Complaint. Answer. Docket and public comments.
Status: Consent order. $65,000 penalty. (Consolidated with complaints from two other passengers)
Summary: price advertising violations including mischaracterizing surcharges as “tax”
Misrepresentation of Fuel Surcharges in Airline Price Advertising with Xiaoxiao Wu
Air travel tickets often include surprisingly large amounts described as “tax.” In one round trip New York-Paris ticket we quoted in January 2012, the fare was listed as $230 while “tax” was listed as $598.14 — fully 72% of the listed total. If government taxes were actually as large as Air France claims, many passengers might want to complain to responsible politicians and regulators. And passengers might have a different view of cramped seating, unpalatable food, or other service shortfalls on a $230 ticket versus a $828.14 ticket. But in fact, specifically contrary to Air France’s characterization of $598.14 as “tax,” the majority of the “tax” was not charged by any government, airport, or similar authority, and rather was retained by Air France to defray its ordinary operating expenses.
Our investigation uncovers a variety of examples in which airlines have mischaracterized various surcharges as “tax” and otherwise failed to satisfy applicable price advertising regulation. We present proof in both screenshots and recorded telephone calls, preserving clear records of carriers’ misrepresentations. Details:
Misrepresentation of Fuel Surcharges in Airline Price Advertising
American Airlines – price advertising violations (February 2013)
Complaint. Answer. Edelman Reply. American Surreply. Edelman supplemental filing. American response and supplemental response. Docket and public comments.
Status: Consent order. $60,000 penalty.
Summary: price advertising violations including mischaracterizing surcharges as “tax”
Cathay Pacific – price advertising violations
Complaint. Answer and Oneworld answers to questions. Docket and public comments.
Status: Consent order.
Summary: mischaracterizing surcharges as “tax”
British Airways – price advertising violations (2013)
Complaint. Answer. Edelman Reply. British Airways Surreply. Docket and public comments.
Status: Consent order.
Summary: price advertising violations including a “fuel surcharge” in excess of cost of fuel
Online Discount Vouchers – Letter-Writing Tool with Paul Kominers and Xiaoxiao Wu
Following up on my recent article about consumer protection problems in discount voucher sales, I’ve posted a letter-writing tool to help consumers resolve their voucher problems. From expiration to cashback to day-of-week, time-of-day, and unexpected terms added after purchase, there are quite a few ways consumers can end up dissatisfied with the discount vouchers they buy. Many voucher services offer refunds only if consumers complain vigorously. Our tool helps consumers write concise but persuasive letters, including drawing on applicable state law where appropriate.
Give it a try:
Consumer Protection in Online Discount Voucher Sales with Paul Kominers
We evaluate five areas where online discount voucher services — Groupon and similar sites — risk falling afoul of applicable consumer protection law. We present applicable laws from selected states and evaluate compliance by voucher services and their affiliated merchants. We examine voucher services’ attempts to limit their liability, and we explain why consumers and regulators should find current practices insufficient.
Details, including specific legal requirements, vendors’ practices, and assessing responsibility:
Adverse Selection in Online ‘Trust’ Certifications and Search Results
Edelman, Benjamin. “Adverse Selection in Online ‘Trust’ Certifications and Search Results.” Electronic Commerce Research and Applications 10, no. 1 (January-February 2011): 17-25.
Widely used online “trust” authorities issue certifications without substantial verification of recipients’ actual trustworthiness. This lax approach gives rise to adverse selection: the sites that seek and obtain trust certifications are actually less trustworthy than others. Using an original dataset on web site safety, I demonstrate that sites certified by the best-known authority, TRUSTe, are more than twice as likely to be untrustworthy as uncertified sites. This difference remains statistically and economically significant when restricted to “complex” commercial sites. Meanwhile, search engines create an implied endorsement in their selection of ads for display, but I show that search engine advertisements tend to be less safe than the corresponding organic listings.
Knowing Certain Trademark Ads Were Confusing, Google Sold Them Anyway — for $100+ Million
Disclosure: I serve as a consultant to various companies that compete with Google. But I write on my own — not at the suggestion or request of any client, without approval or payment from any client.
