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.

Talking about Direct Response, FTC

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