only advertisers liable, but in certain situations they have extended liability to include secondary players including advertising agencies, catalog companies, infomercial producers, and online retailers for creating, producing, and disseminating the advertising claims. The FTC in particular has extended liability beyond the advertisers. For example, the FTC's complaint in the Enforma dietary supplement case named the company, the individuals who owned the company, the infomercial producer, and the infomercial co-hosts. In July of 2001, the FTC took action against ValueVision International, a home shopping network, for advertising dietary supplements with allegedly unsubstantiated weight loss claims. 7. Advice to Foreign Marketers 7.1 What is the most important advice you would give to a marketer that wishes to market a product through direct selling in your country? A. Be diligent in reviewing all claims to be certain they are neither false nor misleading. B. Be certain that the fulfillment process is as fool proof as possible. C. Immediately respond to all consumer complaints, no matter how trivial they may seem to be. D. Adopt a "no questions asked" return policy. E. If contacted by a regulatory agency, do not attempt to handle the response without legal counsel.