United States: Dot Com Disclosures 2.0: FTC Updates Online Disclosure Guidelines To Address Changes In Digital Advertising

Last Updated: March 21 2013
Article by Neil Austin

Nearly thirteen years after issuing guidelines governing online advertising, the Federal Trade Commission ("FTC") recently updated its so-called Dot Com Disclosures to take account of the many changes to the online world that have occurred over those intervening years. Whereas most digital advertising thirteen years ago was popping up or scrolling across our computer screens, today's digital advertising is far more integrated into our online culture—whether as email offers to invitation-only flash sales ("50% off; today only!"), sponsored Twitter feeds, solicited blog reviews, or advertisements dressed up to look like news ("THIS JUST IN: Scientists have discovered a revolutionary breakthrough in weight loss."). Into this Wild West of digital advertising, the FTC has ridden with some updated guidelines to help marketers avoid running afoul of false advertising law.

The FTC's new guidelines, issued on March 12, are intended to provide guidance to ensure that digital advertising is truthful, fair, and not misleading. The guidelines are focused primarily on the issue of disclosure—i.e., words necessary to limit, qualify, or explain a claim.

As with any FTC guidelines, the revised Dot Com Disclosures are staff interpretations of laws administered by the FTC (so following them is a good idea), but they do not have the force and effect of law. This means that if the FTC were to pursue a marketer for failing to follow the guidelines, it would have the burden of proving that the marketer's ads were actually unfair or deceptive.

On the other hand, following the guidelines will not necessarily inoculate a marketer from a false advertising claim. While it certainly minimizes the risk associated with disclosures, there are other guidelines and rules that apply to online ads, and failing to follow these could result in a problem. For example, great disclosures in an ad making unsubstantiated claims will not cure the untruthful and deceptive nature of the ad.

The updated guidelines provide detailed examples focusing on modern-day technology and modes of advertising, but the underlying principles are well-established and can be summed up in three bullet points.

  • When Disclosures Are Required: If an ad makes express or implied claims that are likely to be misleading without qualifying information, a disclosure is required. For example, if an ad offers "3/4 ct. diamond earrings" at a price, and the actual weights of the diamonds sold at that price range from .72 carats to .78 carats, a disclosure is necessary.
  • How Disclosures Must Appear:   Disclosures must be clear and conspicuous. In general, this means that a consumer must be able to see and understand the disclosure quickly, without much effort. Disclosures are clear and conspicuous when they: (a) are placed close to the claim they are qualifying, (b) appear prominently in the ad, (c) are repeated as necessary to avoid being overlooked, (d) are made prior to purchase, (e) are written in language that is easy to understand, and (f) in the case of audio disclosures, are at a volume and cadence that can be readily heard and understood.
  • When Even a Clear and Conspicuous Disclosure Is Ineffective:   Disclosures can never cure a false claim. If a disclosure provides information that contradicts a material claim, the disclosure will be ineffective to prevent deception.

The value in the revised guidelines is the application of these well-established principles to specific examples of digital advertising. Here, capturing the essence of revisions in bullet form is a bit more challenging, but some of the more interesting points are summarized below.

  • Hyperlinking to a Disclosure: While hyperlinks are often helpful in space-constrained ads, or where the disclosure would otherwise need to be repeated, it is easy to violate the "proximity" requirement when using hyperlinks. Accordingly, hyperlinks should not be used where the disclosure can be easily made in the text of the ad. If you do use hyperlinks to make disclosures, make sure that: (a) it is clear to consumers that they can click on the hyperlink to get more information, (b) the hyperlink is easy to find and conveys the importance of the information to which it leads, and (c) the hyperlink is compatible with the various programs and devices on which consumers might access the ad.
  • Pop-up, Scrolling, and Other Non-Stationary Forms of Disclosure: As a rule, fixed and static disclosures are more likely to be clear and conspicuous than those that appear, and then disappear, on a screen (even though the latter category may be more likely to capture a consumer's attention). The reason for this is largely technical – i.e., some browsers or devices do not support techniques for displaying non-stationary disclosures, or, in the case of pop-up disclosures, other software may prevent their use. If you do use non-stationary forms of disclosure, be sure that the disclosures are actually reaching the consumer.
  • Space-Constrained Ads (a.k.a. Sponsored Tweets): Marketers cannot circumvent disclosure requirements simply because ads are made in a space-constrained medium. Even in the world of Twitter, where a marketer is limited to 140 characters, the FTC expects ads to comply with its disclosure guidelines. Marketers must disclose that a space-constrained ad is sponsored and, if applicable, that it is a paid endorsement. In addition, if the ad makes claims that that are likely to be misleading without qualifying information, the marketer must at the very least include a link to such information, and must relay in the ad that the link contains important qualifying information. Whether this can be done in 140 characters is questionable. If it cannot, then the marketer should avoid running the ad.

Any company engaged in digital advertising should quickly familiarize itself with the FTC's revised guidelines. Online advertising is an area of intense focus at the moment, and flouting the FTC's guidelines is a risky proposition. While failing to adhere to the guidelines is not a per se violation of the false advertising laws, it does create a risk of an FTC investigation or enforcement action. And marketers should not be tempted to play the odds. Just because the FTC has not historically focused on your industry does not mean that it will not do so in the future. In addition, virtually every state has its own set of regulators looking at potential false advertising claims, and state regulators often borrow from FTC guidelines in assessing the truthfulness of advertising claims.

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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