Advertising Law Alerts

December 23rd, 2015

Did the FTC Just Kill Native Advertising?

Two years after conducting a workshop to study native advertising, the FTC on December 22nd released long-awaited guidance that all marketers and publishers need to review. As we previously reported, the legal and ethical issues around native advertising have become more and more complex because of the many ways that advertising can be integrated into traditionally editorial spaces. Until now, though there have been several NAD actions involving native advertising, and the FTC had signaled its interest by conducting the workshop, the rules of the road were somewhat unclear. No longer.

The FTC issued the Guidance along with an Enforcement Policy Statement on Deceptively Formatted Advertisements. While the Policy Statement reiterates FTC's long-standing view that advertising masquerading as editorial is misleading and deceptive, the Guidance goes much further, asserting both a broad philosophical view about what constitutes "advertising" and very prescriptive rules about how, where and when disclosures must be made.

Highlights from the Guidance and Policy Statement include:

- Although the FTC does not define "native advertising," the Policy Statement notes that native advertising encompasses a broad range of advertising and promotional messages that match the design, style and behavior of the digital media in which it is disseminated. The FTC says that native advertising is deceptive when it misleads consumers as to the "nature or source" of the content. In other words, it is deceptive when consumers do not realize that an advertiser is behind the content they are viewing.

- The more a native ad is similar in format and topic to content on the publisher's site, the more likely that a disclosure will be needed to prevent deception. Disclosures may be necessary on both the publisher's site and on linked pages where the content appears.

- An article which is not itself an ad, when promoted by a company through a recommendation widget, can become an ad by the company. That company is in turn responsible for ensuring that the statements in the article are truthful and substantiated.

- The FTC reiterated that, like other disclosures, whether a disclosure regarding a native ad's commercial nature is clear and conspicuous will be measured by its performance: did consumers actually notice, process and understand the disclosure? Just putting a disclosure somewhere on the page as a "CYA" does not work. In order to be effective, according to the FTC, disclosures should appear near where consumers are likely to look first.

- Common terms like "promoted" or "presented" may no longer be adequate to convey that a sponsoring advertiser was involved in the creation of the content. Phrases that include the actual word "advertisement" are preferable. Unfortunately, this presents a dilemma for companies that do not consider all content they produce to be "advertising"; if all sponsored content with a brand or product mention is "advertising" and must be labeled as such, companies that produce or sponsor it will almost certainly have to grapple with rights clearance issues. Moreover, these companies may well see a fall-off in reader engagement with the content (no matter how engaging the content is), which will undoubtedly affect their interest in paying for it, to the potential detriment of publishers relying on that income stream. 

Why this matters
Advertisers and publishers engaged in native advertising should certainly review this new Guidance - especially given the likelihood that enforcement actions will follow. The FTC has made clear that advertisers and all other players in the digital content eco-system must be transparent about the source of any content presented to readers. 

If you have questions about native advertising or other advertising law issues, please contact Terri Seligman at (212) 826 5580 or tseligman@fkks.com or any other member of the Frankfurt Kurnit Advertising Group.