There is much anticipation for the FTC’s December 4 workshop on native advertising. We learned that while the FTC was considering delaying this workshop several weeks due to the recent shutdown, they are planning to go forward as scheduled. Advertisers looking to move beyond a mundane brand webpage, Facebook page, and the banner ad and who want to integrate their brand and marketing message with quality digital content are wrestling with when and how they need to disclose the fact that their brand is sponsoring this “native advertising”. Some use this term to apply to sponsored tweets, advertorials and search ads or other sponsored content. Others such as AdAge say these forms of advertising look like the web content on sites where they are found but do not really weave the brand and the content – the higher goal of native advertising. And the disclosure obligations likely differ depending on the definition.
We have gotten good pieces of information from the FTC from their recent letters to search engines regarding sponsored search terms, and of course, the revised Dot.Com disclosure guidelines and the Endorsement and Testimonial Guides. As far back as 1968, the FTC issued Advisory Opinion 191 looking at “whether it was deceptive to publish an advertisement in a format of a news article without disclosing it was an advertisement,” and concluding disclosure was appropriate in the case of a restaurant review that was sponsored and “uses the format and has the general appearance of a news feature and/or article for public information which purports to give an independent, impartial and unbiased view of the cuisine facilities of a particular restaurant . . . but in fact consists of a series of commercial messages which are paid for by the advertiser.” And one of the first consent orders involving an infomercial was brought when BluBlockers aired a program length ad in a format that allegedly looked like an investigative journalist report similar to 60 Minutes or 20/20, and the FTC required that such programs disclose they are “paid advertisements” at least twice in any spot longer than 15 minutes so consumers understand they are watching an ad and not an objective news program. And more recently, the FTC has cracked down on flogs or allegedly fake blogs or websites news sites appearing to be news organizations. However, in 2005, the FTC said in a closing letter that not every sponsored product placement without a disclosure violates Section 5, using as an example the American Idol judges with their ubiquitous Coke cups.
While we wait for the December workshop, the NAD recently looked at a series of articles on www.mashable.com that were sponsored by Qualcomm and its Snapdragon processors used in mobile devices. Qualcomm entered into the sponsorship agreement with Mashable to run a series of articles called “What’s Inside,” looking at the technology behind many electronic devices. Qualcomm did not have editorial rights to the articles or even any say in “planning, creating, or posting” any of the pieces. Snapdragon was not featured nor any other Qualcomm product. During the run of the sponsorship between November 2012 and March 2013 the index page for the series called out that it was “supported by Snapdragon” and the articles included a yellow bar indicating that the content was sponsored. Ads for Snapdragon ran on Mashable contiguously to the articles. At the end of the sponsorship, the articles remained on the website, but Mashable removed the references to the Snapdragon sponsorship. The NAD concluded it was necessary and appropriate to have disclosed this sponsorship. While it considered whether it was necessary to continue to disclose the affiliation after the sponsorship ended, it determined this was not needed because the content was pre-existing and not influenced by Qualcomm. What is interesting in the decision is how far the NAD went. First NAD said “consumers can be misled when an advertiser conveys a commercial message without disclosing that it is the author of the message because sponsored content can convey an explicit or implicit message about a product, the benefits of using the product, or the disadvantages of a competing product.” This sounds right. But NAD went on to say “[i]f the content simply conveys information about an issue with which the advertiser wants to be associated, the advertisers may still have an obligation to identify itself as the sponsor because consumers generally will attach different significance to articles that are sponsored than those that are not sponsored and purely editorial. As a result, failing to disclose the sponsor of an article may deprive consumers of insight into why a particular article was published, including the motivations of the author.” This seems to suggest in NAD’s view that a consumer protection mission includes protecting consumers from undisclosed bias in journalism not just in purchasing decisions. We think it is unlikely the FTC will take such an expansive view of Section 5 if and when they follow the workshop with a staff report. And while the workshop likely will proceed on schedule, the shutdown delayed some of the planning and the FTC staff is still working to put together panels. Stay tuned for the future posting of speakers and a more detailed agenda.