Is It or Isn’t It? FTC Issues Guidance to Companies on Native Advertising

While the policy statement and its related guidance are new, the FTC emphasized that it has been regulating native advertising under Section 5 of the FTC Act since 1967 and that this policy document and guidance is a summary of the principles that it has developed over the years. While the FTC has been regulating native advertisements for decades, the issuance of this guidance indicates that the FTC will be making regulation of native advertising a priority in 2016.
 
Native advertising – as defined by the FTC – is advertising that matches the design, style, and behavior of the digital media in which it is disseminated. The main problem with respect to native advertising arises when the content is formatted in a way that suggests or implies it is not an advertisement.

When are disclosures necessary?

In reviewing native advertisements for legal compliance, the key objective is to make sure consumers understand that the content they are viewing is an advertisement. An advertisement (even if the content is truthful and accurate) may still be deceptive if it is formatted to appear as if it is not an advertisement.
 
To determine whether a reasonable consumer will understand that content is an advertisement, it is important to look at the overall impression of the advertisement by looking at the general appearance of the advertisement, whether the advertisement uses a writing or visual style similar to non-advertising content on the publisher’s site, and whether the advertisement contains information similar to non-advertising content on the publisher’s site. For instance, if a website prominently features news articles related to personal finance and an advertisement appearing on the website for a financial advisory company is formatted as a news story, then a disclosure is likely necessary to prevent confusion.  Similarly, if a furniture company paid an online lifestyle magazine to write and publish an article recommending its products as part of an overall renovation plan, then a disclosure is likely necessary to prevent confusion.
 
The FTC also emphasizes that native advertisements can arise in circumstances outside of news articles, including news feeds, content recommendation widgets, video games, and online programming and videos. Therefore, it is important to evaluate any circumstance where your company is paying for the promotion of its goods and services in a manner where the advertising matches the behavior of the digital media in which it is disseminated.

Are there situations when disclosures are not necessary?

The FTC has recognized that all native advertising does not require disclosures. One such situation is where the content of the advertisement clearly conveys that the content is commercial and the content of the advertisement substantially differs from the non-advertising content featured on the site. For instance, an advertisement for a refrigerator formatted as a news article and featured on the website of a sports magazine would likely not need a disclosure even if the color scheme, font, and graphics are similar to the format of the sports magazine.  
 
Another such example is where the native advertisement itself does not commercially promote the goods of the advertiser. For instance, if a website prominently features news articles related to personal finance and a financial advisory company pays to have a story published on the “top-20 places to retire” but the story does not actively promote the services of the financial advisory company, then disclosure is likely not necessary to prevent confusion.     

What should the disclosures say and where should they be placed?

Disclosures that are necessary to prevent deception must be clear and prominent. Some examples from the FTC guidance of ways to ensure disclosures are prominent include:

• Placing disclosures in a location where consumers will notice them and be able to easily identify the content to which the disclosure applies.
• Putting the disclosure in front of or above the headline of the native advertisement.
• Determining the focal point of the advertisement and placing the disclosure there. For instance, the focal point of a video ad may be the thumbnail view of the video rather than its written description.
• Placing the disclosure both on the “teaser” and on the main advertising page. For instance, the disclosure should be visible on the main page of an online magazine where the article summary is displayed as well as on the full article page.

The FTC also advised that terms such as “Ad,” “Advertisement,” “Paid Advertisement,” and “Sponsored Advertising Content” are likely to be understood by consumers while statements such as “Promoted,” “Promoted Stories,” “Presented by,” “Brought to You by,” “Promoted by,” or “Sponsored by” are less clear and may not adequately inform consumers about the financial relationship between the content and the advertiser.