Canada: Is It An Article Or An Advertisement? Native Advertising Under The Microscope

Is it an article or an advertisement? Or both? That is the question raised by native advertising as the ability for consumers to decipher between the two becomes an increasing concern for regulators and advertisers.

Native advertising blurs the line between the native content of a website or publication and advertising through the creation of content that mirrors regular editorial content, but is in some way sponsored by or in support of an organization or brand. With rapidly falling click-through rates in more traditional internet advertisements, and ad revenue diminishing for web publishers, both advertisers and publishers are hoping that the growing model of native advertising can attract and keep consumer attention on branded content and thus generate revenue. However, such blended content can also confuse or even deceive, and with the rapidly increasing use of the practice, regulators are also beginning to take a closer look.

While native advertising is not unique to the online sphere (it can certainly appear in print newspapers and magazines), the online arena has seen rapid growth in the area and this is where most organizations, including potential regulators like the U.S. Federal Trade Commission (FTC), have focused their energy. The  FTC held a workshop on the subject on  December 4, 2013, and may issue additional guidance on the matter shortly.

In Canada, regulators have yet to step visibly into the arena or to issue specific guidance on the practice.

Defining the issues

Any attempt to create a code of standards for native advertising will face serious hurdles. As mentioned in the recent FTC workshop, the difficulty in providing clear guidance on the subject is largely based on the  spectrum of possible arrangements that can be made between advertisers and publishers and each potentially necessitating different disclosures. For example, an advertiser might provide the completed piece of content in its entirety for the publisher to simply include on its website. An advertiser may, by contrast, merely pay for a series of articles to be produced by the regular editorial team on a certain general topic, which may or may not make any reference to the brand. There are cases where the advertiser pays for a review or mention of a specific product, or simply to be associated with pre-existing content. Depending on the arrangement, the advertiser or sponsor may or may not exert editorial control.

There are also a number of collateral issues that would need to be addressed, such as how the content is worked into the general layout of the publication, or how sponsored content on Twitter or Facebook feeds should be displayed. The question also remains as to whether a link to a native advertising article listed under a "Most Read" or "Recommended" heading on a website should be called out as "Sponsored Content" or as "Advertising" prior to the consumer clicking the link. Alternatively, should native advertising content be permitted to appear under such headings at all? It may be, after all, problematic for a publisher to "recommend" native advertising content to its readers.

The U.S. Interactive Advertising Bureau's recently released Native Advertising Playbook simply concludes that native advertising must, through contextual clues, word choice, labels, or other means make it clear that the native advertising content has been paid for and is not regular editorial content. That it has twelve pages devoted to defining different types of native advertising, but only one on recommended practices, highlights the current difficulty in both defining native advertising and providing guidelines for it.

Existing Canadian regulations and guidelines

While guidance specific to native advertising has not yet been forthcoming, Canadian advertisers should be careful to follow existing advertising rules and regulations.

First and foremost, both federal and provincial laws prohibit false or misleading representations made for a commercial purpose. While the content of a piece of native advertising may not be misleading, the placement and purpose of the advertisement may be. If, for example, the general impression created by a native advertisement in the form of a newspaper article is that it was created by the publication's own (presumably unbiased) editorial team, then the advertisement may be considered misleading, especially if the article was created by marketers and highlighted the use of a specific product or service. Since consumers may be persuaded to purchase a product or service based on positive treatment by a supposedly unbiased source, such deception may also be material and likely to affect consumer behaviour.

For the reasons set out above, any such articles should make it abundantly clear that they are first and foremost advertisements. As discussed in the FTC workshop, using the word "sponsored" to label the content may be insufficient, as it does not properly connote the idea that the advertisement was entirely created or placed because of a financial relationship between the advertiser and publisher. "Sponsored" typically only indicates that advertiser has paid to be recognized as a sponsor and be associated with an event or product that already exists (such as the sponsorship of a sporting event or athlete). A consumer may not understand that "sponsored content" indicates that the entire piece of content was created by a third-party. The byline of any article created by a third-party should likely bear that party's name.

In addition to the law, Clause 2 of the Canadian Code of Advertising Standards currently prohibits advertising that conceals its commercial intent. However, since 2004, Advertising Standards Canada has publicly addressed only nine consumer complaints related to disguised advertising techniques, and has not issued any additional interpretation guidelines on this section of the Code. While it's clear from the Code that advertising should be clearly identified as such, the Code does not address issues relating to how to identify the degree of advertiser participation, nor how to address merely sponsored articles or social media content. It also does not comment on possible cases where native advertising is not appropriate. 

