Joint Comment of the Federal Trade Commission Staff and the Antitrust Division to North Carolina State Senator Bill Cook on North Carolina HB 436 Concerning Online Legal Forms and the Practice of Law

FEDERAL TRADE COMMISSION
Washington, DC 20580
DEPARTMENT OF JUSTICE
Washington, DC 20530
June 10, 2016
The Honorable Bill Cook
North Carolina Senate, 1st District
300 N. Salisbury Street, Room 525
Raleigh, NC 27603-5925
Re: North Carolina HB 436
Dear Senator Cook:
The staff of the Federal Trade Commission (the “FTC” or the
“Commission”)1 and the Antitrust Division of the U.S. Department of Justice (the
“Division”) (together, the “Agencies”) welcome the opportunity to share our
views on the definition of the practice of law and North Carolina House Bill 436
(“HB 436” or “the Bill”).2 The Bill would exclude from the statutory definition of
the practice of law the operation of a website that offers consumers access to
interactive software that generates legal documents in response to consumer
input. Such websites would have to comply with several conditions, including
disclosing that the forms do not substitute for attorney advice or service.
The Division and FTC staff believe that “the practice of law” should mean
activities for which specialized legal knowledge and training is demonstrably
1 This letter expresses the views of the FTC’s Office of Policy Planning, Bureau of Competition,
Bureau of Consumer Protection, and Bureau of Economics. The letter does not necessarily
represent the views of the FTC or any individual Commissioner. The Commission, however, has
voted to authorize staff to submit these comments.
2 See Letter from Bill Cook, North Carolina State Senator, District 1, to Michael J. Bloom, Assistant
Director, Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission
(July 28, 2015).

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June 10, 2016
2
necessary to protect consumers and an attorney-client relationship is present.
Overbroad scope-of-practice and unauthorized-practice-of-law policies can
restrict competition between licensed attorneys and non-attorney providers of
legal services, increasing the prices consumers must pay for legal services, and
reducing consumers’ choices.
Accordingly, the Agencies recommend that the North Carolina General
Assembly consider the benefits of interactive websites for consumers and
competition in evaluating HB 436. Interactive software for generating legal
forms may be more cost-effective for some consumers, may exert downward
price pressure on licensed lawyer services, and may promote the more efficient
and convenient provision of legal services. Such products may also help increase
access to legal services by providing consumers additional options for
addressing their legal situations.
The Agencies also recognize that such interactive software products may
raise legitimate consumer protection issues. The Agencies recommend that any
consumer protections, such as requiring disclosures, be narrowly tailored to
avoid unnecessarily inhibiting competition and new ways of delivering legal
services that may benefit consumers.
I. Interest and Experience of the Agencies
Competition is the core organizing principle of America’s economy,3 and
vigorous competition among sellers in an open marketplace gives consumers the
benefits of lower prices, higher quality goods and services, greater access to
goods and services, and innovation.4 The Agencies work to promote competition
by enforcing the antitrust laws, which prohibit certain business practices and
transactions that harm competition and consumers, and through competition
advocacy, whereby the Agencies advocate for policies that promote competition
3 See, e.g., N.C. State Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101, 1109 (2015) (“Federal antitrust
law is a central safeguard for the Nation’s free market structures.”); Standard Oil Co. v. FTC, 340
U.S. 231, 248 (1951) (“The heart of our national economic policy long has been faith in the value of
competition.”).
4 See, e.g., Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978) (noting that the
antitrust laws reflect “a legislative judgment that ultimately competition will produce not only
lower prices, but also better goods and services. . . . The assumption that competition is the best
method of allocating resources in a free market recognizes that all elements of a bargain—quality,
service, safety, and durability—and not just the immediate cost, are favorably affected by the free
opportunity to select among alternative offers.”).

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June 10, 2016
3
and consumer welfare via comments on legislation, court filings, and discussions
with regulators, among other means.
