Does a customer's click on "I agree" protect me from an FTC deception claim?

Not by itself. The Commission acknowledges that courts have frequently enforced clickwrap agreements as valid contracts. But it cautions that a EULA disclosure alone may not be sufficient to correct a misleading impression created elsewhere. For that reason it approaches EULA-only disclosure case by case, weighing what information is material to consumers and the overall net impression of the transaction.

Is it a defense that the customer checked a box saying they read the terms?

Not when the advertising leaves a different net impression than the terms do. In the Roca Labs matter, customers checked a box stating they had read and agreed to the terms, but they were not required to read the Terms and Conditions before purchasing. The court held that the disclaimer in the terms failed to dispel the net impression created by the $480 advertising.

If my clickwrap contract is valid, can the FTC still say a term in it is unfair?

Yes, because contract enforceability and FTC unfairness are separate questions. In the Roca Labs matter, the court noted that the enforceability of the contract was not at issue, and that the issue was whether the defendants' practices related to the gag clause were unfair under Section 5.

Does the FTC require separate-screen consent for every online transaction?

No, the Commission has said it has not set that standard. It stated that the proposed Sears consent order does not create a new standard of disclosure for Internet transactions in general. In the Zango matter it said much the same of its proposed consent order, which does not create an overarching standard for all software downloads.

Is a one-sentence clickwrap with a hyperlink enough to authorize large charges?

Not in the Krotzer matter. The court there found that nothing in the website, and certainly nothing in the so-called "one-sentence-clickwrap-contract" where consumers clicked a hyperlink to the sign-up page, gave consumers a reason to anticipate a multi-year $20,000 contract that could not in essence be cancelled.

LabelingLegal test

Clickwrap

Berkeley Robinson, Managing Attorney at Robinson Law Firm PLLC

Author

Berkeley Robinson, Esq.

Managing Attorney, Robinson Law Firm PLLC

Berkeley has served as the go-to counsel for many scaling businesses in a transactional and litigation management capacity. Before becoming an attorney, Berkeley grew sales teams, ran online marketing campaigns, and did everything else an entrepreneur does—and still does today as the founder of two online businesses.

Definition

One comment submitted to the FTC described clickwraps as online agreements where consumers manifest acceptance by clicking on an "I accept" button at the end of the terms of service. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)

Key legal rules

Clickwrap sits where contract law meets consumer-protection law, so a click is tested against both. These are the main rules:

Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility, in language from Specht v. Netscape Communications Corp. as quoted in a privacy-law treatise. Source: Corporate Counsels Guide to Privacy Law § 9:10 (quoting Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002))
EULA-only disclosure is assessed case by case, weighing what information is material to consumers and the overall, net impression upon the consumer regarding the transaction, and a EULA disclosure alone may not be sufficient to correct a misleading impression created elsewhere. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)
Disclaimers or qualifications "are not adequate to avoid liability unless they are sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression." Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.)
A seller cannot avoid liability by advertising a price without any caveats and then burying the conditions of the discount in a separate disclaimer. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018)
To establish liability under §§ 5(a) and 12 of the FTC Act for deceptive practices and false advertising, the FTC must prove that there was a representation, that the representation was likely to mislead customers acting reasonably under the circumstances, and that the representation was material. Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.)
Under Section 5 of the FTC Act, an act or practice is unfair if it "causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not out weighed by countervailing benefits to consumers or to competition." Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018)

For the sake of space, this page lists only the primary rules related to this term that most businesses should follow. More may apply to your situation, and your unique facts affect how they apply.

Send us a message through our online form to talk through yours.

Send a message

Response within 24 hours

Why these rules exist

A click shows that a consumer assented to something. It does not show that the consumer saw what the terms said. In the Roca Labs matter, customers had to check a box stating that they had read and agreed to the terms, yet the court found it unlikely that consumers would have noticed or clicked on the link to the Terms and Conditions. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) That gap is why deception is judged on the whole presentation rather than on the contract alone: a court looks to "the advertisement’s overall, net impression rather than the literal truth or falsity of the words of the advertisement." Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.) If a click could cure every misleading claim, a seller could put an attractive price or cancellation right in the headline and the opposite in the terms, and consumers who relied on the headline would have no protection.

