The FCC’s Sponsorship Identification Rule is a close, perhaps neglected cousin of the FTC’s Enforcement Policy Statement on Deceptively Formatted Advertisements, i.e., its Native Advertising Guide. Nevertheless, the FCC’s latest enforcement action demonstrates how failure to follow the rule can result in penalties far larger than any imposed to date by the FTC. It also hints at the possibility that a single ad can result in dual liability for advertisers and broadcasters.

The Sponsorship ID Rule is fairly straightforward: if a broadcast station charges or accepts (or is promised) any money, service, or other valuable consideration in exchange for airing a piece of programming, then the broadcaster must disclose – at the time of the broadcast: (1) that the programming is “sponsored,” “paid,” or “furnished,” and (2) the identity of the sponsor. The Rule contains additional disclosure requirements for political ads, as well as “beneficial owner”-type provisions that require disclosure of the true sponsor in interest, rather than the name of any agent or middleman used to furnish the payment. A corollary to the Sponsorship ID Rule imposes a similar burden on sponsors to disclose to broadcasters when they have provided money, services or other consideration in exchange for the broadcast. 47 U.S.C. § 508.


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Join Venable on October 27 for a half-day workshop in the firm’s Los Angeles office designed to make sense of recent enforcement actions involving social, influencer, and native campaigns. Venable’s Amy Ralph Mudge, Randy Shaheen, Melissa Steinman, and Po Yi will share best practices that in-house counsel and compliance personnel at brands,

Design Lab Asymmetrical DressBaseball season is just around the corner, and the FTC’s native advertising case against retailer Lord & Taylor illustrates the baseball rule of “Three strikes and you’re out!”  In its first native advertising case since releasing its Enforcement Policy Statement Addressing Native Advertising and Deceptively Formatted Advertising, the FTC reminds advertisers that those guidelines will be enforced.

According to the complaint, Lord & Taylor launched a new Design Lab collection in the fall of 2014.  As part of its marketing campaign, Lord & Taylor included a comprehensive social media campaign (“product bomb”) for the end of March 2015.  The campaign consisted of Lord & Taylor-branded social media posts and the use of a team of “influencers,” all focused on one article of clothing—the Design Lab Asymmetrical Dress.


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Photo by Roland Tanglao [CC BY 2.0] via Flikr
Photo by Roland Tanglao [CC BY 2.0] via Flikr

It’s been a big week for premieres. And if you thought you sensed a disturbance in the Force then the Force is indeed strong with you as the FTC just released their Enforcement Policy Statement on Deceptively Formatted Advertisements and Business Guidance on Native Advertising.

A long time ago, in a conference room far, far away, the FTC held a workshop on Native Advertising with a promise that some form of industry guidance would follow.  As it turns out, the premieres in both cases were worth waiting for.  Bearing in mind the Master’s admonition — “Do.  Or do not.  There is no try,” our take on the Enforcement Statement and Business Guidance is below.  And like many a typical blockbuster movie there was just too much good stuff to leave behind on the cutting room floor so our apologies ahead of time for the length of this blog.


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If there is one takeaway from yesterday’s panel on native advertising, it’s that sponsored content is not going anywhere in the foreseeable future.  Although NAD has talked about it before, the FTC has held a workshop to address it, and of course, we’ve blogged on it, native advertising is still a hot topic.  Native advertising, a form of sponsored content, is a fast-growing method for promoting products.

As explained by Diedre Sullivan, Senior Counsel to the New York Times Company, one of the threshold questions in sponsored content is whether the piece is, in fact, commercial speech.  Under the umbrella of sponsored content are a number of types of native advertising, such as content written and provided exclusively by the advertiser, versus content created by the publication with subjects of interest to the advertiser but without the advertiser’s direct input (branded content), or content written jointly by the advertiser and the publication (sponsored content).  If the content is exclusively editorial, it is afforded higher protection than commercial speech.  However, the question for advertisers is not generally whether the piece is an ad but instead how to disclose.