Because of the importance of legal services to consumers and the
economy, the Agencies have long sought to foster competition in the legal
services marketplace. The Agencies and their staff have provided comments to
policymakers and stakeholders on the scope of the practice of law, the
unauthorized practice of law, attorney advertising, and other aspects of the
regulation of legal services.5 They have engaged in various activities relating
specifically to innovation in the area of legal services.6 In particular, the
Agencies have previously provided comments on the definition of the practice of
law as it relates to interactive software for generating legal forms.7 The Agencies
have also submitted amicus briefs to courts regarding the application of
competition principles to the provision of legal services.8
The Agencies have generally encouraged legislatures, courts, and state
bars to avoid restrictions on the performance of legal-related services that are not
necessary to address legitimate and substantiated harms to consumers, and
recommended that any such restrictions be narrowly drawn to minimize their
anticompetitive impact.9 The Agencies recognize the important role of state
legislatures, courts, and bar associations in protecting consumers of legal services
5 The Agencies’ joint letters regarding the practice of law are available at FTC, ADVOCACY FILINGS,
https://www.ftc.gov/policy/advocacy/advocacy-filings (Topic Filter: Attorneys); U.S.
DEPARTMENT OF JUSTICE, ANTITRUST DIVISION, COMMENTS TO STATES AND OTHER ORGANIZATIONS,
https://www.justice.gov/atr/comments-states-and-other-organizations.
6 See generally Submission of the United States to the Organisation for Economic Co-operation and
Development Regarding Disruptive Innovations in Legal Services (May 30, 2016),
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WP2
/WD(2016)4&docLanguage=En (summarizing DOJ and FTC activities).
7 DOJ-FTC Comments on the American Bar Association’s Proposed Model Definition of the
Practice of Law 10-12 (Dec. 20, 2002), https://www.justice.gov/atr/comments-american-bar-
associations-proposed-model-definition-practice-law (hereinafter “DOJ-FTC 2002 ABA
Comments”).
8 See, e.g., Brief Amici Curiae of the FTC and United States of America, McMahon v. Advanced
Title Servs. Co. of W. Va., 216 W. Va. 413 (2004), https://www.ftc.gov/policy/policy-
actions/advocacy-filings/2004/05/ftc-amicus-curiae-brief-lorrie-mcmahon-et-al-v (real estate
settlement services); Brief of FTC as Amicus Curiae Supporting Neither Party, Cleveland Bar
Ass’n v. CompManagement, Inc., 104 Ohio St. 3d 168 (2004),
https://www.ftc.gov/policy/policy-actions/advocacy-filings/2004/07/ftc-amicus-curaie-brief-
cleveland-bar-association (representation in workers’ compensation matters).
9 E.g., DOJ-FTC 2002 ABA Comments, supra note 7, at 13-15.

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June 10, 2016
4
from harm. The Agencies have previously noted, however, that unnecessarily
broad definitions of the practice of law or the unauthorized practice of law can
impose significant competitive costs on consumers of legal services, restrict
access to legal services, and inhibit the development of innovative ways to
deliver legal services to consumers.10
The Agencies believe the definition of the practice of law should be
limited to activities where: (1) specialized legal skills are required, such that there
is an implicit representation of authority or competence to practice law, and (2) a
client relationship of trust or reliance exists.11 The Agencies have recognized
District of Columbia Court of Appeals Rule 49 Commentary as instructive.12
In addition to its shared authority to enforce the antitrust laws, the FTC
also combats fraud and promotes truthful and non-deceptive information in the
marketplace.13 It has expertise in various other aspects of consumer protection
that are relevant to interactive software for generating legal forms.14 The
Commission has extensive expertise in the advertising and marketing of
products and services, including disclosure issues.15 For instance, the FTC has
10 E.g., id. at 9-12.
11 E.g., DOJ-FTC Comments Before the Supreme Court of Hawaii on Revised Proposed Rule
Concerning Unauthorized Practice of Law (Apr. 20, 2009), https://www.ftc.gov/policy/policy-
actions/advocacy-filings/2009/04/ftc-and-department-justice-comment-supreme-court.
