United States: Highlights From FTC's Native Advertising Workshop: More Questions Than Answers?

On Wednesday, the Federal Trade Commission (the "FTC") hosted its much-anticipated workshop, "Blurred Lines:  Advertising or Content?", in Washington, DC. The workshop facilitated a discussion among major industry stakeholders on the practice of "native advertising" in order to help the FTC determine whether additional guidance from the FTC is needed. 

While there has been a growing focus on native advertising by regulatory and self-regulatory bodies (as evidenced by recent National Advertising Division cases, discussed here), native advertising is anything but new. Over the past decades, the FTC has brought enforcement actions challenging ads that, in the FTC's view, were deceptively posing as editorial content (including "advertorials" in magazines and infomercials on television). However, the legal and ethical issues around native advertising have become more complex in recent years because of the many (and varied) ways that advertising can be integrated seamlessly into traditionally editorial spaces in an online and mobile environment and in light of the wide adoption of native advertising by online publishers.

The workshop provided a forum for robust discussion about native advertising practices, consumer demand for, and understanding of, native advertising, and the need for (and ways of) differentiating native advertising from surrounding editorial content. Here are a few highlights: 

  • What is Native Advertising?  As the Interactive Advertising Bureau noted in its Native Advertising Playbook (released this week), native advertising is hard to define because it takes many different forms.  The workshop participants explored the diverse array of native advertising formats and techniques, including (1) custom content (which may be written by the publisher or written by the brand in partnership with the publisher), (2) content that appears in-feed (such as a promoted tweet on Twitter or content in a publisher's "top news" feed), and (3) content that appears in a recommendation "widget" placed on a publisher's site.  As the workshop made clear, numerous other forms of native advertising exist, and additional forms are certain to be developed in the coming years. 
  • Distinguishing Advertising from Editorial Content. There was a wide consensus among participants that "transparency" is key - both to protect the publisher's credibility with readers and to avoid potential deception in situations where consumers may have difficulty discerning that the content in question is a paid advertisement. However, a number of panelists emphasized that certain types of media opportunities that are sometimes labeled as "native advertising" may not constitute advertising at all (and, therefore, may not require any disclosure under Section 5 of the FTC Act) - for example, a camera manufacturer that pays a publisher to create a custom "listicle" about ten great vacation destinations, where the "listicle" does not make any claims about the manufacturer''s products or contain any other content that is likely to influence a purchasing decision. And one panelist noted that preliminary research also shows that consumers often don't care if the content they read is sponsored by a brand, raising the question of whether native advertising poses any harm to consumers in the first place.
  • Manner and Methods of Disclosure.  Participants largely agreed that, in situations where disclosure is called for, a one-size-fits-all approach is not only undesirable, but impossible. The panelists debated the efficacy of labels like "sponsored by," "presented by," and "sponsored content" and the use of graphic or color differentiation (and other visual cues) to differentiate between sponsored and editorial content. The final panel used a series of hypothetical native ads that illustrated the challenges publishers and advertisers face as they try to figure out effective ways of telling consumers what they need to know.
  • Social Sharing. Most native advertising products allow for social sharing. The participants pondered a scenario where disclosure is made on the original site to which content is posted, but does not travel with the content as it is shared out by consumers or brands. The publishers noted that they have little control over how users interact with their content and should therefore not be held responsible for consumers'' actions.

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As the FTC's Mary Engle noted, the workshop may have "raised more questions" for regulators "than it answered." While we wait to see whether the FTC will take action, advertisers and agencies that use native advertising products should bear in mind that there could still be FTC enforcement actions based on existing law.

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This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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Authors
Terri J. Seligman
Hannah E. Taylor (Frankfurt Kurnit Klein & Setz)
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