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January 7, 2016 -

FTC Releases New Guidelines for Native Advertising

On December 22, 2015 the Federal Trade Commission (FTC) issued two guidance documents setting out disclosure and formatting requirements for native advertising (generally, advertising that in content, style and/or format is designed to resemble surrounding content on publisher Internet properties or other publications and thus is not immediately identifiable as advertising or promotional content).  In its Enforcement Policy Statement on Deceptively Formatted Advertisements and Native Advertising:  A Guide for Businesses, the FTC announced several key principles which advertisers and anyone else involved in disseminating native ads (e.g., advertising agencies, operators of publisher sites) must keep in mind to avoid a possible enforcement action for deceptive advertising in violation of Section 5 of the FTC Act:   (1) advertising and promotional messages should be identifiable as advertising, since otherwise consumers may be misled into believing they are independent, impartial or not from the sponsoring advertiser itself; and (2) clear and prominent disclosures of the commercial nature of the content are necessary if this misleading misrepresentation is material, that is, if “it is likely to affect consumers’ choices of conduct regarding the advertised product or the advertisement, such as by leading consumers to give greater credence to advertising claims or to interact with advertising with which they otherwise would not have interacted.”  Without the proper disclosures (if required), native advertisements “are deceptive even if the product claims communicated are truthful and non-misleading.”  (Emphasis added by the author).

The italicized parts of the FTC’s policy statement above provide a clue as to why the new guidelines are already proving controversial in the digital advertising community, where some are already calling them heavy-handed.  A major difference between native advertising and traditional advertising is that native advertising does not feature a pitch for the advertised product or brand front and center (and indeed the FTC states that where the promotional element would be readily apparent to a reasonable consumer, no disclosure is required).  Rather, the content mentions or creates an association with the product or brand in a more subtle, oblique fashion and is often designed and formatted to resemble surrounding content (for example, on a news aggregator site, native advertising may appear as just another headline to be clicked on).  Creators and promoters of native advertising have claimed that it is essentially a glorified form of product placement, although this characterization is dubious, since (unlike a movie character drinking a Coke, for example) the content in which the product or brand is featured is sponsored, meaning that consumers’ initial decision to interact with it may be influenced by their lack of knowledge of its promotional nature.

This is exactly the FTC’s point, and the agency has stated that a disclosure at the initial point of access is needed (e.g., while a disclosure on a landing page accessed by clicking on a sponsored headline is also necessary, this is not sufficient by itself).  Another issue is that the seemingly infinite variety of different contexts in which native advertising can appear means that there is no one-size-fits-all rule for when a disclosure is required or what type of disclosure is sufficient; everything is dependent on the relevant facts and circumstances.  Thus, the FTC’s Guide for Businesses provides no fewer than 17 examples applying its guidelines in different hypothetical factual settings, ranging from sponsored headlines to video channels to search listings where the order of a link’s appearance is influenced by the payment of compensation.   The FTC also suggests that many commonly used forms of native advertising disclosure (e.g., “Sponsored”) may not be sufficient, as in many settings consumers may not understand their meaning or significance.

In light of this topic’s importance for our clients, Baer Crossey McDemus will be present a free webinar on the FTC’s new native advertising guidelines on February 4, 2016.  Please email mpolitz@baercrossey.com for more information, or click here to register.