12 E.g., id. at 2; see also D.C. Court of Appeals Commentary to Rule 49(b)(2) (Mar. 1, 2016),
http://www.dccourts.gov/internet/documents/DCCA_Rules_02-04-2016.pdf (“[There are] two
essential elements of the practice of law: The provision of legal advice or services, and a client
relationship of trust or reliance. Where one provides such advice or services within such a
relationship, there is an implicit representation that the provider is authorized or competent to
provide them; just as one who provides any services requiring special skill gives an implied
warranty that they are provided in a good and workmanlike manner. . . . The presumption that
one’s engagement in [an activity] is the ‘practice of law’ may be rebutted by showing that there is
no client relationship of trust or reliance, or that there is no explicit or implicit representation of
authority or competence to practice law, or that both are absent.”) (internal citations omitted).
13 See generally FTC Policy Statement on Unfairness (Dec. 17, 1980), appended to Int’l Harvester Co.,
104 F.T.C. 949, 1070 (1984), https://www.ftc.gov/public-statements/1980/12/ftc-policy-
statement-unfairness (see 15 U.S.C. § 45(n)); FTC Policy Statement on Deception (Oct. 14, 1983),
appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174 (1984), https://www.ftc.gov/public-
statements/1983/10/ftc-policy-statement-deception.
14 The comments in this letter regarding deception and disclosure issues are based on the FTC’s
consumer protection experience. In particular, see infra Section IV.B. (discussing consumer
protection considerations for HB 436).
15 For example, FTC staff has conducted research regarding consumer understanding of
disclosures relating to mortgages. See, e.g., JAMES M. LACKO & JANIS K. PAPPALARDO, IMPROVING

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June 10, 2016
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worked to combat scams by “notarios” claiming they can help with the
immigration process,16 and to shut down an immigration services business that
allegedly advertised and marketed its services online in a deceptive manner.17
More generally, FTC staff has issued guidance on how to make effective
disclosures in the online context.18 The Commission also has significant
consumer protection expertise in identifying data security, privacy, and identity
theft issues that websites and other software applications may raise.19
II. The Legal Services Marketplace
Licensed attorneys have traditionally performed many legal services on
behalf of clients. Non-lawyers have also historically performed many legal-
related services that have not been deemed subject to regulation as “the practice
of law.”20 Defining the practice of law has been a difficult question for the legal
CONSUMER MORTGAGE DISCLOSURES: AN EMPIRICAL ASSESSMENT OF CURRENT AND PROTOTYPE
DISCLOSURE FORMS (2007) (FTC Bureau of Economics Staff Report),
http://www.ftc.gov/os/2007/06/P025505MortgageDisclosureReport.pdf; JAMES M. LACKO &
JANIS K. PAPPALARDO, THE EFFECT OF MORTGAGE BROKER COMPENSATION DISCLOSURES ON
CONSUMERS AND COMPETITION: A CONTROLLED EXPERIMENT (2004) (FTC Bureau of Economics
Staff Report), http://www.ftc.gov/os/2004/01/030123mortgagefullrpt.pdf.
16 See generally FTC, SCAMS AGAINST IMMIGRANTS, https://www.consumer.ftc.gov/articles/0141-
scams-against-immigrants.
17 See Press Release, FTC, FTC Action Bans Defendants from Providing Immigration Services (Jan.
24, 2012), https://www.ftc.gov/news-events/press-releases/2012/01/ftc-action-bans-
defendants-providing-immigration-services.
18 FTC STAFF, .COM DISCLOSURES: HOW TO MAKE EFFECTIVE DISCLOSURES IN DIGITAL ADVERTISING
(2013), http://ftc.gov/os/2013/03/130312dotcomdisclosures.pdf.
19 See FTC STAFF, MOBILE PRIVACY DISCLOSURES: BUILDING TRUST THROUGH TRANSPARENCY (2013),
http://www.ftc.gov/os/2013/02/130201mobileprivacyreport.pdf.
20 See generally HERBERT M. KRITZER, LEGAL ADVOCACY: LAWYERS AND NONLAWYERS AT WORK 11
(1998) (“[B]y one count, as of 1994, nonlawyers can appear as advocates before thirty-eight
federal agencies.”). Non-lawyers have practiced before the U.S. Patent and Trademark Office
from its inception, with the express approval of the Office and with the knowledge of Congress.
Sperry v. Florida ex rel. Fla. Bar, 373 U.S. 379, 384-88 (1963). Accountants and other tax specialists
may practice in tax matters before the Treasury Department. Grace v. Allen, 407 S.W.2d 321 (Tex.
