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September 26th, 2016
Compliance Focus: FTC Begins Study of Consumer Disclosures
How effective are your consumer disclosures? A recent FTC workshop suggests it's a good time to ask. Here's a summary of what happened.
The Federal Trade Commission ("FTC") held a public workshop on September 15, 2016 called "Putting Disclosures to the Test." The goal: to examine the testing and evaluation of disclosures that companies make to consumers about advertising claims, privacy practices, and other information online and in digital media. The workshop explored how to test the effectiveness of these disclosures to ensure consumers notice them, understand them, and can use them in their decision-making. The FTC last updated its guidance about disclosures in online advertising in March 2013 (the Dot Com Disclosure Guides), and has studied the effectiveness of disclosures in other industries and for specific purposes since then- for example mobile shopping applications. We have previously reported on the FTC's guidance [here] and [here]. While the FTC reiterated the importance of including disclosures at the workshop, the big news was the message that simply putting out disclosures that comply with guidelines may not be sufficient. Businesses and marketers should test disclosures for actual effectiveness through qualitative and quantitative research studies.
The FTC called a panel of experts to offer their findings on the most effective research methods for testing how consumers view disclosures and use the information in disclosures to make decisions. Generally, experts recommend both observing consumer behavior and directly soliciting consumers for their responses to disclosures. Eye tracking - assessing where people are looking, in what order and for how long - was cited as a particularly effective testing method as faster response time indicates a disclosure is more conspicuous. Also recommended: Recall and recognition interviews to test how well a carefully selected sample of consumers understand the disclosures.
The experts presented their conclusions on which disclosure techniques were found to be the most effective, which may provide guidance on best practices going forward. Researchers advocated for a multi-pronged approach across a variety of media, with disclosures tailored in each case to match audience sophistication. The experts stressed the value of shorter disclosures with fewer words of ambiguity (e.g. 'may', 'some' or 'as needed'), and favored providing information in a contextualized rather than numerical manner. In addition, disclosures should be placed in the visible field and competing stimuli (e.g. secondary audio) should be reduced. This is particularly true for advergames since users may already be overstimulated and therefore may have greater difficulty in identifying ads. Expert references, warning symbols, color contrasts, and the timing of disclosures can all help to draw attention to the disclosure. For example, in-app disclosures were found to be least effective when provided at installation.
The experts noted that native ads are particularly confusing for consumers in the context of social media. Research indicates that additional cues beyond just disclosure are needed, especially where the ad is in-stream and there is low brand recognition. Adding professional photos or explicitly stating that an ad is "promoted by" a brand can help to boost ad recognition.
While the FTC did not discuss the ramifications of failing to comply with the testing recommendations, it appears that the FTC increasingly focused on holding companies accountable for making a good faith effort to understand the success of their disclosures in achieving their intended effect.
If you have questions about advertising disclosures, or about any other advertising law issues, please contact Terri Seligman at (212) 826 5580 or firstname.lastname@example.org, or any other member of the Frankfurt Kurnit Advertising, Marketing & Public Relations Group.
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California recently amended its Automatic Purchase Renewals law. The amended statute - effective July 1st -- require marketers to provide consumers of automatic renewal or continuous service offers with more information and easier ways to terminate. Read more.
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“Made in the U.S.A.” Claims Continue to be Scrutinized
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FTC Issues a $2 Million Reminder to Ad Agencies
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