United States: FTC Issues Native Ad Guidance

We have been closely following the evolution of "native advertising" and the regulatory response since before the FTC's Workshop "Blurred Lines: Advertising or Content?" over two years ago. Applying traditional FTC truth-in-advertising principles, we have recommended how to avoid deception claims by the FTC or the NAD by providing clear and conspicuous disclosure that advertisements with the look and feel of editorial content are ads or that an advertiser otherwise has a material connection to the content.

Just before Christmas last week, the FTC finally issued its long-awaited guidance on native advertising, "Enforcement Policy Statement on Deceptively Formatted Advertisements" (the "Native Ads Policy Statement"). The Native Ads Policy Statement explains how the FTC applies its long-standing consumer protection standards in the native context and how businesses can provide transparency in their native ads to avoid running afoul of the FTC's antideceptive rules. The Policy Statement reaffirms what we have been advising for years — transparency is necessary to avoid deception, and if consumers are misled regarding commercial messaging, the FTC can prosecute for a violation of Section 5 of the FTC Act, which prohibits false or misleading commercial practices. On the same day, the FTC also issued a supplemental "Native Advertising: A Guide for Businesses," (the "Native Ads Business Guide") which provides informal guidance from FTC staff on how to apply the Native Ads Policy Statement in routine digital advertising practices.     

Key takeaways from the Native Ads Policy Statement include:

  • Ads should be transparent. Content that promotes the benefits and attributes of goods and services should be clearly identifiable as advertising to consumers.
  • Such promotional content is deceptive if it misleads readers "into believing it is independent, impartial, or not from the sponsoring advertiser itself."
  • The FTC will consider the following factors when determining whether an ad formatted like an editorial is deceptive: 1) the net impression the entire ad conveys to the reasonable consumer in the context of the platform, and 2) any qualifying information in the ad.
  • Qualifying information, such as the advertiser's material connection to the content, must be clear, conspicuous, prominent, and unambiguous.

The Native Ads Business Guide provides 17 examples of different types of native advertising and explains when the FTC thinks a disclosure is necessary. For instance:

  • "Presented by" is appropriate to disclose that an advertiser paid a publisher to create and publish an article that may be of interest to its consumers where the article does not reference or promote the advertiser's products or services. There, the ad is the sponsorship not the content. However, were the article to depict or discuss the advertiser's products or services, the article (or the applicable part of it) would need to be clearly and prominently disclosed as an advertisement.
  • "More Content for You" and "From Around the Web," commonly used in recommendation widgets, does not sufficiently disclose that associated ad content is advertising and not independent editorial.
  • Paid product placement or brand integration in entertainment programming need not be disclosed if the product is merely depicted in a way that does not include or suggest objective claims about the product or service. However, if the placement links to an ad (e.g., in an interactive game), that placement should be identified as an ad before the user clicks out to the ad.
  • Even where content once viewed is clearly an ad, if the content is not also apparently an ad before it is viewed, then it must be clearly identified as an ad in a manner that enables consumers to understand that before they go on to view that content.

The Native Ads Business Guide also provides counsel on how to make clear and prominent disclosures when a disclosure is necessary:

  • Disclosures need to be near the ad's focal point (e.g., in front of or above the headline or image).
  • If editorial and advertising content are mixed, then disclosures should be made for each ad. However, if all ads are grouped together and clearly segregated from editorial content, an effective disclosure may be applied to the grouping as a whole.
  • Disclosures should remain when the ad content is shared virally or republished in nonpaid search requests.
  • For multimedia ads, the disclosures should be made in the ad itself and before consumers receive the ad's message. If the ad has audio, an audio disclosure is recommended. For video, the disclosure needs to remain on screen long enough to be read and understood, and may need to be repeated throughout longer programming.
  • Disclosures should be prominent and stand out so consumers can easily read or hear them.
  • Disclosures should be understandable and use likely understood terms such as "Ad," "Advertisement," "Paid Advertisement," "Sponsored Advertising Content," or some variation thereof.
  • Advertisers should avoid ambiguous terms like "Promoted" or "Promoted Stories" to qualify an advertiser's content, as that could potentially mislead consumers that the content is endorsed by the publisher site.
  • Depending on the context, terms such as "Presented by [X]," "Brought to you by [X]," "Promoted by [X]," or "Sponsored by [X]" could be an adequate disclosure.

With the Native Ads Policy Statement and Business Guide, the FTC is clearly putting advertisers and publishers on notice as to what native ad practices may be deceptive, and giving businesses the opportunity to modify their methods to comply with the FTC's truth-in-advertising regulations. Indeed, it appears from some early reports that by at least some measures, many publishers may need to change their native ad practices under the new FTC rules. We also note that the FTC's Native Ads Policy Statement and Business Guide do not just concern online publishers and brand advertisers, but may be enforced against other players in the digital advertising ecosystem such as "ad agencies and operators of affiliate advertising networks."  The Native Ads Business Guide emphasizes that everyone who participates "directly or indirectly in creating or presenting native ads" is responsible for ensuring that ads do not deceive consumers.

Stay tuned for a more detailed and in-depth analysis of the Native Ads Policy Statement and Business Guide early in the new year. In the meantime, for more background on native advertising and the long line of FTC precedent setting the compliance guideposts for this practice, see our prior blog posts on the topics here, here, here, and most recently last month, here.

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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