Civ. App. 1966) (accountants admitted to practice before Treasury Department in preparation
and presentation of client’s protest of federal income tax assessment may perform some legal
research and provide assistance to tax lawyers). Accredited non-attorney representatives may
represent persons in immigration proceedings before immigration judges and the Board of
Immigration Appeals. Al Roumy v. Mukasey, 290 F. App’x 856, 861 n.2 (6th Cir. 2008).
Non-attorney practice has also been allowed before a number of state administrative agencies.
E.g., Cleveland Bar Ass’n v. CompManagement, Inc., 104 Ohio St. 3d 168 (2004) (non-lawyers
who appear and practice in a representative capacity before the Ohio Industrial Commission and

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June 10, 2016
6
profession for many years. The boundaries of the practice of law are frequently
unclear and have varied significantly over time and from jurisdiction to
jurisdiction.21
The legal services marketplace has experienced a number of changes in
recent years. These trends include: client demands for more cost-effective and
efficient services; unbundling of services and disaggregation of legal matters
across multiple service providers; development of new billing models and law
firm models; geographic expansion of law firms and other legal services
providers; provision by non-law firms of certain services previously obtained
exclusively from law firms; increased use of automation technologies; online
matching, reviewing, and ranking of lawyers; and use of Internet, World Wide
Web, and related computer technologies to deliver legal services. In particular,
the increased use of computer, software, and online technologies has enabled
non-lawyers to provide many services that historically were provided
exclusively by lawyers and traditional law firms.
Notwithstanding these changes, there remains a well-known crisis in
access to legal services for millions of American consumers, especially for low-
and middle-income people. Surveys have repeatedly shown that many low- and
middle-income Americans cannot afford the services of a licensed attorney,
despite a generally increasing number of lawyers.22 This seeming paradox of
unmet legal needs and an abundance of lawyers continues to persist.23
In response to consumer demands for less expensive ways to address their
legal needs, software companies, entrepreneurs, and law firms have developed
inexpensive interactive software for generating legal documents. These
programs allow users to create wills, trusts, articles of incorporation, and other
the Bureau of Workers’ Compensation are not engaged in the unauthorized practice of law when
they act in conformance with Industrial Commission standards of conduct); Petition of Burson,
909 S.W.2d 768, 777 (Tenn. 1995) (statute permitting non-attorney agents to represent taxpayers
before boards of equalization did not sanction unauthorized practice of law).
21 See generally DOJ-FTC 2002 ABA Comments, supra note 7.
22 See generally LEGAL SERVICES CORP., DOCUMENTING THE JUSTICE GAP IN AMERICA: THE CURRENT
UNMET CIVIL LEGAL NEEDS OF LOW-INCOME AMERICANS (2009), http://www.lsc.gov/lsc-updates-
october-1-2009; ABA, LEGAL NEEDS AND CIVIL JUSTICE: A SURVEY OF AMERICANS (1994),
http://www.americanbar.org/content/dam/aba/migrated/legalservices/downloads/sclaid/le
galneedstudy.authcheckdam.pdf.
23 See J.D. Smeallie, From BBA President: Connecting Supply With Demand to Fill the Justice Gap,
BOSTON BAR ASS’N (July 17, 2013), http://www.bostonbar.org/public-policy/public-policy-
archive/2013/07/22/from-bba-president-connecting-supply-with-demand-to-fill-the-justice-gap.

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June 10, 2016
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legal documents, based on answers to questions presented by the software. Such
programs have included physical software products (e.g., CD-ROMs), as well as
web-based internet applications and non-web-based internet applications (e.g.,
smartphone-type “native” applications). A number of courts24 and government
agencies25 also now provide online legal forms for use in their jurisdiction. Prior
to these developments, document generation assistance was available in a
number of states through legal self-help books and standardized paper legal
forms for completion by a consumer, as well as through attorneys.26
Interactive software programs for generating legal documents appear to
be responsive to consumer demands for more cost-effective and efficient ways to
address their legal issues. These software products may expand consumer access
to legal services, facilitate the unbundling of legal services, promote a more
efficient allocation of resources (e.g., among licensed attorneys, non-attorney
providers, and self-help efforts), reduce transaction costs, increase convenience,
and help some consumers more effectively to address their legal situations. For
example, a consumer who may be unable to afford to retain a licensed attorney
both to draft and review a legal document may be able to use interactive
software to generate a draft document, and pay an attorney only to review the
document, if desired. At the same time, such programs may raise consumer
protection issues regarding consumers’ understanding both of the generated
forms, and whether or when it may be desirable for a consumer to seek the
services of an attorney.
