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The FTC's New .com Disclosures and What They Mean for Your Social Media Advertising Campaign

Wednesday, June 26, 2013

By Camille Calman, Davis Wright Tremaine LLP  

In March 2013, the Federal Trade Commission issued the first revision of its Dot Com Disclosures since that guide's original publication in May 2000. Both the original and the revised documents provide guidance for advertisers on complying with FTC rules on avoiding false and misleading advertisements. But there are important differences between the two versions. In technological time, 13 years is several lifetimes, and the revamped guide focuses on issues that did not exist in 2000, such as advertising via social media and mobile devices.

This article summarizes the key updates to the Dot Com Disclosures and provides some helpful tips for creating ad campaigns, particularly utilizing social media, that comply with the FTC's guidance. Like all FTC guidance, the publication does not have the force of law, but rather creates a safe harbor for advertisers seeking to avoid FTC scrutiny.

The First Dot Com Disclosures

The original Dot Com Disclosures, subtitled “Information About Online Advertising,” dates backs to May 2000.1At the turn of the millennium, most Americans who accessed the internet from home did so over a dial-up phone line connected via modem to a desktop or laptop computer. Cellphones did not offer internet access or even color displays. The phrase “social media” had not yet been coined. Pioneering (but now-unfashionable) social media sites such as Myspace and Friendster had not yet been invented. Mark Zuckerberg was a high school student. Tweeting was for birds.

The consumer-facing World Wide Web was, if not in its infancy, still in its early days, and the FTC wanted to make clear to advertisers that the agency's jurisdiction extended to the brave new world of banner ads, pop-ups, and hyperlinks. The original Dot Com Disclosures provided straightforward explanation of how the FTC would apply its then-existing disclosure standards to online advertising and what the FTC would look to in cyberspace for determining whether such advertising was false or misleading under the FTC Act.

The overarching message of the original Dot Com Disclosures was that the FTC's traditional views about disclosures were the same regardless of whether the medium was print, television, radio, or the internet.2 Then, as now, however the advertiser chooses to address its customers, it must make sure that (1) all relevant information is disclosed, and (2) all disclosures are clear and conspicuous.3

In the original guidance, the FTC focused on disclosures that appeared on separate pages or that were available only via hyperlink. The agency urged advertisers to:


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  • place disclosures near the claims they related to, ideally on the same screen;4

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  • make sure disclosures are easily seen and not buried in distractions, given that consumers do not read every word of ads;5

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  • use a hyperlink only if the disclosure is lengthy or needs to be repeated in several places, make the link obvious, and label it appropriately;6

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  • signal to consumers if they need to scroll down a page to see a disclosure;7 and

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  • make all necessary disclosures to consumers before they commit to making a purchase.8

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New .com Disclosures

By 2011, the FTC recognized that although the underlying message of the Dot Com Disclosures remained valid, the rules themselves needed an update to reflect technological innovation, including the facts that many consumers now access the internet on mobile devices; use software to block pop-up ads; and view advertising mixed with posts from friends on social media sites such as Facebook, Twitter, and Pinterest.

In preparation for the overhaul of the Dot Com Disclosures, the FTC solicited comments from the public during three public comment periods and hosted a public workshop in May 2012.9 In March 2013, it released the new .com Disclosures, now subtitled “How to Make Effective Disclosures in Digital Advertising,” a titular nod to the breadth of new media beyond the personal computer.10

There are no major surprises in the revised .com Disclosures. The FTC reiterates that it will continue to apply the same policies no matter what the advertising format or media.11 Wherever an advertisement runs, it must be truthful and nonmisleading, and any disclosures required to make it so must be clear and conspicuous based on the net impression of the ad—which means proximity of the disclosures to the claim they modify, their prominence in the ad, their understandability, their presentation free from distractions, and their appearance for a sufficient duration.12

But the revised publication does clarify the FTC's position that the limited real estate available on mobile devices or social media does not relieve advertisers of the burden of including clear, conspicuous disclosures. The FTC takes a hard line: If the space constraints of a cellphone screen or the 140-character maximum length for tweets preclude effective disclosures (including potential hyperlink disclosures), then the ad cannot run in that medium.13 Indeed, disclosures that may pass muster on a full-size desktop computer monitor may still be problematic, because many consumers will view them on a small mobile-device screen. Accordingly, the FTC expects advertisers to consider the full range of devices on which their ads will be viewed.14 Advertisers are also required to “keep abreast of empirical research about where consumers do and do not look on a screen” in laying out copy and related disclosure.15