The Commission has also described the limits of this concern. In the Sears matter it said its proposed consent order does not create a new standard of disclosure for Internet transactions in general. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009) The separate-screen notice and express-consent provisions relate to the particular conduct and software at issue, and they are designed to ensure that the respondents do not engage in similarly deceptive or unfair practices. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)

Enforcement examples

In re Sears Holdings Management Corporation (software and end user license agreement)

Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)

A commenter objected that the proposed order, which would require Sears to disclose certain information prior to, and on a separate screen from, any end user license agreement or similar document, set a new disclosure standard for all online transactions. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009) The commenter added that courts have routinely enforced clickwrap agreements and that the facts detailed in the Commission's complaint show a valid clickwrap agreement between Sears and consumers. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)

Outcome. The Commission answered that the proposed consent order does not create a new standard of disclosure for Internet transactions in general, while acknowledging that the courts have frequently enforced clickwrap agreements as valid contracts. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009) It said it would take up EULA-only disclosure case by case, and it then issued the Decision and Order in final form without modification. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)

FTC v. Roca Labs (weight-loss products sold with a checkbox-accepted gag clause)

Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018)

Roca Labs advertised the price as $480, and the advertisements did not say that the price was discounted or subsidized in exchange for the customer's agreement to refrain from publishing negative comments. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) The link to the Terms and Conditions sat at the bottom of the RocaLabs.com page, just above the submit button. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) Customers did have to check a box saying they had read and agreed to the terms, yet they were not required to read the Terms and Conditions before purchasing. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018)

Outcome. The court held that the disclaimer in the Terms and Conditions failed to dispel the net impression that the price was $480 with no strings attached, and it granted the FTC summary judgment on the deceptive discount claim. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) On the gag-clause count, the defendants pointed to cases about the enforceability of online clickwrap contracts. The court observed that enforceability was not at issue and that the question was whether the practices were unfair under Section 5. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) On that count, too, the court found the FTC entitled to summary judgment. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018)

FTC v. Krotzer (online alcoholism program with accelerated charges)

Federal Trade Commission v. Krotzer, Order

The Alcoholism Cure Foundation website repeated, in bold, that consumers could cancel anytime they were not being cured. Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.) The only mention of a 76-month commitment was buried in fine print on the fifty-fifth page of the printed website. Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.) Krotzer nonetheless argued that his "One-Sentence-Clickwrap-Contract" was sufficient notice to establish the contingent payment contract and its acceleration. Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.)

Outcome. The court held that the inconspicuous Terms and Conditions did nothing to affect, disclaim or qualify the repeated, highlighted and bold-faced claims of low cost and easy cancellation, and it found that no issue of fact exists regarding the cost and cancellation count. Source: Federal Trade Commission v. Krotzer, Order (M.D. Fla.) The court also concluded that ACF and Krotzer engaged in an unfair practice in violation of § 5(a) of the FTC Act by charging consumer credit accounts without authorization. Source: Federal Trade Commission v. Krotzer, Order

Exposure

A click-accepted contract does not shield a seller from FTC Act liability, and the remedies are the ordinary ones for deception and unfairness. In the Roca Labs matter, the court found a permanent injunction against all defendants warranted. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) The court also found the FTC entitled to monetary relief under Section 13(b) for consumer redress, including disgorgement. Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018) Disgorgement is measured by unjust gains, and the "amount of net revenue (gross receipts minus refunds)" is the correct measure under Section 13(b). Source: Roca Labs: Order Granting Plaintiff's Amended Motion for Summary Judgment as to Liability and Denying Defendants' [Amended] Motion for Partial Summary Judgment as to Count Three of the Amended Complaint (Sept. 14, 2018)

Liability can also reach the individual behind the business. In the Krotzer matter, the court concluded that Krotzer may be held personally liable for his own violations of the FTC Act as well as for ACF's violations. Source: Federal Trade Commission v. Krotzer, Order

The Commission has also required separate-screen notice and express consent in consent orders. The Sears order's provisions on that point are very similar to provisions in recent consent orders the Commission approved. Source: Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)

FAQs

1.Letter to Commenter Sidley Austin, LLP. Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)
2.Corporate Counsels Guide to Privacy Law. Corporate Counsels Guide to Privacy Law § 9:10 (quoting Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002))
3.Letter to Commenter Sidley Austin, LLP. Letter to Commenter Sidley Austin, LLP, FTC Matter No. 0823099 (Aug. 31, 2009)See also Zango 180solutions Letter to Commenter DMA. Letter to Commenter DMA, Zango, Inc., FTC Matter No. 0523130 (Mar. 7, 2007)