24 E.g., CALIFORNIA COURTS, FORMS & RULES, http://www.courts.ca.gov/forms.htm; DELAWARE
COURTS, FORMS, http://courts.delaware.gov/forms/; NORTH CAROLINA COURT SYSTEM, JUDICIAL
FORMS, http://www.nccourts.org/Forms/FormSearch.asp; IDAHO JUDICIAL BRANCH COURT
ASSISTANCE OFFICE, FORMS: INDIVIDUAL FORMS AND INSTRUCTIONS,
http://www.courtselfhelp.idaho.gov/individual-forms-instructions; IOWA JUDICIAL BRANCH,
COURT RULES AND FORMS, http://www.iowacourts.gov/Court_Rules__Forms/Overview/; MASS.
COURT SYSTEM, COURT FORMS, http://www.mass.gov/courts/forms/; U.S. COURTS, FORMS,
http://www.uscourts.gov/services-forms/forms.
25 E.g., NORTH CAROLINA DEP’T OF THE SECRETARY OF STATE, CORPORATE FORMS,
https://www.secretary.state.nc.us/corporations/printforms.aspx; U.S. COPYRIGHT OFFICE,
FORMS, http://copyright.gov/forms/; U.S. PATENT AND TRADEMARK OFFICE, PATENTS FORMS,
http://www.uspto.gov/patent/patents-forms and TRADEMARK ELECTRONIC APPLICATION
SYSTEM, http://www.uspto.gov/trademarks-application-process/filing-online.
26 See, e.g., N.Y. Cnty. Lawyers’ Ass’n v. Dacey, 28 A.D.2d 161, 171 (N.Y. App. Div. 1st Dept. 1967)
(Stevens, J., dissenting), rev’d, 21 N.Y.2d 694 (1967) (adopting dissenting opinion of Appellate
Division, holding that incorporating legal forms into self-help book entitled “How to Avoid
Probate!” was not the unauthorized practice of law). See also generally DOJ-FTC 2002 ABA
Comments, supra note 7.

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June 10, 2016
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III. HB 436
HB 436, in its current version, would amend North Carolina General
Statutes Section 84-2.1 to exclude from the statutory definition of the practice of
law the operation of interactive websites that generate legal documents based on
a consumer’s answers to questions presented by the software.27 A website would
have to satisfy several conditions in order to be excluded from the definition of
the practice of law, and thus for its provider not to be subject to prosecution for
the unauthorized practice of law. These conditions include providing a
disclosure that the forms are not a substitute for attorney advice or services, and
disclosing the provider’s legal name and physical location and address.28
IV. Competition and Consumer Protection Considerations for HB 436
A. Competition Considerations
HB 436 appears meant to promote competition from interactive websites,
and the Agencies recommend that the General Assembly consider the benefits of
interactive software for consumers and competition.29 The Agencies believe that
27 H.B. 436, N.C. Gen. Assemb., 2015-16 Sess. (4th ed. Sept. 23, 2015),
http://www.ncleg.net/Sessions/2015/Bills/House/PDF/H436v4.pdf. This version of the Bill is
apparently meant to cover certain web-based interactive forms, such as LegalZoom.com. See
LegalZoom.com, Inc. v. N.C. State Bar, 2015 NCBC 96 (Sup. Ct. N.C. Oct. 22, 2015) (Consent
Judgment) (“The parties have agreed to mutually support and use best efforts to obtain passage
by the North Carolina General Assembly of HB 436 in the form currently pending before the
House Judiciary Committee.”). This version of the Bill, in contrast to prior versions, does not
appear to encompass other similar self-help products that may generate legal forms, however.
