United States: A Guide To Native Advertising's Legal Issues

Native advertising has by all accounts been the darling of the digital marketing world in 2013. Although it comes in all shapes and sizes, the general consensus defines "native advertising" as the practice of designing ads to look like the natural editorial content of the website on which they appear. Native's proponents hail it as the second coming, while critics assail native ads as commercials masquerading as content -- whatever your view, most everyone seems to be doing it.

A recent study indicates that about 75 percent of advertisers have gone native and the rest intend to. Social giants like Facebook and Twitter have adopted it, and publishers like BuzzFeed, The Atlantic, and Forbes have embraced it -- each with varying approaches and levels of success.

For instance, in your average BuzzFeed native ad, the site will post advertising content dubbed as articles "Presented By" its featured partners and set up to appear like the rest of BuzzFeed's content, typically in its signature list-of style.

Using its wealth of demographic information to target the most relevant audience, Facebook places ads as "Suggested Posts" directly into user's news feeds. Twitter has a similar approach with "Promoted Tweets."

Lately it seems everyone is jumping on the native bandwagon. Instagram announced that its users will soon be seeing sponsored images shuffled into their photo streams. LinkedIn has recently shifted much of its advertising focus to native content, greatly increasing the number of sponsored stories in users' "Updates." Pandora has gone native with the introduction of sponsored playlists. Even The New York Times is beginning to implement a native content platform.

But just because everyone is doing it, doesn't mean what everyone is doing is legal. Now we're not suggesting that native is not a legal form of advertising. Of course it is. But like any form of advertising, native needs to comply with certain laws, rules, and regulations. So native's breakout year begs an important question: How far can brands, advertisers, and publishers legally push it?

As we've written about before, there's a golden rule in advertising law: Don't deceive the consumer. And when it comes to native advertising, there may be a fundamental tension with this principle: Native blurs the line between editorial content and advertising content, and, when most effective, engages readers in the same way as the surrounding editorial content for a site. The more relevant and interesting native content is to the reader, the more effective the ad becomes. There is also the more critical and cynical school of thought that native advertising is simply the latest handle given to attempts to make online advertising look independent by presenting an ad in a look and feel similar to surrounding editorial content and persuading viewers to click through advertising content as effortlessly as editorial content.

The question then becomes: When do these blurred lines between content and advertising become unfair or deceptive in the eyes of the FTC or industry regulators?

Applicable existing rules and regulations to native advertisings

Native advertising has actually been around in some form or another since the early 1900s and the heyday of radio (e.g. The Texaco Star Theater). In fact, native today could be considered just the next evolution of the print and TV ad practice often dubbed as "hybrid advertising" by regulators. Blurring of editorial and advertising content in "hybrid ads" (think advertorials or late night infomercials) has long been subject to FTC scrutiny. For instance, the FTC's first infomercial case from the 1980s concerned a complaint against a sunglasses manufacturer for falsely claiming that a 30 minute TV show in an "Inquiring Reporter" format with scientists, "spontaneous" trials on the street, and a talk show format was an independent show as opposed to an ad.

There is no reason that the rules and regulations applicable to non-sexy, non-native ads aren't equally applicable to native. Indeed, as we've written before, advertising law basically requires digital marketers to tell the truth and don't be sneaky just as it does with off-line marketers. Advertisers and publishers looking to stay on the right side of regulators and the law with native ads can look to the FTC's existing rules and regulations for some guideposts, which frankly already govern these practices.

Generally speaking, section five of the FTC Act sets forth the basic principles of advertising law applicable to native:

  • Advertising must be truthful and not misleading.
  • Advertiser must substantiate any express or implied claims.
  • Advertising cannot be unfair or deceptive.
  • Any disclosures necessary to make an ad accurate must be clear and conspicuous.

In addition to these broad principles, the FTC has recently clarified these tenets as applied to the on-line world. For instance, the FTC's recent "Dot Com Disclosures: Information about Online Advertising" offers guidance on issues clearly relevant to many aspects of a typical native advertising campaign. As summarized in the "Dot Com Guidelines" (which we recommend every digital marketer read), one key principle is that online advertising needs to be disclosed as such. Moreover, the "Dot Com Guidelines" make plain that online advertisers need to ensure that any disclosures fit into the context in which the advertising appears and are placed in close proximity to the ad. All these points apply squarely to native advertising.

The FTC's guidance on sponsored search engine results suggests some best practices for native advertising as well. In these search engine guidelines, the FTC recommends that sponsored search results should be clearly set apart from organic search results. The FTC approves such methods as shading and borders around the sponsored results to set them apart. This might inform digital marketers in how they should set apart their native content from editorial content of a site.

Finally, the FTC's guidance on online endorsements is also relevant to native advertising. The online endorsement guidelines make clear that the FTC wants the relationship between advertisers and content creators, like bloggers, clearly and conspicuously disclosed. This is particularly relevant in the context of paid endorsements on social media. Obviously, if the FTC is requiring bloggers to disclose any "material connection" to a brand, (i.e., a connection that might affect the credibility of the endorsement), the FTC will follow suit with native advertising and at minimum require identification of any native content as an advertisement. Most native ads already identify the commercial brand by stating "Sponsored by," "Presented by," or something similar. Although it remains to be seen whether the FTC will require anything more, advertisers should be especially careful not to be too cute when disclosing the material connection.