For advertisers preparing an online or social media campaign, the key takeaways from the new .com Disclosures include:


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  • When practical, advertisers should try to include “relevant limitations and qualifying information” within the claim itself, rather than in a separate disclosure.16

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  • Disclosures are required to be “clear and conspicuous” no matter what the format or what space constraints exist.17

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  • Advertisers need to consider how their ad will display on the full range of devices and platforms on which people may view it. If your disclosures are clear and conspicuous when your ad appears on a computer or tablet, but disappear on a smartphone screen, then you will need to revise your ad.18

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  • Advertisers should pay attention to consumer behavior:

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  • Consumers who zoom in to read text on a smartphone may concentrate on the center of the screen and miss those disclosures at the edges. Ideally, a website optimized for mobile devices should not require left- or right-scrolling.19

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  • Advertisers need to monitor the effectiveness of their hyperlinks, including click-through data and time spent on the disclosure screen. The FTC expects that if data show consumers are not following hyperlinks or reading disclosures, the advertiser will find another method to convey the necessary information.20

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  • If consumers must scroll to see a disclosure, then ideally, the disclosure should be “unavoidable”—that is, the consumer can't continue to the next screen until she scrolls.21

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  • Hyperlink disclosures may be acceptable in some circumstances, but simple disclosures should never be behind a hyperlink, nor should cost, safety, or health information:22

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  • Hyperlink labels should “convey the importance, nature, and relevance of the information” to which the hyperlink leads. It is not enough for the hyperlink to say “Disclaimer” or “Terms and Conditions.”23

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  • Hyperlink styles should be consistent.24

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  • Hyperlinks should be placed as closely as possible to the text they modify.25

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  • The hyperlink should take the consumer directly to the disclosure.26

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  • Pop-ups that can be blocked by pop-up blocking software should not be used for disclosures.27

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  • Methods of disclosure that cannot be viewed on certain mobile devices, such as disclosures using pop-ups or Adobe Flash Player, should not be used for ads that will be seen on those devices.28

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  •  If the product being advertised is available from sources other than direct purchase from the advertiser (for instance, at brick-and-mortar stores or other websites), then disclosure must be made before consumers go to the store or website to make a purchase.29

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The new .com Disclosures also offers specific guidance for social media. For instance:


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  • When a paid endorser posts an endorsement on Twitter, the post must disclose that it is an advertisement:

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  • “#Ad” or “#Sponsored” are acceptable disclosures.30

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  • “#SPON” is not an acceptable disclosure because the FTC does not believe that consumers necessarily understand it to mean that the post is an ad.31

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  • The indication that the post is an ad should appear at the beginning of the post.32

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  • Each social media ad stands alone. You cannot make a disclosure in one of a series of tweets and assume that consumers will understand the disclosure to apply to the entire series.33

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  • In some circumstances, a tweet may direct or hyperlink consumers to a website for more information (for instance, if the tweet does not mention the product name, or if the product or special offer being touted is available only through the advertiser's website). The website linked to must prominently feature the full disclosure.34

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The new .com Disclosures ends with a series of examples, including examples involving social media.

The FTC has not yet taken any actions against advertisers who have violated the principles of the new .com Disclosures.

Social Media Ad Campaigns: Beyond .com Disclosures

The .com Disclosures offer useful guidance for advertisers planning a social media advertising campaign. But even a campaign that complies with this guidance can still be false or deceptive if it otherwise falls short of FTC expectations. Advertisers should consider the following potential pitfalls beyond the .com Disclosures when creating ad campaigns for social media.

Advertisers Must Be Transparent About Endorsements

In 2009, the FTC issued a revised version of its Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides”) that clarified the agency's policy on social media advertising.35 The Endorsement Guides make clear that if a celebrity is paid to endorse a product or service on social media, that relationship must be disclosed because “consumers might not realize that she is a paid endorser.”36 Any other material connection, such as the provision of free products, must also be disclosed.37 The other provisions of the Endorsement Guides apply to social media as they would to any other type of endorsement: The endorser must be a bona fide user of the product or service;38 cannot make false or unsubstantiated statements about the product or service;39 and, if the endorser discloses a personal experience (for instance, a particular amount of weight loss), the endorsement must disclose what a typical consumer result would be.40 The Endorsement Guides must be looked to in conjunction with the .com Disclosures when creating testimonial advertising campaigns.

