Are Your Web Site's Privacy and Terms of Use Policies Up to Snuff?

In 2009, the online policies of Sears, Overstock.com and Blockbuster each came up short.

Alarmingly, there was nothing atypical about the terms, conditions or disclaimers these Web sites used, or the manner in which the policies were presented to and accepted by online users. The lessons learned from these companies' troubles are that material information should be disclosed more prominently and online visitors should affirmatively accept the terms.

If your company's online policies have not been re-examined in the last year, now is the time to do so.

Prominently Disclose Important Information
Affecting Consumer Decisions

As Sears discovered, any information that is likely to affect a consumer's decision-making should be prominently disclosed and presented separately from other boilerplate policy information. Such relevant information should also be disclosed early in the consumer's decision-making process.

The FTC launched an enforcement action against the operator of the Sears.com and Kmart.com Web sites, despite the fact that all necessary disclosures were made in the online policies and the consumer was required to affirmatively indicate that he or she had read the statement and terms. The Web sites' policies were presented in a scroll box, in 10-line increments and the material disclosures were not provided until approximately 75 lines into the policy.

The FTC found that material disclosures were neither conspicuously nor timely presented to the consumer. In settling the enforcement action, the FTC required that all material information be disclosed clearly and prominently, and be displayed prior to, and separately from, the privacy policy, Terms and Conditions statement or other similar agreement.

Companies should assess which terms are most important to their Web site visitor's decision-making and provide disclosure of these terms prominently and early. Lengthy policies may also not be well suited for scroll box viewing, so consider providing a print option.

Seek Affirmative Acceptance of Policies and Terms

In Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362 (E.D.N.Y. 2009), the court refused to enforce Overstock's re-stocking fee, arbitration, and forum selection provisions because its Web site failed to “prompt [the consumer] to review the Terms and Conditions” and because the link “was not prominently displayed so as to provide reasonable notice of the Terms and Conditions.”

The Web site employed a “browse-wrap” agreement, which provides that the simple use of the site is presumed to be an assent to the terms posted in the site's policies.

The plaintiff argued that she had never been directed nor instructed to review the policy before making her purchase. She also said the site directed her at each step of the purchasing process to click on a bar to continue to the next step, and thus it was never necessary for her to scroll to the bottom of any page, where the link to Overstock's policies was located.

Again, the prominence of the disclosures was a key issue for the court. Additionally, Overstock.com suggests that browse-wrap agreements may not withstand judicial scrutiny.

If your site employs a browse-wrap agreement, consider switching to a “click-wrap” agreement, which requires the user to affirmatively accept the terms of service.

If you continue using a browse-wrap agreement, you should: 1) prominently advise consumers upon entering the site that use of the site constitutes acceptance of the Web site's policies; 2) ensure that material information is conspicuously disclosed; and 3) make links to policies visible to the user without having to scroll to the bottom of a page.

Don't Reach Too Far

In Harris v. Blockbuster, Inc., 622 F. Supp. 2d 396 (N. D. Tex. 2009), Blockbuster sought to invoke the arbitration provision of its Web site policy. The policy provided, in part, that “Blockbuster may at any time and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice. Such modifications will be effective immediately upon posting.”

Blockbuster argued that because it was not trying to apply a “modified” arbitration provision, the fact that it reserved for itself the right to change the terms had no bearing on the enforceability of the arbitration provision. The court, however, found that nothing in the agreement prevented Blockbuster from modifying any term and retroactively applying the modified term. By the court's reasoning, the agreement was illusory not because of an attempted retroactive application of a modified term, but simply because Blockbuster had reserved the right to change the contract terms at any time.

If your policy includes a unilateral right to modify, consider adding language to make clear that unilateral modifications apply only prospectively, after affected consumers receive adequate notice of the change and, ideally, after the Web site user has affirmatively accepted the revised policy.

In 2009, the online policies of Sears, Overstock.com and Blockbuster each came up short.

Alarmingly, there was nothing atypical about the terms, conditions or disclaimers these Web sites used, or the manner in which the policies were presented to and accepted by online users. The lessons learned from these companies' troubles are that material information should be disclosed more prominently and online visitors should affirmatively accept the terms.

If your company's online policies have not been re-examined in the last year, now is the time to do so.

Prominently Disclose Important Information
Affecting Consumer Decisions

As Sears discovered, any information that is likely to affect a consumer's decision-making should be prominently disclosed and presented separately from other boilerplate policy information. Such relevant information should also be disclosed early in the consumer's decision-making process.

The FTC launched an enforcement action against the operator of the Sears.com and Kmart.com Web sites, despite the fact that all necessary disclosures were made in the online policies and the consumer was required to affirmatively indicate that he or she had read the statement and terms. The Web sites' policies were presented in a scroll box, in 10-line increments and the material disclosures were not provided until approximately 75 lines into the policy.

The FTC found that material disclosures were neither conspicuously nor timely presented to the consumer. In settling the enforcement action, the FTC required that all material information be disclosed clearly and prominently, and be displayed prior to, and separately from, the privacy policy, Terms and Conditions statement or other similar agreement.

Companies should assess which terms are most important to their Web site visitor's decision-making and provide disclosure of these terms prominently and early. Lengthy policies may also not be well suited for scroll box viewing, so consider providing a print option.

Seek Affirmative Acceptance of Policies and Terms

In Hines v. Overstock.com, Inc. , 668 F. Supp. 2d 362 (E.D.N.Y. 2009), the court refused to enforce Overstock's re-stocking fee, arbitration, and forum selection provisions because its Web site failed to “prompt [the consumer] to review the Terms and Conditions” and because the link “was not prominently displayed so as to provide reasonable notice of the Terms and Conditions.”

The Web site employed a “browse-wrap” agreement, which provides that the simple use of the site is presumed to be an assent to the terms posted in the site's policies.

The plaintiff argued that she had never been directed nor instructed to review the policy before making her purchase. She also said the site directed her at each step of the purchasing process to click on a bar to continue to the next step, and thus it was never necessary for her to scroll to the bottom of any page, where the link to Overstock's policies was located.

Again, the prominence of the disclosures was a key issue for the court. Additionally, Overstock.com suggests that browse-wrap agreements may not withstand judicial scrutiny.

If your site employs a browse-wrap agreement, consider switching to a “click-wrap” agreement, which requires the user to affirmatively accept the terms of service.

If you continue using a browse-wrap agreement, you should: 1) prominently advise consumers upon entering the site that use of the site constitutes acceptance of the Web site's policies; 2) ensure that material information is conspicuously disclosed; and 3) make links to policies visible to the user without having to scroll to the bottom of a page.

Don't Reach Too Far

In Harris v. Blockbuster, Inc. , 622 F. Supp. 2d 396 (N. D. Tex. 2009), Blockbuster sought to invoke the arbitration provision of its Web site policy. The policy provided, in part, that “Blockbuster may at any time and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice. Such modifications will be effective immediately upon posting.”

Blockbuster argued that because it was not trying to apply a “modified” arbitration provision, the fact that it reserved for itself the right to change the terms had no bearing on the enforceability of the arbitration provision. The court, however, found that nothing in the agreement prevented Blockbuster from modifying any term and retroactively applying the modified term. By the court's reasoning, the agreement was illusory not because of an attempted retroactive application of a modified term, but simply because Blockbuster had reserved the right to change the contract terms at any time.

If your policy includes a unilateral right to modify, consider adding language to make clear that unilateral modifications apply only prospectively, after affected consumers receive adequate notice of the change and, ideally, after the Web site user has affirmatively accepted the revised policy.