If native advertising content comes in the form of a testimonial, advertisers should also observe Canadian testimonial rules under the Canadian Code of Advertising Standards. The Code provides that testimonials must both accurately reflect the genuine opinion of the person or organization giving the testimonial, and that they must not be deceptive. This applies both to "planted" consumer reviews and to paid reviews ostensibly given by a professional reviewer. The FTC's document on the issue, Guides Concerning the Use of Endorsements and Testimonials in Advertising,  may also be instructive for Canadian advertisers, and provides more detailed guidelines for testimonials. These include requirements for the disclosure of any connection between the advertiser and the endorser that may affect the weight of the endorsement if the connection is not reasonably expected by the audience.

Some organizations have also published relevant best practices and guidelines for their members. Magazines Canada has provided more detailed guidance on native advertising in its Code of Reader & Advertiser Engagement. The Code provides that any advertising having an editorial appearance be conspicuously identified with the word "advertising" or "advertisement," and an advertiser's name or logo should not be used to suggest sponsorship of any regularly appearing editorial. Additionally, the design of advertisements should be different from the publication's normal design and should not appear immediately before or after editorial segments mentioning the advertised brands or products.

In the social media sphere, the Word of Mouth Marketing Association (WOMMA) has published the Social Media Marketing DisclosureGuide. This Guide provides best practices for social media marketers to ensure that any material connection between a person who posts a brand message on social media (including blogs) and the relevant marketer be disclosed clearly and prominently. This might include, for example, a clear disclosure of having received the product under review from the marketing team, or having a business relationship with the brand or organization. WOMMA's Code of Ethics also requires its members to ensure full disclosure of any relationship between brand advocates and marketers, as well as compliance with FTC Guides.

Unresolved questions

While existing Canadian rules may be able to address many advertisements, some examples of native advertising are more subtle, and harder to regulate. Consider the case where an advertiser pays a publisher to have articles on a certain subject written by an editorial team in order to drum up consumer interest in the topic, without making any direct note of the advertiser's organization or products. In these cases, a misleading element is less clear: the content of the articles may be beyond reproach, and there is little, if any, "advertising" content. In these cases, should a "sponsored by" notification appear along with the brand name or logo? Or should the entire series be identified as advertising?

The National Advertising Division (NAD) of the Better Business Bureau in the United States recently look at Qualcomm's sponsorship of a series of technology articles created by and hosted on the website Mashable. Qualcomm neither directed the creation of the articles, nor had any editorial control over the content. The articles did not mention Qualcomm or their Snapdragon processor, nor any devices that used it.  The advertisements for the Snapdragon processor was simply to run beside the articles, along with a line stating it was "supported by" Qualcomm's Snapdragon. When the sponsorship period ended, their advertisement and the "supported by" line was removed from the articles, but the articles remained. The NAD investigated, but found that there was no violation in this case, and that neither Mashable nor Qualcomm needed to continue identifying the articles as sponsored or supported by Qualcomm. 

While the outcome of the Qualcomm investigation may seem intuitive, and would likely be similar in Canada, it highlights regulatory concerns surrounding sponsored content. Would the outcome be different had Qualcomm had editorial control over the topics or contents of the articles, even if they did not mention Qualcomm or Snapdragon? Would a failure to mention the association be misleading or deceptive if the content itself was unassailable? Guidance on these issues from either the Competition Bureau or Advertising Standards Canada may therefore be inevitable.

In summary

Despite the absence of guidance from Canadian regulators specifically on the use of native advertising, existing codes and regulations may well be used to police it. Therefore, advertisers are likely better served by erring on the side of caution, and ensuring that any advertiser participation in native content be clearly marked as such, and the level of advertiser involvement disclosed. As in all areas of marketing, advertisers should be especially careful in creating any native advertising targeting children. Children are less likely to be able to tell the difference between normal content and advertising, and it's possible that native advertising is not appropriate on any website or publication targeting children. Of course, advertisers are not able to target children in Quebec in any event. 

As regulators may soon be stepping into the arena, advertisers using or considering native advertising should be watchful for any new developments, and be sure to comply with existing law and regulations.

Gowlings will continue to follow this issue closely and provide periodic updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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