Competitors or the NAD May Challenge Social Media Ad Campaigns

The National Advertising Division (NAD) of the Better Business Bureau has had several occasions to review social media advertising campaigns. For instance, in October 2011, NAD reviewed a “like-gated promotion” by online vision supplier Coastal Contacts Inc. on Facebook. A “like-gated” promotion is one that provides a benefit for consumers (in this case, a free pair of glasses) in return for “liking” the advertiser's Facebook page.41 The challenger, 1-800 Contacts, argued that by encouraging users to “like” its Facebook page by offering free glasses without sufficiently disclosing the terms, the advertiser was artificially inflating the popularity of its Facebook page. The challenger wanted the advertiser to remove the “likes” it received as the result of what it considered a deceptive promotion. The NAD found “no evidence in the record that Coastal obtained its ‘likes' through misleading or artificial means,” and did not require it to remove the “likes.”42 It cautioned, however, that it might have reached a different result if Coastal Contacts had received its “likes” from consumers, but not held up its end of the bargain.

In August 2011, the NAD reviewed a Twitter campaign for golf ball manufacturer Bridgestone Golf Inc. that included the use of the hashtag “#1BallFitter.”43 All Twitter hashtags begin with the hash, or number, sign—but the challenger argued that this particular hashtag was a superiority claim that Bridgestone was the “number one ball fitter”—meaning it had performed the most golf ball fittings, had the most golf ball fitting experience, and/or had the most comprehensive ball fitting program. The NAD found it reasonable to assume that consumers would understand the “#1BallFitter” hashtag to convey a “Number 1” claim. However, the NAD also found that the advertiser had a reasonable basis for its claim and so did not require modification.44

In September 2012, the NAD reviewed a campaign on Pinterest by Nutrisystem Inc.45 The campaign, called “Success Stories,” invited real users to post their weight-loss stories to the Pinterest board—but because the stories featured atypical results, without disclosure of what a typical result would be, the NAD determined that it ran afoul of the FTC Endorsement Guides and recommended that Nutrisystem add clear and conspicuous disclosures of what results consumers could typically expect.46

Advertisers Must Follow Social Media Sites' Rules

Facebook Inc. and Twitter Inc. also have their own guidelines for advertising campaigns on their websites.47 For instance, ads on Facebook “may not imply a Facebook endorsement or partnership of any kind.” Facebook has particularly strict rules for promotions and contests held via Facebook, including that all contests must be administered by using a Facebook app.48 Twitter asks advertisers that sponsor sweepstakes to “[d]iscourage the creation of multiple accounts” and “[d]iscourage posting the same Tweet repeatedly.”49

Advertisers Should Monitor How Their Ads Appear on Social Media Sites

As The New York Times pointed out in a recent article, advertisers on social media websites run the risk that their ads will appear alongside content that may be objectionable—such as pages advocating violence against women.50 Twitter now offers a “negative match” option that will help advertisers avoid their messages being placed in the context of certain words or phrases.51 Facebook avoids placing ads on pages that have been flagged as controversial, but does not seek out such pages to flag.52 Advertisers should think carefully about what words, phrases, and types of content they want to avoid.

Advertisers May Be Responsible for Employees' Behavior on Social Media

Advertisers should not allow their employees to use social media to review or “like” the advertisers' products, or to post negative reviews of a competitors' products. For instance, in 2010, public relations firm Reverb Communications Inc. settled charges with the FTC that its employees had posed as consumers to post positive reviews of video games sold by the company's clients on the iTunes store.53 Similarly, in 2009, a cosmetic surgery company called Lifestyle Lift settled with the New York attorney general over charges that its employees created false positive reviews on websites and online message boards.54 Companies should consider addressing such behavior as part of their employee handbooks or create a separate, comprehensive social media policy for employees.

Social media can be an effective way for companies and brands to interact with their consumers. But advertisers should not expect that the informal nature or space constraints of social media will absolve them of their obligations to make sure their advertisements are truthful and nonmisleading.

Camille Calman is an associate in Davis Wright Tremaine LLP's New York office who has handled a range of cases, including false advertising, trademark infringement and dilution, copyright infringement, and libel. She also counsels clients on sweepstakes law, intellectual property issues, privacy and security concerns, and libel and other issues related to news-gathering and publishing.  

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Disclaimer
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