The Agencies suggest that the North Carolina General Assembly consider expanding the Bill to
encompass similar self-help products. As explained in Section IV.A. infra, a pro-competitive
regulatory framework should not favor one type of competitor over another in addressing similar
harms.
28 The Bill would also require that: a consumer be able to see a blank template or completed
document before final purchase; each blank template be reviewed by a North Carolina attorney; a
provider not disclaim any warranties or liability, or limit damages or other remedies; and a
provider not require a consumer to agree to jurisdiction or venue outside North Carolina.
29 The Agencies also recommend that the General Assembly reconsider broadening the Bill to
exclude similar self-help products from the definition of the practice of law. Doing so may
further benefit consumers. The legislature may wish to consider the experience of Texas in this
regard. The Texas Unauthorized Practice of Law Committee succeeded in having a federal
district court enjoin the sale and distribution of Quicken Family Lawyer software as the
unauthorized practice of law. See UPL Comm. v. Parsons Tech., Inc., 179 F.3d 956 (5th Cir. 1999).
Texas subsequently enacted legislation amending the statutory definition of the practice of law to
exclude from its definition such software and similar products, if they clearly and conspicuously
state they are not a substitute for attorney advice. TEX. GOV’T CODE ANN. § 81.101(c) (1999).

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June 10, 2016
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consumers generally benefit from competition between lawyers and non-lawyers
in the provision of legal-related services. Consumer demand should determine
the range of choices in the marketplace, unless it is clear that specialized legal
training is required to perform a legal-related service. Overbroad scope-of-
practice and unauthorized-practice-of-law policies can increase prices, impede
innovation, and otherwise harm competition and consumers.
Interactive websites that generate legal documents in response to
consumer input may be more cost-effective for some consumers, may exert
downward price pressure on licensed lawyer services, and may promote the
more efficient and convenient provision of legal services.
Such products may also help increase access to legal services by providing
consumers additional options for addressing their legal situations. They may
especially benefit low- and middle-income consumers, those who live in rural
areas where a lawyer is unavailable, and others who may not have convenient
access to a traditional law office during typical working hours.30
The Agencies recommend that the North Carolina General Assembly not
adopt restrictions on such software products unless there is credible evidence
that they harm consumers, any restriction is narrowly tailored to address that
harm, and the benefits of the restriction will outweigh the harm that will likely
result to competition. Should the General Assembly receive any claims of
consumer harm from interactive websites or similar products, the Agencies urge
the legislature to consider whether the evidence substantiates any such actual or
predicted harm.
This analysis should also examine whether any harm from these products
is materially greater than comparable harms posed by traditional attorney-client
relationships or government provision of legal services or information, such as
legal forms or other information available at the website of a government court
or agency. As a matter of sound competition policy, a regulatory framework
should not in purpose or effect favor one type of similarly situated competitor
over others in addressing any identical or similar harms from these products.
Based on this legislation, the Fifth Circuit Court of Appeals vacated the injunction against the
software.
30 See generally NORTH CAROLINA EQUAL ACCESS TO JUSTICE COMMISSION, A COMMISSION OF THE
NORTH CAROLINA SUPREME COURT, http://ncequalaccesstojustice.org/about/ (collecting
Commission reports finding that the number of low-income people in North Carolina needing
legal assistance has continued to increase in recent years).

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June 10, 2016
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B. Consumer Protection Considerations
The Agencies recognize that licensing requirements and scope-of-practice
policies can have valid consumer protection justifications. Some circumstances
and tasks require the knowledge and skill of a person trained in the law. Policies
to protect consumers in such situations are legitimate. As noted above, however,
overbroad scope-of-practice and unauthorized-practice-of law-policies can
potentially inhibit new ways of delivering legal services that may benefit
consumers.31
Providers of interactive software programs and other similar products
should provide truthful, non-deceptive information about their characteristics.32
For example, a commercial software product for generating legal forms should
not falsely represent, either expressly or impliedly, that it is a substitute for the
specialized legal skills of a licensed attorney, or that it is affiliated with or
endorsed by a government entity.33 Providers also should not falsely represent,
either expressly or impliedly, the scope or cost of the product or service,
including whether they will initiate a legal submission to a government entity.
