FTC on Native Advertising

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The FTC recently issued some guidance on native advertising (https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses). Here are some thoughts. Be advised, this one is a little more dense than other Lift Letters. 

First, some fun FTC facts, from ex-lawyer Eric:

  • The FTC is an executive agency that was authorized by congress under the FTC Act in 1914. This gives the FTC the power to, among other things, prevent unfair competition / deceptive acts and practices in commerce, to seek damages, and to create trade regulation rules defining acts or practices that are unfair or deceptive - and establish requirements designed to prevent those practices or acts.
  • The FTC does NOT create the law (it's an executive, not legislative agency), but it can issue regulations and hold administrative hearings subject to its regulations. The regulations, the scope of the regulations, and the results of its hearings, are all subject to appeals in the federal court system. The FTC gets overruled from time to time, either for overreaching its mandate or making a rule that otherwise is illegal. This bullet is a little simplified, but it's largely correct
  • The FTC has issued a number of regulations on native advertising, the first was in 1967. They have been active in the native digital space, ruling on sponsored search results, fake reviews, emails, etc.

So with all that said, the FTC issued an enforcement policy on native advertising (https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf). In it, they specifically said, "the particular facts will determine whether an advertisement formatted like the material in which it appears is deceptive, this statement sets forth the factors the Commission will consider in making that determination" - this is the overarching rule of the whole thing. They go on to discuss the expectations of the consumer on the site, the degree of disclosure, the use of labelling, the nature of targeted audiences. The FTC states that a "disclosure’s adequacy ultimately will be measured by whether reasonable consumers perceive the ad as advertising."

The FTC then issued a set of guidelines, based on the enforcement policy above (https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses). This talks about best practices for labelling native ads, given the above considerations. Seems reasonable to me - in fact, the entire purpose of the opinion is to try to define ads that a "reasonable consumer" would understand to be ads. By requiring a logo, saying it's sponsored at least once - often twice - and clearly clicking to advertising landing pages, we're on the side of righteous goodness. 

Who's not on the side of righteous goodness? Well here's an example from the horse's mouth (the FTC):

A content recommendation widget included on different publisher sites displays links to external pages. One site on which these third-party links are placed is Newsby. On the Newsby site, these links are formatted to look like news headlines and are grouped together in a box with headings like “More Content for You,” or “From Around the Web.” One of the headlines appearing in the box is for the Winged Mercury ad described in Example 4, “Running Gear Up: Mistakes to Avoid.” The similarity of the Winged Mercury ad’s format to the type of headlines Newsby publishes on its site, combined with phrases like “More Content for You,” or “From Around the Web,” is likely to lead consumers to believe it is an independent news story, and not from the sponsoring advertiser. Thus, before consumers click to access the Winged Mercury content on the Fitness Life site, a clear and prominent disclosure is necessary to inform them of its commercial nature. As discussed in Example 4, the click-into page on the Fitness Life site also should disclose the commercial nature of the content.

So why is the IAB "concerned" about all this (http://www.iab.com/news/iab-concerned-about-ftc-guidance-on-native-advertising/)? Well first, their job is to protect the interests of all their dues-paying members. That includes content recommendation widget companies. Theoretically the IAB should oppose the FTC regulations that touch on any form of digital advertisers, though they probably draw the line right around the common standard of decency. Their problem here, specifically, is that "the section on ‘clarity of meaning’ [in the guidelines] in native advertising disclosures is overly prescriptive, especially absent any compelling evidence to justify some terms over others."

Basically, the IAB saying that there's no evidence that saying "Promoted" instead of "Sponsored by [X]" is deceptive, which is the position of the FTC. It's a really nuanced argument, and it must have taken some hand-wringing at the IAB to choose to not fully support FTC's argument, but instead give it tentative support, largely because of this issue.

The long and short of it is that the FTC is saying "don't deceive a reasonable customer." By the standards they've laid out, we do a pretty good job, and I think their standards are fair for an agency tasked with fighting deceptive practices and promoting the consumer.