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TrollsYes, we’re a tease.  The Bureau Director and Commissioners do not have cameos in next month’s final installment of the Hobbit (and no, this is not strategically placed native advertising #notanad).  The Commission has taken a starring role in battling trolls of a much more human sort.

The agency last week announced a settlement

We have written a lot about the emerging legal issues with “native advertising” and eagerly track case development at the NAD (Qualcomm, eSalon and Shape) as well as the FTC. And so much more is covered in the marketing press about what native advertising is and how can it be scaled. Marketers agree the ideal of native advertising is to create content so compelling that consumers flock to engage, and in the process connect with the brand behind the content. Many are deeply suspicious. Publishers for one, who take passionate and almost violent pride in protecting the line between editorial and advertising content. And many question whether advertisers can be really engaging. As lawyers to the marketers, we find good marketing to be wildly entertaining and have faith this can be accomplished. And we did not have to look far to find this brilliant example. While we seek out every opportunity to bring you witty videos (and sometimes work hard to craft a legal musing around them, this may be our best link ever. Please take a moment to enjoy and we will be back with you shortly:

How awesome was that?
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We will first tell you what you need to do if you are engaged in native advertising and wish to avoid coming within the busy lens of the NAD monitoring program. For those who are interested in the debate around this issue, we will then tell you why we, respectfully, disagree with the NAD’s views on this topic, again (see here and here, prior blog posts on qualcomm and esalon).

If you are an advertiser (or an advertiser’s lawyer more likely) working with web publishers to curate, write, or edit articles that review your product or more generally you would like to see published around your advertising copy‎, you have gone native. If you have not gone down this path yet, all of your marketers are plotting to do so, and thus you will want to be proactive. NAD has previously articulated that if you sponsor articles that generally relate to your product or attributes you want associated with your product, in its view, the connection between the advertiser and publisher must be disclosed. In its most recent decision, NAD communicates that if there is such a connection it must be disclosed even if it would be obvious to reasonable readers. So unless and until the FTC provides some guidance around when it believes disclosure would and would not necessarily be required, following up from its Blurred Lines workshop, the NAD view is
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eye examOn December 4 before a packed house, the FTC held its much-anticipated workshop on native advertising, Blurred Lines: Advertising or Content?, which examined the practice of blending of advertisements with news, entertainment, and other editorial content in digital media.  And like Robin Thicke’s summer hit itself, the FTC’s workshop raised a lot of questions (and eyebrows) about the future of the medium. In case you missed it, here are some of the highlights.

Chairwoman Ramirez opened by noting that native advertising, while not new, is growing at a rapid rate.  In 2013 alone, 73% of websites currently offer native advertising and an additional 13% are considering it for 2014.  The FTC’s resident blogger Lesley Fair gave a historical perspective on FTC enforcement actions against advertorials, infomercials, and paid endorsements; explaining that while times change, that the touchtone for any analysis is (and always has been) whether the practice violates Section 5.

The day’s first panel
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As we have written before, NAD is using its monitoring of advertising function to bring cases examining native advertising.  And on the eve of the FTC’s upcoming workshop on native advertising the NAD has made its views in this area known again in another monitoring case.

While much of what NAD does is involves competitive, or an occasional consumer, challenge, it also monitors ads to bring its own cases.  Often it has brought cases in product categories like cosmetics where there are relatively fewer competitive disputes.  We have seen this, for example, with the cases NAD has brought against makers of mascara looking at whether celebrity pictures are literal product demonstrations.

In eSalon, NAD expands upon the views on native advertising it expressed in Qualcomm.  Read together these two decisions suggest that NAD is setting a high standard for disclosures.  It will be interesting to see where the FTC eventually comes out on many of these same issues.  NAD’s summary headline perhaps says it best: “Advertisers are required to identify a message as advertising when it appears in a context that consumers may reasonably understand to be editorial in content.”
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