Published Articles

March 5th, 2005

Doing A Product Placement?

Responding to a complaint brought by Commercial Alert in late 2003, the Federal Trade Commission ("FTC") recently said that it has decided not to require advertisers to disclose product placements in television programs at the time that the product appears on screen.

Commercial Alert -- a non-profit organization with the mission of protecting children and communities from commercialism -- had written to the FTC, arguing that television viewers have the right to know when they are being exposed to product placements. Calling undisclosed product placements "an affront to basic honesty," Commercial Alert urged the FTC to require advertisers to include a prominent "advertisement" disclosure, whenever a product placement occurs in a television program. Commercial Alert believes that, if there is no disclosure, consumers will be misled about whether a product placement is, in fact, an advertisement in disguise.

With “brand integration” becoming a more widely-used advertising tool, an adverse decision by the FTC could have had dramatic consequences. Commercial Alert’s challenge was essentially a head-on attack on the whole concept of branded entertainment. If a large "advertisement" super had to appear on screen every time Regis Philbin said "let’s go to our friends at AT&T" on the television show Who Wants to be a Millionaire, would that tie-in ever have happened?

Are product placements misleading?

The FTC has previously warned advertisers not to deceive consumers about whether something is actually advertising. For example, the FTC told Internet search engines that consumers have the right to know when they are seeing sponsored search results. The FTC has also long required infomercial marketers to prominently disclose to consumers that an infomercial is a "paid advertisement."

In its response to Commercial Alert’s complaint, the FTC said that disclosures may be needed when objective product claims are being made if consumers will be confused about whether those claims are being made by the advertiser or an independent third party. The reason for this is that consumers may give more weight to claims if they think that the claims are being made by someone other than the advertiser. The FTC said, however, that it does not believe that advertisers are generally using product placements to make objective claims about their products. Therefore, the FTC believes that it is not generally deceptive to fail to disclose when something is a product placement.

The FTC cautioned that it can still take action against an advertiser if a product placement is used to make a false claim. The FTC also acknowledged that when the line between advertising and programming is blurred, there may be situations where a disclosure may be necessary in order to prevent consumer confusion.

The FTC concluded, however, that since every situation is different, "a one-size-fits-all rule or guide would not be the most effective approach" for dealing with the possible deception that could arise from product placements. (The FTC’s decision does not affect the Federal Communication Commission’s sponsor identification requirements.)

What does this mean for advertisers? Significantly, the FTC is not requiring that all product placements be disclosed. But, if you’re using a product placement to make specific claims about your product, you should still make sure that the claims are truthful and not misleading. And, if the nature of the product placement will cause consumers to give extra credibility to those claims (for example, if you’ve paid someone to endorse your product in a television program), then a disclosure -- explaining that there was in fact a paid product placement -- may be needed. Not only should this keep the FTC happy, but it should prevent the bad press that could result if it looks like you are trying to trick people.

- Jeffrey A. Greenbaum

This article first appeared in the March 2005 issue of SHOOT magazine. It presents a general discussion of legal issues, but is not legal advice, and may not be applicable in all situations. Consult your attorney for legal advice.