The Federal Trade Commission today issued an Enforcement Policy Statement on Deceptively Formatted Advertisements.  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.

Native advertisements can take a variety of forms, but all are intended to look “native” to the outlet in which they appear, unlike traditional display or pop-up advertisements.  As native advertisements have become increasingly popular over the last several years, they have also garnered the attention of the FTC.

In December 2013, the FTC held a workshop on native advertising and brought together academicians, publishers, and ad networks.  Around that time, industry groups such as the Interactive Advertising Bureau and the American Society of Magazine Editors created best practices in the area, and the industry anticipated that the FTC would publish additional guidance on the issue.

In a press release accompanying the Policy Statement today, the FTC’s Director of the Bureau of Consumer Protection Jessica Rich said that the “FTC’s policy applies time-tested truth-in-advertising principles to modern media.”  In addition to the Policy Statement, the FTC released an accompanying guidance, “Native Advertising: A Guide for Business,” 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 reiterates the FTC’s position that an advertisement that is not identifiable as advertising to consumers is deceptive if it misleads consumers into believing it is independent, impartial, or not from the sponsoring advertiser itself.  The Policy Statement describes past enforcement actions that the FTC has taken against three types of deceptive advertisements: (1) advertisements that misrepresent their source or nature by, for example, appearing in news format; (2) door openers that fail to promptly and clearly disclose the purpose of the contact; and (3) endorsements that fail to disclose a sponsoring advertiser.

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 “scrutinize the entire ad, examining such factors as its overall appearance, the similarity of its written, spoken, or visual style to non-advertising content offered on a publisher’s site, and the degree to which it is distinguishable from such other content.”

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.  For example, “if a natively formatted ad with an image of a particular sports car and the headline ‘Come and Drive [X] today’ were inserted into the news stream of a publisher site, that ad likely would be identifiable as an ad to consumers, even though it was presented in the same visual manner as news stories in the stream.”

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.  Disclosures must use “simple, unequivocal” language and must be made contemporaneously with the misleading claim it is intended to qualify.  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:

1. 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.

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

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

4. 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.

5. Disclosures should remain when native ads are republished by others.

6. 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.

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

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

9. 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.”

Megan Rodgers is the author of this article.