Telling Stories with Transparency

by Lesley Fair on Jul 20, 2016 12:00:00 AM Advocacy, DRTV

Telling_Stories_with_Transparency-022279-edited.jpg“Omnichannel” may be the term du jour, but it’s business as usual for electronic retailers. For more than 30 years, they have introduced innovative ways of communicating with prospective buyers—and have wrestled with the legal challenges that creative formats can present.

Nowhere is the advantage of experience more apparent than in native advertising—content that bears a similarity to the news, feature articles, product reviews, and other material that surrounds it. Some advertisers claim to be perplexed by how established truth-in-advertising principles apply in what they perceive as a new marketing medium. But ads that blur the line between advertising and content have long been a consumer protection concern for the Federal Trade Commission (FTC). And if the legal issues raised by native advertising—for example, whether consumers understand the commercial nature of the content—sound familiar to direct-to-consumer marketers, it’s because the same questions arose in the early days of infomercials. That’s why industry members have a leg up on understanding the need for transparency.

In December 2015, the FTC issued its Enforcement Policy Statement on Deceptively Formatted Advertisements and an accompanying staff publication, Native Advertising: A Guide for Businesses. The policy statement draws heavily upon the FTC’s experience in considering novel advertising formats such as infomercials. It’s the law—and it has always been the law—that “advertising and promotional messages that are not identifiable as advertising to consumers are deceptive if they mislead consumers into believing they are independent, impartial, or not from the sponsoring advertiser itself.”

Why would that information matter to consumers? According to the policy statement, “Knowing the source of an advertisement or promotional message typically affects the weight or credibility consumers give it [and] also may influence whether and to what extent consumers choose to interact with content containing a promotional message.”

The particular forms that native advertising takes may be new, but the FTC views it through the same legal prism: “Regardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising.”

A proposed settlement in a recent FTC case against a national department store illustrates those principles. According to the complaint, the retailer deceived consumers by paying for native advertising that included a seemingly objective article in an online fashion publication and a post on the magazine’s Instagram page, without disclosing that the contents actually were paid promotions for the company’s spring clothing line. The FTC also alleged that the retailer paid fashion “influencers” to post Instagram pictures of themselves wearing a dress from the company’s collection, but failed to disclose it had given each influencer the dress and thousands of dollars in exchange for their endorsement.

What do these developments suggest for DR marketers interested in native advertising? The FTC’s staff business guide offers 17 how-to examples to help advertisers avoid deception, but it boils down to this: An ad or promotional message shouldn’t suggest or imply to consumers that it’s anything other than an ad. The touchstone is transparency.

Even without a disclosure, some native ads may be so clearly commercial that they’re unlikely to mislead consumers. In other instances, a disclosure may be necessary to ensure that consumers understand that the content is advertising. And if a disclosure is necessary, it must be clear and prominent. In Native Advertising: A Guide for Businesses and .com Disclosures: How to Make Effective Disclosures in Digital Advertising, the FTC explains what advertisers can do to meet that standard.

The former ends with a cautionary note about the breadth of liability under the FTC Act. In appropriate circumstances, the FTC has taken action against others who helped create deceptive advertising content, including ad agencies, operators of affiliate advertising networks, and infomercial producers. Thus, direct-to-consumer marketers who use native advertising have an interest in ensuring that anyone participating in the promotion of their products is familiar with the bedrock principle—that an ad should be identifiable to consumers as an ad.

Lesley Fair is an attorney with the FTC’s Bureau of Consumer Protection.

The above blog post was adapted from the “Fair Trade” column published in the July-August issue of ER magazine.

Lesley Fair's blog
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