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Legal Review: Advertisers Go Native; FTC and NAD Pay Attention

1 Nov, 2013 By: Jeffrey D. Knowles, Venable LLP’s Advertising Response

There is no doubt that “native advertising” is the hottest trend for large brands advertising directly to consumers. In this novel form of advertising, which occurs predominantly in the online and mobile channels, marketing messages closely resemble the editorial content they accompany. Since rising to prominence last year, the practice has proven successful for marketers and lucrative for publishers.

If it seems to you that native advertising could easily blur the line between editorial content and paid advertising, you are not alone. The Federal Trade Commission (FTC) and the National Advertising Division of the Council of Better Business Bureaus (NAD), a self-regulatory body for the advertising industry, both addressed native advertising in recent announcements.

On Sept. 16, the FTC announced it would host a Dec. 4 workshop on native advertising to explore best practices and determine how well consumers are able to distinguish between editorial and so-called “sponsored content.” It is not yet clear whether this workshop will be the first step in the FTC promulgating regulations to govern native advertising.

On Sept. 30, the NAD announced that it had concluded its first-ever examination of a native advertising campaign. NAD launched the inquiry after semiconductor manufacturer Qualcomm dropped the “sponsored by” label from a Qualcomm-sponsored series on the influential technology website titled “What’s Inside” that ran alongside advertisements for Qualcomm’s new Snapdragon mobile phone chipsets. In the end, the NAD found that Qualcomm had behaved appropriately.

“We’ve been interested in the native advertising category for some time,” Laura Brett, an NAD staff attorney, told AdAge in a story about the decision. “The NAD has been watching this conversation unfold and it looked like a good opportunity to explore how native advertising is evolving.” Brett’s comments leave no doubt that NAD will remain interested in native advertising for the foreseeable future.

The FTC’s announcement and the NAD’s interest in the topic should make it clear to all marketers that while there are currently few regulatory and self-regulatory rulings addressing native advertising, there will be more — just over the horizon.

During the past several years, the FTC has paid tremendous attention to disclosures and consumer perception in the online environment. The most obvious example of this is the release of the FTC’s Dot-Com Disclosures guidance in March. The Commission also sent letters to a number of search engines in June, outlining the steps the FTC feels are necessary to differentiate paid advertisements from the organic search results they appear alongside.

When planning to launch a native advertising campaign, marketers should consider how the relationship in each specific engagement will be disclaimed and work with the publisher to ensure those disclosures are clear and conspicuous in terms of font size, wording and proximity to the content. Marketers should also ensure the disclaimers are unavoidable and that elements of the page do not distract attention from the disclosures. To limit consumer confusion, marketers could employ measures, such as:

  • An explicit disclaimer stating that the following content is sponsored by the marketer.
  • Text labels that indicate a piece of content is “sponsored” or “paid” content; in its letter to the search engines, the FTC recommended that these labels be in a large font and appear immediately before the ad or at the top left corner of the content, specifically mentioning that such disclaimers should not be buried on the right side of the screen where consumers may not see them.
  • Ensuring that any sponsored content features a different background color than “pure” editorial content. If using this measure, marketers and publishers should ensure that the difference is readily apparent on different devices and in varied light conditions.

A list of bullet points cannot take the place of fact-specific legal advice, so it is a good idea for marketers to consult with experienced advertising lawyers who can provide counsel based on the marketer’s specific plans and the current regulatory environment. ■

About the Author: Jeffrey D. Knowles

Jeffrey D. Knowles

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