Last week, the National Advertising Division (NAD) held its annual conference. The wide array of speakers covered a broad range of topics, from the metaverse to dark patterns, social justice, environmental claims, and (as always) substantiation and disclosures. Multiple speakers from the Federal Trade Commission also presented and gave insight into the FTC’s current priorities.
The regulators. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, made clear that the agency is closely tracking practices it believes result in consumer economic harm and consumer surveillance and privacy issues. He made clear that the Commission is not shying away from seeking big ticket monetary relief against national well-known advertisers, and intends to hold individuals and executives responsible for their companies’ advertising practices. In addition, Serena Viswanathan, FTC’s Associate Director in the Division of Advertising Practices, highlighted the Commission’s focus on disclosure issues as well as endorsements and reviews, such as review solicitation and aggregation, and product ranking websites.
Effective disclosures. Second, presenters across the industry, including advertisers, regulators, and lawyers, discussed the importance of effective disclosures in advertisements. Presenters reiterated the expectation that disclosures be “unavoidable” and mirror the manner in which the claim was made (visually, orally). NAD noted that the number of influencer and customer review cases it hears is expanding. Venable has covered this subject in prior blogs as well, including with respect to influencers.
The implications for the metaverse are complex, as within the 3-D world, consumers (players) can turn around, look up or down, and so may not even see certain disclosures in the virtual world. Thus, even with changing technologies, it remains clear that competitors and regulators are scrutinizing disclosure issues, and whether an advertisement or campaign is making those disclosures unavoidable to consumers could affect the risk of a campaign.
Environmental claims. Next, sustainability claims such as those regarding the environmental impact of a product, or how a fish or other animal was caught or raised, continue to be popular among advertisers, and thus regularly attract the attention of regulators and competitors. Moreover, as the Commission reiterated during presentations, the Green Guides are soon to be updated as part of their 10-year review. Along with the updated guides, the prospect of sustainability marketing in the metaverse presents new challenges. For example, in a virtual world where trees can grow instantly, and animals and fish can appear at the touch of a button, implied claims may need to be carefully considered by the advertiser so as not to overstate the environmental benefits of its products.
The metaverse. The metaverse remained a hot topic, as blockchain-enabled resources such as non-fungible tokens and cryptocurrencies serve as both a platform for carrying advertisers’ messages and products and a source of FTC compliance and litigation risk. Presenters made clear that the same rules apply for new technologies—advertising must not be misleading, and any required disclosures must be made clearly and conspicuously. In the metaverse in particular, though, attendees learned that the line between sponsored and unsponsored content can be unclear, especially to children, who make up a large portion of the users on these new platforms. Moreover, NAD has made clear in its recent cases that privacy claims are fair game for its monitoring and challenger cases.
Dark patterns. Dark patterns were also a recurring theme. For those unfamiliar with the term, “dark patterns” are marketing methods that supposedly obscure or subvert consumer decision-making or choice through user experience design. Presenters discussed how FTC has monitored dark pattern practices for some time, and Director Levine directed advertisers to the report highlighting newer, more sophisticated dark patterns, including difficult-to-cancel subscriptions, and using urgency and scarcity to push consumers into a buying decision. As companies engage in more metaverse activations, the use of dark patterns is likely to become only more complex and sophisticated.
What’s next? NAD made clear that it is willing to take on new questions and industries, including social issues, privacy, customer reviews, and dark patterns. For example, NAD announced it has updated its procedures to assist in resolving complaints or questions concerning national advertising, including national advertising that is misleading or inaccurate because of its portrayal or encouragement of negative harmful social stereotyping, prejudice, or discrimination. Furthermore, in conjunction with the expansion of the metaverse, those selling access to online environments (telecom companies) that make claims regarding wireless coverage and pricing and fees, for example, are also becoming targets. Overall, the rise of the metaverse and blockchain resources seems to simply raise the stakes for advertisers willing to enter this new and largely uncharted environment: the presence of children and minors as consumers on the platform, the possibility of overstating implied claims, and the possible complexities of dark patterns are all issues of concern for the NAD, FTC, and competitors alike.
Time will tell what comes next, but one thing is clear: the FTC and NAD are ready and willing to take on new industries and new advertising practices. Companies would do well to take note.