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The Federal Trade Commission issued an Enforcement Policy Statement on Deceptively Formatted Advertisements on December 22, 2015.  The Policy Statement addresses occasions in which certain media outlets blur the traditional line between advertisements and editorial content, and seeks to clarify advertisers’ and publishers’ obligations regarding native advertising and social media.

In addition to the Policy Statement, the FTC released an accompanying guidance, “Native Advertising: A Guide for Businesses,” to help companies understand and comply with the Policy Statement. The guidance provides examples of when and how to make effective disclosures in native advertisements.

The Policy Statement set forth the following factors that the FTC will consider to determine whether an advertisement is deceptive:

1. The net impression of the advertisement.

An advertisement or promotional message should not suggest or imply to consumers that it is anything other than an ad. In making this interpretation, the FTC will consider the net impression of the entire advertisement. The FTC conducts this analysis from the perspective of a reasonable consumer, but if an ad is targeted at a specific audience, the FTC will consider the effect of the ad’s format on reasonable or ordinary members of that targeted group. Moreover, if an advertiser intends to communicate a specific message, the FTC will presume that a reasonable consumer would understand that message.

2. Disclosures may be required.

Some native ads may be so clearly commercial in nature that they are unlikely to mislead consumers even without a specific disclosure. In other instances, however, a disclosure may be necessary to ensure that consumers understand that the content is advertising. The accompanying guidance provides a series of examples of instances where a disclosure would be required.

3. If a disclosure is required, it must be clear and prominent.

If a disclosure is necessary to prevent deception, it must be clear and prominent on all devices and platforms that consumers may use to view the native ad. The adequacy of a disclosure will be considered from the perspective of a reasonable consumer.

The accompanying guidance further explains steps advertisers can take to help ensure that disclosures will be considered clear and prominent:

a) Place disclosures on the main page of a publisher site where consumers will notice them and easily identify the content to which the disclosure applies.

b) Place disclosures in front of or above the headline of the native ad.

c) If a native ad’s focal point is an image or graphic, a disclosure might need to appear directly on the focal point itself.

d) If a single disclosure relates to more than one native ad, it should be accompanied by visual cues that make it clear the disclosure applies to each ad in the grouping.

e) Disclosures should remain when native ads are republished by others.

f) Once consumers arrive on the click- or tap-into page where the complete native ad appears, disclosures should be placed as close as possible to where they will look first.

g) In multimedia ads, a disclosure should be delivered to consumers before they receive the advertising message to which it relates.

h) Disclosures should stand out so that consumers can easily read or hear them.

i) Disclosures must be understandable.

The FTC was careful to note that its native advertising Policy Statement does not apply only to advertisers. Instead, the FTC warned that it will take action against parties who help create deceptive advertising content, including ad agencies and operators of affiliate advertising networks. Moreover, the FTC cautioned that “[e]veryone who participates directly or indirectly in creating or presenting native ads should make sure that ads don’t mislead consumers about their commercial nature.”

The guidelines have been anticipated by the industry since an FTC workshop on native advertising in December 2013. The new guidelines do not impose a strict labeling requirement, which would have raised concerns for our industry, but largely apply existing precedent. In July 2014, we published a White Paper providing newspapers with examples of what publishers are doing to provide greater transparency to consumers around sponsored content to differentiate between a native ad and editorial content. These examples in the white paper are consistent with the agency’s guidance on disclosures.

If you have any questions, please contact Kurt Wimmer, News Media Alliance General Counsel, at kwimmer@cov.com or Danielle Coffey, Vice President of Public Policy.

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