FTC Issues New Guideline Report for Online and Mobile Advertising Disclaimers

The Federal Trade Commission (“FTC”) issued new guidelines this week for media outlets, advertisers, brands, celebrity brand spokespeople and other parties advertising products online. The report, titled “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,” builds upon the FTC’s previous report on digital marketing practices, issued in 2000. In addition to emphatically clarifying that the FTC’s jurisdiction applies as much to the “wide spectrum of online activities” as it does to offline advertisements, the report provides useful guidance regarding the placement of effective limitations and qualifications on advertising claims and the “clear and conspicuous” standard that governs required disclosures.

FTC Jurisdiction Online

The FTC report resolves any ambiguity regarding the FTC’s jurisdiction over online and mobile matters. Advertisers and other applicable parties that might previously have taken an approach of “beg for forgiveness, don’t ask for permission” regarding claims online may now have to change their approach. Moreover, the FTC report is broadly worded and states “the Act is not limited to any particular medium,” thus suggesting automatic jurisdiction over digital platforms and technologies not yet devised.

With that said, the report does acknowledge that the uniqueness of certain online ads and digital technologies, including social media and mobile, may “affect how an ad and any required disclosures are evaluated.”

Background on Disclosures

The report provides general context regarding the FTC’s policy on disclosures. It makes clear that the burden of complying with FTC guidelines regarding all express and implied claims lies with advertisers. Claims are evaluated using a “reasonable consumer” standard, based upon the ad as a whole, including the text, product name, and depictions. Therefore, there is no single “catchall” technique for making disclosures that will ensure compliance for every ad, on every platform, aimed at every audience.

The report also confirms that a disclosure can only qualify or limit a claim to avoid a misleading impression. It cannot cure a false claim.

The Clear and Conspicuous Requirement

Disclosures that are required to prevent an advertisement from being deceptive or unfair must be presented “clearly and conspicuously.” The FTC report provides useful guidance regarding the interpretation of what “clearly and conspicuously” means in an online context. The onus is on advertisers to draw attention to the disclosure and assume that a “reasonable consumer” will not read every word of an ad (nor follow every link). The FTC also makes it very clear that if a disclosure is necessary to prevent an advertisement from being deceptive, unfair, or otherwise violative, and if it is not possible to make the disclosure clear and conspicuous, then either the claim should be modified so the disclosure is not necessary or the ad should not be disseminated. Moreover – and perhaps intimidating to certain parties – the FTC states that “if a particular platform does not provide an opportunity to make clear and conspicuous disclosures, it should not be used to disseminate advertisements that require such disclosures.

Parties seeking to advertise on the internet should read the report in full and/or consult with an attorney, but here are some issues that the FTC flags as potentially being dispositive in a “clear and conspicuous” analysis:

  • The placement of the disclosure in the advertisement and its proximity to the claim it is qualifying
  • The prominence of the disclosure
  • Whether the disclosure is unavoidable
  • To extent to which items in other parts of the advertisement might distract attention from the disclosure (Authors’ note: this is indicative of a huge emerging theme – the collision of engineering and UX design with legal)
  • Whether an audio disclosure is of sufficient volume
  • Whether the disclosure needs to be repeated several times to be effectively communicated
  • Whether the language of the disclosure is understandable to the intended audience (read: in plain English)

Practical Applications

At the pace at which technology evolves, it is impossible to pin down all of the ways in which this report may practically affect online advertisements. One thing it does shut down categorically is the practice of placing disclaimers on another part of a site and placing a hyperlink to that page in a non-conspicuous location. The FTC report makes it clear that the best disclaimers are placed near or directly adjacent the claim itself, although it does concede that some scrolling up or down may be acceptable to accommodate the smaller mobile screen.

Placing disclaimer information behind a hyperlink is only acceptable when the disclaimer is “too complex” to place next to the claim, and even then the FTC recommends labeling the link itself conspicuously. Advertisers should use a consistent format and style for hyperlinking to disclaimers and, wherever possible, use words instead of symbols to indicate the presence of a disclaimer. When hyperlinks are included in ads, they must be labeled clearly and conspicuously and (especially in the event that they lead to a product purchase page) the FTC recommends that further disclaimers are placed on the click-through landing page for the hyperlink.

The FTC urges parties to be extremely cautious with pop-up disclaimers, especially when there is the possibility for consumers to use software to block their appearance. It also suggests that parties consider size, color and graphics to highlight a disclaimer, and consider whether any additional multimedia elements could distract users from it. Again, the FTC makes its analysis on the ad as a whole and not the absence and/or presence of any single feature.

Additionally, the emphasis on disclosure will likely affect two popular digital marketing techniques: paid Twitter endorsements and so-called “viral marketing.” The report features a case study describing acceptable and unacceptable practices when “tweeting” about a brand, product or service for which the Twitter account holder has received consideration. In essence, the party tweeting must disclose that he or she is being paid, and must do so clearly and conspicuously. Solely placing the hashtag “#spon” at the end of the message is deemed to be non-compliant because it might confuse consumers, but placing “Ad:” at the start is acceptable. These guidelines are sure to be of interest to in-house counsel at brands and to celebrity endorsers and their representation. The Wall Street Journal has a neat summary of the examples cited by the FTC.

Individuals and entities engaged in viral marketing that relies upon narrative elements and the pretense of reality (e.g. a “viral” video in which an “average person” – but really a paid actor – is featured in a story and/or event including brand placements) may wish to be cautious in ensuring compliance. While it is arguable that many viral videos are not making explicit claims, such parties should be aware that even an arguable “implied claim” could pull them within FTC scrutiny and force them to alter their practices by offering highly conspicuous disclaimers on content. In fact, the FTC tells advertisers – of all kinds – “don’t be subtle.”

While the FTC cannot prosecute criminality based on failure to offer adequate disclaimers, we nonetheless urge all parties involved in marketing and sales online to examine their activities and ensure reasonable compliance with its guidelines. If you have any questions regarding the above, please contact an attorney in the CDAS Digital Media practice group.