United States: FTC Issues Enforcement Policy Statement On Native Advertising In New Media

Digital media marketers are aggressively increasing the use of so-called sponsored content, or native advertising to reach new customers. Particularly with the growing use of ad blockers on web and mobile browsers, marketers have sought to present advertising in a new form that can circumvent automated blocking and somehow capture the attention of users who may face a barrage of digital display ads everyday.

Generally speaking, natively formatted advertising attempts to match the design and style of the digital media it is embedded into. The ads can appear in a variety of settings, including in: the stream or display of regular content on news or news aggregations sites, videos, social media feeds, search results, infographics, images, animations, in-game modules, and playlists on streaming services. Such ads can be placed directly by the publisher or inserted via ad networks, and be specifically targeted to the user.

However, the proliferation of native advertising in digital media has raised questions about whether such evolving formats deceive consumers by blurring the distinction between advertising and news or editorial content.

In 2013, the FTC hosted a workshop, "Blurred Lines: Advertising or Content? – An FTC Workshop on Native Advertising," to examine the blending of advertisements with news, entertainment, and other editorial content in digital media. Following up on its findings, in December 2015, the agency released its Enforcement Policy Statement on Deceptively Formatted Advertisements, which lays out the general principles the Commission considers in determining whether any particular ad format is deceptive and violates the FTC Act.

The Policy Statement notes that: "deception occurs when an advertisement misleads reasonable consumers as to its true nature or source, including that a party other than the sponsoring advertiser is the source of an advertising or promotional message, and such misleading representation is material." According to the Policy Statement, under FTC principles, advertisers cannot use "deceptive door openers" to induce consumers to view advertising content. Advertisers are responsible for ensuring that native ads are identifiable as advertising before consumers arrive at the main advertising page. If the source of the content is clear, consumers can make informed decisions about whether to interact with the ad and the weight to give the information conveyed in the ad. However, the FTC will find an ad's format deceptive if the ad materially misleads consumers about its commercial nature, including through an express or implied misrepresentation that it comes from a party other than the sponsoring advertiser.

How is the format of a native advertisement evaluated? In determining whether an ad is deceptive, the FTC considers the "net impression" the ad conveys to consumers, that is, the overall context of the interaction, including what the ads says and the format it is presented in. According to the Policy Statement, the agency will examine such factors as its overall appearance, the similarity of its written, spoken, or visual style to non-advertising content offered on a publisher's site, and the degree to which it is distinguishable from such other content.

Clarifying information that accompanies a native ad must be disclosed clearly and prominently to overcome any misleading impression. Native ads may include disclosures such as text labels, audio disclosures, or visual cues distinguishing the ad from other non-commercial content. The FTC declares that any disclosure must be "sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression," and "made in simple, unequivocal language, so that consumers comprehend what it means."

The Policy Statement advises that disclosures should be made in the same language as the predominant language in which ads are communicated. In its accompanying guidance, Native Advertising: A Guide for Businesses, the FTC further notes that such disclosures should not be couched in technical or industry jargon, or displayed using unfamiliar icons or terminology that might have different meanings to consumers in other situations. The Guidance suggests that terms likely to be understood include "Ad," "Advertisement," "Paid Advertisement," "Sponsored Advertising Content," or some variation thereof, but that advertisers should not use terms such as "Promoted" or "Promoted Stories," which the agency deems "at best ambiguous." The Guidance also states, that, depending on the context, "consumers reasonably may interpret other terms, such as 'Presented by [X],' 'Brought to You by [X],' 'Promoted by [X],' or 'Sponsored by [X]' to mean that a sponsoring advertiser funded or 'underwrote' but did not create or influence the content."

This is only a very brief summary of the FTC's position on native advertising. We advise that all companies engaged, directly or indirectly, in the creation, placement or publishing of native advertisements read closely the FTC's Policy Statement and Guidance document to aid their determination about what types of native ads could be found misleading. As native advertising continues to appear in digital media, we will continue to follow regulatory and industry developments.

FTC Issues Enforcement Policy Statement on Native Advertising in New Media

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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