Do we need specific regulations for native advertising?

No regulator or self-regulator has determined to date whether additional specific regulations are needed. But the growth of practice is clearly on the radar.

For instance, the FTC will host a native advertising workshop on December 4 to examine the practice. Titled "Blurred Lines: Advertising or Content?", the workshop will bring together FTC representatives with panelists from digital publications, advertising industry organizations, academia, and consumer groups, including Huffington Post, IAB, Columbia School of Journalism, and Public Citizen. Notably, there is a good chance that the workshop may result in FTC guidelines, similar to this year's updated "Dot Com Disclosures" after the May 2012 workshop.

On the self-regulatory side, IAB has created a task force to explore the native landscape with the goal of providing best practices. The National Advertising Division of the Better Business Bureau (or "NAD") recently issued its first decision a few weeks ago addressing native advertising practices, finding that Qualcomm was not obligated to continually identify itself as the author of several sponsored content articles after expiration of the agreement because Qualcomm didn't author the content. At a micro-level, a few publishers are starting to promulgate their own native guidelines. For instance, after the now infamous Scientology debacle, The Atlantic adopted native content guidelines, which include a two-stage review process, prominent "sponsored content" labels, and monitoring of user comments.

Three key points for native advertising

Even without more specific guidance, the foregoing FTC online regulations provide a good framework for digital marketers. Here are a few quick lessons that can be gleaned from existing rules and regulations:

Disclose native advertising content as advertising

The first point is a simple one: Disclose that your native advertising content is advertising. Taking guidance from the FTC's "Dot Com Disclosures," any internet advertisement should be clearly disclosed as an ad to consumers. Dropping native advertising content onto websites without a "Sponsored," "Presented By," "Featured Content," or similar disclosure is nothing less than baiting the regulators. Even if your content could stand alone as editorial content on the site that hosts it, this doesn't overcome the fact that it is still advertising content you or your client created and that it should be clearly disclosed as such.

Disclosures should be prominent in the context users will engage the ad

The second point for native we think is critical: Not only do you have to disclose, but you have to make sure that disclosure is visible in the context it appears. The key difference in native advertising today is just how well it blends in with editorial content. Take, for instance, the BuzzFeed story in the image below:

Without the "Presented By" text, it would be incredibly hard to distinguish that story from the other content of the site. It would likewise be hard to distinguish if the disclosure was in tiny text, not included alongside the ad itself, or otherwise obfuscated from the content. One of the criticisms of The Atlantic after it published its infamous Scientology article was that the article was not clearly distinguished from the rest of the site's content.

Vet your native content

At the end of the day, you're on the hook for your own advertising practices. No matter how honest your intentions, if the host of your native advertising is deceptively displaying it like true editorial content, or in a manner likely to deceive consumers, you may incur liability. Make sure it's clear up front with the websites hosting your native content: How does that site separate out its native content from its editorial content? How long will your content be posted? If the content remains on the site after the agreement period, will it continue to be marked as sponsored? Most publishers vet any form of advertising to ensure quality and brand consistency, and these concerns apply with even more force with native ads. As mentioned above, this is one lesson The Atlantic learned the hard way.

Coda -- native advertising and the First Amendment

One assumption we've made in this article is that native advertising is always in fact "commercial speech" and thus subject to certain regulations. Although there has yet to be a challenge directly on this point, sometime in the near future, an argument might be made that some "native advertising" is not "commercial speech" at all in the First Amendment context. From a constitutional perspective, "commercial speech" is generally understood as speech that "does no more than propose a commercial transaction." Commercial speech is entitled to a measure of First Amendment protection, but substantially less than that afforded to "core" First Amendment speech (e.g., the news, politics, and it is therefore freely regulated).

In other contexts, when content created by a company is reasonably in the "public interest" or considered non-commercial, such as reporting on current events or making some larger societal point, that speech may be protected by the First Amendment from certain legal claims like copyright infringement or government regulation. In a prominent California case, for instance, L.A. Magazine successfully defended a misappropriation of image lawsuit from Dustin Hoffman after imposing his head on female model in a "butter-colored silk gown by Richard Tyler" for a fashion article that spoofed iconic movie scenes. Although the photo was part of the cover story and used to sell magazines, the court held that it wasn't necessarily commercial speech. The article "as a whole" was a "combination of fashion photography, humor, and visual and verbal editorial comment on classic films and famous actors." And the fact that part of its purpose was to increase magazine circulation and sales wasn't enough to render it purely commercial. According to the court in that case, "[c]ommon sense tells us this is not a simple advertisement." Question whether the same could be theoretically said for certain types of native ads.

The near future may hold some specific regulations or guidelines on native advertising. But until then, the best practice for native ad campaigns is to follow as close as possible existing advertising rules and guidelines and keep in mind the three points mentioned above.

Originally published on December 2, 2013, by iMedia Connection.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions