United States: FTC Updates Guidelines For Making Proper Disclosures In Digital Advertising

The U.S. Federal Trade Commission (FTC) released updated guidance on how to make online advertising and marketing disclosures "clear and conspicuous" to avoid consumer deception.  The guidelines affect the structure and format of digital advertisements and marketing initiatives such as the use of endorsements and testimonials.

On March 12, 2013, the U.S. Federal Trade Commission (FTC) released updated guidance on how to make online advertising and marketing disclosures "clear and conspicuous" to avoid consumer deception.  The FTC's new .com Disclosures update the agency's original Dot Com Disclosures issued in May 2000, to account for the emergence of new technologies and the extensive changes in the online marketplace since the 2000 guidelines were released.

As background, the FTC aims to protect consumers from deception in the marketplace through Section 5 of the FTC Act (15 U.S.C. 45), which prohibits "unfair or deceptive acts or practices in or affecting commerce."  Deceptive acts or practices may include false representations about goods or services, misleading price claims, sales without adequate disclosure, and bait-and-switch techniques.  In an attempt to reduce consumer injury as a result of such practices, the FTC requires that companies make certain disclosures in advertising, marketing and sales efforts, regardless of the medium, and such disclosure must be "clear and conspicuous."  The FTC takes the position that if a required disclosure cannot be made effectively through a particular online format, then that format should not be used for advertising, marketing or sales.

Acknowledging that there is no set formula to create a "clear and conspicuous" disclosure, the .com Disclosures set forth criteria to evaluate whether a disclosure is made effectively in digital advertising.  The criteria apply to endorsement messages and testimonials as well as traditional advertising conducted on online platforms.

Location, Location, Location.  A disclosure should be placed "as close as possible" to the claim it qualifies.  The FTC encourages placing a disclosure within the text of the claim itself, if the disclaimer can be adequately conveyed by doing so.  Advertisers should also be mindful of how digital advertising may be formatted differently on various devices.  A disclosure should be viewable within the "same screen" as the claim it qualifies, without excessive scrolling or linking to other locations (except in limited instances).  Advertisers should assume that consumers do not read an entire website or screen, and should place a disclosure in a way that increases the likelihood that consumers will notice it and relate it to the relevant claim.

Be Mindful When Separating Disclosures from Qualifying Claims.  The FTC recognizes that in limited cases it may not be easy to incorporate disclosures into, or in close proximity to, a claim (e.g., particularly lengthy disclosures or disclosures that need to be repeated due to multiple triggering claims).

If scrolling is necessary to view a disclosure, the disclosure should be "unavoidable."  One example is to have consumers "click-accept" a disclosure before allowing a purchase, or before proceeding to the next webpage.  Advertisers should also be familiar with the formatting capabilities of the technology they are using to provide the disclosures.  Disclosures should not be contained in blockable pop-ups or formatted using technology that may display correctly on some devices but not others.

It is acceptable to hyperlink to a disclosure if the hyperlink appears proximate to the claim that triggers the disclosure and is formatted in a manner that makes obvious to consumers that the link can be clicked.  The wording of the hyperlink should not state "Disclosure," "Details Below," "Terms and Conditions," "Fine Print" or other such generic language that does not convey the importance, nature or relevance of the information.  The best practice is to give consumers an indication of what the disclosure is about (e.g., "See below for important information on additional fees" or "Click here for limitations on product warranty").  Furthermore, a hyperlink should take consumers directly to the disclosure without additional searching or scrolling.  If data shows that the hyperlinks are not being clicked, that may provide an indication that the disclosures are not being clearly and conspicuously conveyed to consumers.  In those circumstances, advertisers should provide the disclosures to consumers in a different way.

In certain cases, the FTC strongly discourages use of hyperlinks—even if formatted properly.  Advertisers should make every effort to include required health and safety disclosures on the same page as the qualifying claim(s), immediately adjacent to the claims made, with appropriate prominence.  In addition, the FTC disfavors use of hyperlinking to disclosures that provide cost information, unless details about significant additional fees associated with a purchase are too complex to describe adjacent to the price claim.

Carefully Craft Space-Constrained Advertisements.  Space-constrained ads are not immune from FTC disclosure requirements.  Disclosures made in a space-constrained ad (e.g., a Tweet or SMS) should be placed in each message, in the beginning of the message, so the disclosure stays with the message if it is republished.  Abbreviations that adequately inform consumers of the essence of a required disclosure may be used, however, the meaning of the abbreviation must be generally understood by consumers.  For example, "ad" and "sponsored" are likely to be generally understood by consumers whereas "spon" or "fs" may not immediately be recognized by consumers to mean "sponsored" or "free sample," respectively.

Display Disclosures Prominently.  Advertisers are responsible for drawing consumer attention to the required disclosures.  The FTC suggests using size, font and color to distinguish a disclosure so it is not lost in the surrounding text.  In addition, an advertisement should not distract consumers from the disclosure, for example, placing moving visuals behind a text disclosure.  Advertisers should repeat disclosures if necessary, especially on lengthy websites.  Essentially, disclosures should be prominent, unavoidable and in plain view so consumers can easily locate them, regardless of the technology platform.

Match the Medium.  The concept of disclosures accompanying the triggering claim also translates to media selection.  Audio claims should use audio disclosures; written claims should use written disclosures; and visual disclosures presented in video clips or moving visuals should appear for a sufficient duration to be noticed, read and understood by consumers.

What the Disclosures Mean in the Context of Endorsements and Testimonials

In light of the .com Disclosures, advertisers may wish to reexamine their internal guidelines and external instructions regarding endorsements and testimonials.  In these guidelines, advertisers should:

  • Emphasize that endorsers place the requisite relationship disclosure statement at the beginning of each endorsement message (i.e., the beginning of a blog, Tweet, text or post)
  • Instruct Tweeting or texting endorsers to use clearly understood disclosure abbreviations such as #ad and #sponsored, and not #spon
  • Tailor disclosure guidelines for endorsers to the form of media the endorser will use, e.g., bloggers should not need to use hyperlinks or abbreviated hashtags to make the necessary relationship disclosure statement, so guidelines should instruct bloggers to avoid these disclosure formats

Companies may be held liable for misleading statements made by third-party endorsers, so the best practice is to employ quality control processes to ensure the guidelines in the .com Disclosures are followed.

In light of this guidance, companies should review and update their internal guidelines, policies and practices regarding disclosures in the digital environment.

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