Proposed Terms of Service Act: Making Terms Consumer Friendly - Klein Moynihan Turco LLP

Proposed Terms-of-Service Act: Making Terms Consumer-Friendly

Earlier this month, several members of Congress introduced a bill aimed at simplifying website Terms and Conditions for online consumers. The Terms-of-service Labeling, Design and Readability Act (“TLDR Act”) is intended to address Website Terms of Service that consumers must agree to before using online services. While the Terms-of-Service Act is merely a bill (and, if passed, will not come into effect for at least another year), website operators should be aware of the potential impact it may have on their businesses. 

How Would the Bill Change the Laws that Apply to Website Terms and Conditions?

The TLDR Act is designed to inform consumers as to what data is collected from them and make the Terms of Service consumer friendly (i.e., consumers should be able to easily digest such information and compare different websites’ Terms). To achieve these goals, the TLDR Act proposes that website operators create a summary of their Terms of Service and a graphic diagram that depicts how they share users’ sensitive information. Such terms need to be concise, easily understandable, machine-readable (i.e., work with screen readers) and located at the top of the Terms of Service page. It is important to note that small businesses are exempt from the TLDR Act’s requirements.

In addition, the Terms of Service Act sets out the requirements for such summaries. According to the introduced TLDR, Terms of Service summaries must include, among other things:

  1. The categories of sensitive consumer information collected (e.g., health information, geolocation information, content and parties to a communication, financial information, and online browsing history related to such information);
  2. The need for such information, and if such information is shared with third-parties;
  3. If and how a consumer can delete such data;
  4. A summary of the rights transfer from consumers to the website operator (e.g., rights to their content, mandatory arbitration, and class action waivers);
  5. Historic versions of the Terms of Use and change logs; and
  6. A list of reported data breaches over the past 3 years.

If the TDLR is passed, the Federal Trade Commission (“FTC”) would have 360 days to draft and implement regulations. Insofar as enforcement of the TDLR Act is concerned, violations would be considered unfair or deceptive acts or practices, subjecting companies to penalties contained under the FTC Act. Additionally, State Attorneys General would be authorized to bring civil actions for TDLR violations if 1,000 residents of their state have been affected. In such actions, states would be able to enjoin website operators and obtain “damage[s], restitution, or other compensation on behalf of residents of the State, among other forms of relief.

Why does the Terms-of-Service Act matter to your business?

It bears repeating that the bill is just proposed legislation right now. If it continues through the legislative process, it will undergo changes and could look much different than it does today by the time it is up for a vote before Congress.

While the TDLR Act may not be law yet, website operators still have a complicated patchwork of Terms and Conditions considerations to navigate today. Website Terms and Conditions are often the best means for website operators to protect their intellectual property, disclaim any applicable warranties, and limit their liability.  However, if a court of law or regulator deems that a set of Terms and Conditions are unenforceable, then the website operator would lose vital legal protections and limitations on liability. Given the crucial role that website Terms and Conditions play, it is highly recommended that website operators retain competent legal counsel to ensure that their Terms are fully enforceable. 

The attorneys at Klein Moynihan Turco have years of experience helping businesses effectively draft website Terms and Conditions and Privacy Policies. 

If you need assistance with drafting or updating the Terms and Conditions applicable to your online operations, email us at info@kleinmoynihan.com or call us at (212) 246-0900

The material contained herein is provided for informational purposes only and is not legal advice nor is it a substitute for seeking legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Photo by Pankaj Patel on Unsplash

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