When a user enters a search term that matches a company’s trademark, Google often shows results for the company’s competitors. To take a specific example: Searches for language software seller "Rosetta Stone" often yield links to competing sites — sometimes, sites that sell counterfeit software. Rosetta Stone think that’s rotten, and, as I’ve previously written, I agree: It’s a pure power-play, effectively compelling advertisers to pay Google if they want to reach users already trying to reach their sites; otherwise, Google will link to competitors instead. Furthermore, Google is reaping where others have sown: After an advertiser builds a brand (often by advertising in other media), Google lets competitors skim off that traffic — reducing the advertiser’s incentive to invest in the first place. So Google’s approach to trademarks definitely harms advertisers and trademark-holders. But it’s also confusing to consumers. How do we know? Because Google’s own documents admit as much.
Today Public Citizen posted an unredacted version of Rosetta Stone’s appellate brief in its ongoing litigation with Google. Google had sought to keep confidential the documents that ground district court and appellate adjudication of the dispute, but now some of the documents are available — giving an inside look at Google’s policies and objectives for trademark-triggered ads. Some highlights:
- Through early 2004, Google let trademark holders request that ads be disabled if they used a trademark in keyword or ad text. But in early 2004, Google determined that it could achieve a "significant potential revenue impact" from selling trademarks as keywords. (ref)
- In connection with Google’s 2004 policy change letting advertisers buy trademarks as keywords, Google conducted experiments to assess user confusion from trademarks appearing in search advertisements. Google concluded that showing a trademark anywhere in the text of an advertisement resulted in a "high" degree of consumer confusion. Google’s study concluded: "Overall very high rate of trademark confusion (30-40% on average per user) … 94% of users were confused at least once during the study." (ref)
- Notwithstanding Google’s 2004 study, Google in 2009 changed its trademark policy to permit the user of trademarks in advertisement text. Google estimated that this policy change would result in at least $100 million of additional annual revenue, and potentially more than a billion dollars of additional annual revenue. Google implemented this change without any further studies or experiments as to consumer confusion. (ref)
- Google possesses more than 100,000 pages of complaints from trademark holders, including at least 9,862 complaints from at least 5,024 trademark owners from 2004 to 2009. (ref)
Kudos to Public Citizen for obtaining these documents. That said, I believe Google should never have sought to limit distribution of these documents in the first place. In other litigation, I’ve found that Google’s standard practice is to attempt to seal all documents, even where applicable court rules require that documents be provided to the general public. That’s troubling, and that needs to change.
Labels and Disclosures in Search Advertising with Duncan Gilchrist
Disclosure: I serve as a consultant to various companies that compete with Google. But I write on my own — not at the suggestion or request of any client, without approval or payment from any client.
Search engines have long labeled their advertisements with labels like “Sponsored links”, “Sponsored results”, and “Sponsored sites.” Do users actually know that these labels are intended to convey that the listings are paid advertisements? In a draft paper we’re posting today, Duncan Gilchrist and I try to find out.
“Sponsored Links” or “Advertisements”?: Measuring Labeling Alternatives in Internet Search Engines
In an online experiment, we measure users’ interactions with search engines, both in standard configurations and in modified versions with improved labels identifying search engine advertisements. In particular, for a random subset of users, we change “sponsored link” labels to instead read “paid advertisement.” We find that users receiving the “paid advertisement” label click 25% to 33% fewer advertisements and correctly report that they click fewer advertisements, controlling for the number of advertisements they actually click. Results are most pronounced for commercial searches, and for users with low income, low education, and little online experience.
We consider our findings particularly timely in light of Google’s change, just last week, to label many of its advertisements as “Ads.” On one view, “Ads”” is an improvement – probably easier for unsophisticated consumers to understand. Yet it’s a strikingly tiny label – the smallest text anywhere in Google’s search results, and about a quarter as many pixels as the corresponding disclosure on other search engines. As our paper points out, FTC litigation has systematically sought the label “Paid Advertisement, and we still think that’s the better choice.