‘Native’ Ad Formatting Can Be Unlawfully Deceptive: FTC

By Joseph Wright

Dec. 22 — The FTC's Enforcement Policy Statement on Deceptively Formatted Advertisements identified three existing categories of deceptively formatted advertisements that also apply to native advertising or sponsored content in digital media:• advertisements appearing in “news” or similar formats misrepresenting their source or nature;

• Misleading “door opener” advertisements designed to mask a sales pitch as research or some other benign purpose; and
• Deceptive endorsements that don't disclose sponsoring advertisers.

The term “native advertising” refers to advertising that mimics the medium in which it is distributed. Examples cited by the FTC include advertising that appears to be news on social media platforms, or advertising that is embedded in social media content content such as in a video on YouTube. Native advertising can also appear in email messages, infographics, and video games.

The FTC's statement provides online publishers and their advertisers with a clear statement of how the agency intends to regulate new online advertising techniques. The crux of the guidance is that the FTC will apply existing consumer protection principles to newly created advertising formats.

“The FTC's announcement shows that the commission is focused on ensuring that long held consumer protection principles are observed in new digital media practices,” Gary Kibel, a partner in the Technology, Digital Media & Privacy Group of Davis & Gilbert LLP, New York, told Bloomberg BNA Dec. 22.

The FTC concurrently released a guidance document entitled “Native Advertising: A Guide for Businesses.” The guidance document presents 17 examples of native advertising and identifies whether additional disclosures would be needed in each scenario.

“The FTC's policy applies time-tested truth-in-advertising principles to modern media,” said Jessica Rich, Director of the Bureau of Consumer Protection in a Dec. 22 statement. “People browsing the Web, using social media, or watching videos have a right to know if they're seeing editorial content or an ad.”

The FTC referred businesses to the agency's existing “.com Disclosures: How to Make Effective Disclosures in Digital Advertising” to ensure the clarity and prominence of necessary disclosures (see related article, 4/9/13).

The FTC said in the business guide that three factors can ensure that native ads aren't deceptive:• Transparency is key—promotional material shouldn't suggest or imply that it is something else.

• Some native ads are obviously commercial and unlikely to mislead, but in other cases disclosures will be necessary.
• When disclosures are needed, they must be clear and prominent.

The FTC's policy statement said that questionable digital advertising practices have offline comparisons that can be used as guidance today. Sponsored news content looks a lot like narrative newspaper columns that described the food and service at a local restaurant. Misleading hyperlinks are similar to door-to-door salesmen who claimed to be conducting research only to give encyclopedia sales pitches once they got past the front door.

The FTC approved the policy statement in a 4-0 vote.

To contact the reporter on this story: Joseph Wright in Washington at jwright@bna.com

To contact the editor responsible for this story: Thomas O'Toole at totoole@bna.com