FTC Unveils
Enforcement Policy for Native Advertising
Two years after holding a public
workshop on the subject, the Federal Trade Commission (FTC) has issued a formal
Enforcement Policy Statement (EPS) and companion Business Guide on native
advertising.
While no longer the hot new innovation that it was, what, you may still ask, is
native advertising? It is the 21st century version of the infomercial or
advertorial: paid advertising that is blended with original, or "native,”
content – such as news or entertainment – so that it comes across as
non-commercial, leading to more clicks. As with these older techniques that
seek to overcome consumer aversion to a saturated advertising landscape – and
others like sponsored product reviews (now addressed in the FTC’s Endorsement
Guides), the issue for the FTC with native advertising is whether the consumer
recognizes the content as advertising, and if not, what "alerts” will put the
consumer on notice so he or she is not misled about its true nature and
purpose.
The EPS explains that while the particular form of native advertising may be
new, the FTC will apply the same principles it always has to evaluate whether
an ad format is deceptive. If a format is not readily identifiable as an ad,
such as by suggesting it comes from someone other than the sponsoring
advertiser, the FTC will regard it as deceptive. The FTC watchword is
transparency: an ad should not come across as anything other than an ad.
The EPS observes that native advertising can appear in a wide variety of forms,
including written narratives, videos, social media posts, e-mail, search
results, infographics, images, animations, in-game modules, messaging apps, and
playlists on streaming services. Often it is inserted into the stream of regular
content a publisher offers, such as news and news aggregator sites and social
media platforms, with a headline, thumbnail image or short description linking
to additional advertising content. The FTC calls these "publisher sites.”
Whether natively formatted advertising in any of these forms deceives consumers
by blurring the distinction between advertising and non-commercial content will
depend on the particular context of the ad. In evaluating whether an ad’s
format is misleading, the FTC will "scrutinize the entire ad, examining 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.”
The EPS, in particular, singles out "deceptive door openers” to induce
consumers to view advertising content. Native ads must be recognizable as
advertising before consumers click through and arrive at the main advertising
page. If they are not, then a disclosure revealing the true source and nature
of the content is required.
The new FTC publication, "Native Advertising: A Guide to Business,” offers 17
hypothetical examples to give some idea how the FTC will apply these principles
in practice and determine whether a disclosure is necessary. In each one, the
answer depends on the degree of similarity between the native ad and the format
and topic of the surrounding content. The more similar, the more likely a
disclosure will be necessary to avoid deception.
If a disclosure is necessary, like any other disclosure, to be effective it
must meet the FTC’s "clear and conspicuous” standard, which demands that the
disclosure be "unavoidable.” The disclosure must be: (1) in clear and
unambiguous language; (2) as close as possible to the native ad to which it
relates; (3) in a font and color that’s easy to read; (4) in a shade that
stands out against the background; (5) for video ads, on the screen long enough
to be noticed, read and understood; and (6) for audio disclosures, read at a
cadence and in words that are easy for consumers to follow and understand.
Advertisers have flexibility in how to how to identify native ads, as long as
consumers notice and understand what the disclosure means.
If you’re using native ads or thinking about it, the Business Guide, available
at www.ftc.gov, is a useful resource for
understanding and complying with FTC law as applied to this method of digital
advertising. Now that the FTC has publicly articulated how it plans to regulate
native advertising, it undoubtedly will begin to practice what it preaches by
bringing enforcement actions against uses of it that mislead consumers.
Studying and applying the advice offered in the Business Guide can spare you
from becoming one of its targets.