For example, providers should not expressly or impliedly represent that a legal
submission will be made to a government entity if, in fact, additional payment to
the provider or to a government entity, or some other further action, is needed to
execute a filing. Providers should provide truthful, non-deceptive information
about the functions their products actually perform.
Regulation of interactive software for generating legal documents should
therefore focus primarily on deterring unfair or deceptive advertising and
marketing practices relating to the content of forms, their validity, liability, other
terms of use, and any related filing fees, and addressing any other consumer
protection issues. In the event the legislature receives evidence of significant
31 The following analysis of consumer protection considerations regarding HB 436 represents the
views of the staff of the Federal Trade Commission, which, as discussed in Section I. above, has
expertise in consumer protection issues. The U.S. Department of Justice Antitrust Division does
not express any views on consumer protection considerations regarding HB 436.
32 See FTC Policy Statement on Unfairness and FTC Policy Statement on Deception, supra note 13.
33 See generally FTC, Enforcement Policy Statement on Deceptively Formatted Advertisements
n.17 (2015), https://www.ftc.gov/news-events/press-releases/2015/12/ftc-issues-enforcement-
policy-statement-addressing-native (discussing commercial communications that mislead
consumers that they are from the government and other examples of deceptively formatted ads).

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June 10, 2016
11
consumer harm from interactive software, or similar products, any restrictions
on their sale, distribution, or use should be tailored to address those harms.34
HB 436 would require certain disclosures by providers of interactive
websites. These appear designed to promote the dissemination of truthful and
non-deceptive information to consumers. Requiring certain disclosures may be
an efficient way to protect consumers from possible misunderstandings about
the nature of these products.35 But the existence of a disclosure should not serve
as a safe harbor for making false or deceptive express or implied claims. The
General Assembly may wish to consider the principles and examples for mobile
and other online advertising disclosures provided in FTC staff’s guidance
document, .com Disclosures: How to Make Effective Disclosures in Digital
Advertising.36 Among other things, it emphasizes that advertisers should ensure
that disclosures are clear and conspicuous on all devices and platforms
consumers may use. Any disclosures should be made in the same language as
the predominant language in which advertisements about the forms are
communicated.37 As discussed above, any such disclosure requirements should
be reasonably tailored to avoid unnecessarily inhibiting the entry, operation, and
expansion of new and innovative ways to serve consumers’ legal needs.
34 Requiring disclosures or other conditions on the sale, distribution, or use of interactive
software, or similar products, may also raise First Amendment issues. See generally Central
Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 566 (1980) (articulating a
four-part test for evaluating whether government regulations on commercial speech are
constitutional).
35 FTC staff recommends that the General Assembly consider evaluating available evidence
regarding the effectiveness of any proposed disclosures. As noted above, the legislature may
wish to consider the experience of Texas in this area. FTC staff research has demonstrated that
disclosures developed even with the best intentions may confuse or mislead consumers, and that
they can be improved substantially through the use of consumer research; in particular, well-
controlled, quantitative testing can help to ensure that disclosures will work as intended. See
supra note 15. FTC staff also recommends that the legislature and other relevant North Carolina
authorities continue to monitor the effectiveness of any disclosures that are implemented, such as
through conducting consumer surveys, to ensure that disclosures are, in fact, made in a clear and
conspicuous manner to consumers, and they are otherwise achieving their underlying consumer
protection objectives.
36 See supra note 18.
37 See FTC Enforcement Policy Statement on Deceptively Formatted Advertisements, supra note
33, at n.58 and related text.

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June 10, 2016
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V. Conclusion
The Agencies recommend that the North Carolina General Assembly
consider the benefits of interactive websites for consumers and competition in
evaluating HB 436. The Agencies also recognize that such products may raise
legitimate consumer protection issues, and recommend that any necessary
consumer protections be narrowly tailored to avoid unnecessarily restricting new
forms of competition that may benefit consumers.
We appreciate this opportunity to present our views.
Marina Lao, Director Robert Potter, Chief
Office of Policy Planning Legal Policy Section
Federal Trade Commission Antitrust Division
U.S. Department of Justice