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Paul Zimmerman
pzimmerman@mrllp.com
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The Key to Native Advertisement in Three Words: Disclose, Disclose, Disclose

There is little doubt that when done right, native advertising works. Digital ads that mimic, in substance or form, news, feature articles, product reviews, social media banter, or entertainment – read, they come across as anything but advertisement – can be extraordinarily effective when it comes to user engagement. But for advertisers, the use of native advertisement is a double-edged sword. Native advertising – equal parts innovative and creative – has the tendency to cross the line from clever to deceptive. Which is why, for years, native advertising has been in the crosshairs of the Federal Trade Commission (“FTC”). Indeed, if there is possible consumer confusion as to whether an advertisement is, in fact, an advertisement (or the affiliation of an endorser is organic), the FTC can and will commence an enforcement action – even where the product claim itself is truthful and accurate.

Thus, in the absence of appropriate and recognizable disclosures that allow consumers to identify the commercial nature of advertising content, native advertising can spell trouble for advertisers, including potentially costly FTC enforcement actions. For this reason, among others, the FTC recently released a study, “Blurred Lines: An Exploration of Consumers’ Advertising Recognition in the Contexts of Search Engines and Native Advertising.” The report summarizes exploratory research (1) to better understand consumers’ ability to identify native and search ads, and (2) to determine whether modest changes to the design and wording of disclosures – based upon previous FTC guidance – improved consumer recognition or otherwise mitigated potential deception (the answer is yes).

Here are the general takeaways from the study and recent FTC actions:

  • Under the FTC’s Enforcement Policy Statement on Deceptively Formatted Advertisements (published in 2016), an advertisement is deceptive under Section 5 of the FTC Act if it materially misleads consumers as to its “commercial nature or source.” In other words and in plain English, “consumers must be able to recognize an ad as an ad.”
  • Such a misrepresentation is material when it “is likely to affect consumers’ choices or conduct regarding the advertised product or the advertisement,” even when product claims are otherwise truthful and not misleading.
  • An advertisement, including a native or search ad, is deceptive when it leads “reasonable consumers” to believe “that a party other than the sponsoring advertiser is the source of an advertising or promotional message.”

 The FTC’s report also found that advertisements with the following characteristics improved the "likelihood that consumers will recognize an ad as an ad"

  • Distinctive Background Shading and a Sufficiently Noticeable Ad Label
  • Text Color That Sufficiently Contrasts with Background Color
  • Consistent Labeling for Ads on the Same Page
  • Native Advertisement That Is Segregated From Other Content
  • Ads That Are Not Located in the Top Right-Hand Corner of a We Page or Ad Grouping
  • Disclosures That Are Placed Above an Ad's Headline
  • Clearly Stated Disclosures That Are Straightforward in Their Meaning
  • Stronger and Clearer Disclosures When Native Advertisement More Strongly Resembles Native Content or Appears in Publications with a Strong Journalistic Brand

Bottom line, when it comes to native advertising, advertisers must clearly and conspicuously disclose that their advertisements are, in fact, advertisements in order to minimize or avoid FTC scrutiny. Likewise, any connection or affiliation of a product endorser to an advertised product must be plainly revealed. And again, advertisers must ensure that a native advertisement’s format is not misleading, even if the veracity of its content is not subject to question.

Although never a guarantee, adherence to the disclosure techniques set forth in the FTC’s study should serve to reduce potential consumer confusion and, ultimately, potentially costly FTC enforcement action.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.