FTC issues guidelines on “native” advertising, IAB expresses concern

Native-AdvertisingIn late December 2015, the FTC issued a formal policy statement and accompanying guidelines addressing “native” advertising and deceptively formatted advertisements.  Native ads are content designed to promote a company or brand that are formatted by a publisher to look like a normal article online. They usually feature a disclaimer or branding from the sponsor.

According to the FTC’s press release, the Enforcement Policy Statement on Deceptively Formatted Advertisements:

[L]ays out the general principles the Commission considers in determining whether any particular ad format is deceptive and violates the FTC Act.  The policy statement affirms the long-standing consumer protection principle that advertisements and promotional messages that promote the benefits and attributes of goods and services should be identifiable as advertising to consumers.

The main thrust of the 16-page policy statement was to set forth voluntary guidelines for determining when native ads are deceiving consumers and how existing policies on deceptive ads apply to them.  In the policy statement, the FTC stated:

Regardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising.

The policy statement then in turn addresses what types of advertising formats are deceptive and the FTC’s policy on deceptively formatted advertising.  Among those types of advertisements the FTC finds deceptive are “advertisements appearing in a news format or that otherwise misrepresent their source or nature,” “misleading door openers,” and “deceptive endorsements that do not disclose a sponsoring advertiser.”  The FTC’s statement then goes on to iterate the FTC’s policy position on deceptively formatted advertising, which notes that “an advertisement’s format can mislead consumers as to its nature or source,” and that “misleading claims about the nature and source of advertising are likely material.”  Finally, the policy statement concludes, finding that:

Although digital media has expanded and changed the way marketers reach consumers, all advertisers, including digital advertisers, must comply with the same legal principles regarding deceptive conduct the Commission has long enforced. This statement sets forth principles of general applicability on which the Commission will rely in determining whether any particular advertising format is deceptive, in violation of Section 5 of the FTC Act. The Commission will find an advertisement deceptive if the ad misleads reasonable consumers as to its nature or source, including that a party other than the sponsoring advertiser is its source. Misleading representations of this kind are likely to affect consumers’ decisions or conduct regarding the advertised product or the advertisement, including by causing consumers to give greater credence to advertising claims or to interact with advertising content with which they otherwise would not have interacted.

Accompanying the FTC’s policy statement was the FTC’s guidelines for businesses employing native advertising, entitled “Native Advertising: A Guide for Business.”   The accompanying guidelines were issued “to help companies understand, and comply with, the policy statement in the context of native advertising.  The business guidance gives examples of when disclosures are necessary to prevent deception and FTC staff guidance on how to make clear and prominent disclosures within the format of native ads,” the FTC said.

The FTC’s guidelines on native advertising is an 11-page guide that contains a number of detailed hypotheticals examples and discussion of what disclosures would be required in each hypothetical case.  For example, when labels such as “advertisement” are necessary, the FTC states that they should be obvious to consumers and be as close as possible to the content itself.  Thus, the more a native ad is similar in format and topic to content on a publisher’s site, “the more likely that a disclosure will be necessary to prevent deception,” the FTC said.  Additionally, when it comes to labeling, the FTC has said advertisers shouldn’t use terms such as “Promoted” or “Promoted Stories,” because they are “at best ambiguous and potentially could mislead consumers that advertising content is endorsed by a publisher site.”

While the FTC’s policy statement and accompanying guidelines appear to provide some clarity regarding native advertising, the Interactive Advertising Bureau (“IAB”) has expressed some concerns about the FTC’s guidance.  In a statement from IAB, IAB VP of Public Policy Brad Weltman said that, while it agrees with the FTC that disclosures are needed to help consumers identify native ads, the organization takes issue with some of the regulatory body’s guidelines, particularly rules that could “impinge on commercial speech protections.”  According to Weltman:

We very much appreciate the hard work the Commission has done to understand the issue of native advertising, and applaud the Commission for putting native advertising guidance into the marketplace. While guidance serves great benefit to industry, it must also be technically feasible, creatively relevant, and not stifle innovation.  To that end, we have reservations about some elements of the Commission’s Guidance. In particular, the section on “clarity of meaning” in native advertising disclosures is overly prescriptive, especially absent any compelling evidence to justify some terms over others.

Weltman and IAB concluded their statement saying they took the FTC’s guidelines on native ads to mean enforcement of those rules would soon follow.  IAB added it hoped going forward all parties could work together “to inform, entertain, and edify consumers, not fool them.”  IAB has been active in monitoring native advertising through its Native Advertising Task Force and its Native Advertising Playbook released in 2013 to provide a framework for understanding native ad options. The group has also been working with the FTC for two years on the topic.