FTC tackles native advertising and sponsored content

FTC tackles native advertising and sponsored content in an Enforcement Policy Statement on Deceptively Formatted Advertisements.

Advertisers must understand that FTC is now up-to-speed on digital formats and carries its prohibition against “unfair or deceptive acts or practices in or affecting interstate commerce” into online, mobile, and other digital spaces

FTC “gets” how advertising has changed in the modern era

Unlike many areas of healthcare law, which are antiquated, the laws against deceptive advertising remain robustly enforced by the federal government.  The Federal Trade Commission makes this clear when FTC tackles native advertising and sponsored content in a way that updates its 1983 Policy Statement on Deception to the world of Web 2.0 and the Internet of Things.

Here are some basic rules every advertiser in the digital age must know:

  • “Net impression” matters:In its enforcement policy statement, FTC first returns to the rule that in determining whether an advertisement, including its format, misleads consumers, FTC considers the overall “net impression” it conveys.
  • Effect on consumer belief matters: FTC says that advertising and promotional messages are deceptive if they “mislead consumers into believing they are independent, impartial, or not from the sponsoring advertiser itself,”
  • Native advertising or sponsored content can be deceptive: FTC expresses particular concern with advertising in digital media which “is often indistinguishable from news, feature articles, product reviews, editorial, entertainment, and other regular content” because, among other things, it matches the style and layout of the content.
  • FTC prohibitions apply “regardless of the medium:” FTC is savvy to new marketing and enforces its rules regardless of whether the medium is in print, online, mobile, or otherwise.

FTC notes that over the years, FTC has challenged as deceptive, many different kinds of ads, including:

  • “advertorials” that appear to the consumer as news stories or feature articles
  • direct-mail ads disguised as book reviews
  • infomercials presented as regular TV or radio programs
  • in-person sales practices that mislead
  • mortgage relief ads designed to look like solicitations from a government agency
  • emails with deceptive headers that appeared to originate from a consumer’s bank or mortgage company
  • paid endorsements offered as the independent opinions of impartial consumers or experts

FTC notes that not only do the format and layout make native advertising or sponsored content not distinguishable as an ad, many publishers also use “formats and techniques that are closely integrated with and less distinguishable from regular content so that they can capture the attention and clicks of ad-avoiding consumers.”

Kinds of advertising formats flagged as potentially deceptive in the past

FTC flags a number of advertising formats as potentially deceptive, including:

  • Advertisements appearing in a news format or that otherwise misrepresent their source of nature.

    One example FTC gives in the holistic health industry involves “ads disguised to look like news reports on weight-loss pills and other products, where a purported journalist tested the advertised product and authored the story;” a second involves a website promoting dietary supplements that “purported to originate from an independent scientific organization.”

Significantly, FTC identifies deception from paid ads “formatted to appear as the regular search results that search engines return in response to consumers’ queries.”

  • Misleading door openers.  FTC includes misleading sales visits and calls and emails with falsified sender information.  (The Telemarketing Fraud Act requires a telemarketer to promptly and clearly disclose that the purpose of the call is to sell goods or services.  Similarly, the CAN-SPAM Act prohibits spam.)
  • Endorsements that fail to disclose a sponsoring advertiser.

FTC enforcement against these various deceptive formats serves as an underpinning for modern enforcement policy.

Digital Media formats

FTC specifically identifies formats such as:

  • written narratives
  • videos
  • infographics
  • images
  • animations
  • in-game modules
  • playlists on streaming services
  • advertising message embedded into entertainment programming
  • personal blogs
  • online comment forums
  • reviews of apps

All of these can “deceive consumers by blurring the distinction between advertising and non-commercial content.”

Again, regardless of the medium or format, deception occurs if the ad misleads a reasonable consumer as to its true nature or source, and this is likely to affect consumer purchasing.  This deception creates a violation, even if the product claims are truthful and misleading,

The Bottom Line

Here are 3 things to watch out for:

  • If you use native advertising, sponsored content, or another format that can disguise the fact that it’s an ad, clearly and conspicuously disclose that the statement is commercial advertising
  • Be careful not to deceive consumers about nature or source of advertising. Disclose the sponsoring party.
  • Don’t misrepresent that an ad is from a scientific organization, the government, or a neutral source, if this is not the case.

And have legal counsel review all marketing materials for FTC compliance.

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