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May 30, 2012

Report from Energized FTC Seminar on Online Advertising

By: Ifrah Law

On May 30, 2012, the Federal Trade Commission held a workshop at its conference center in Washington, D.C., entitled “Advertising and Privacy Disclosures in the Digital World.” This workshop was intended both to provide guidance to the public concerning the FTC’s advertising requirements and to solicit input from the public for updates to the FTC’s existing online advertising guidelines, “Dot Com Disclosures” (DCD). The FTC hopes to update the DCD to take into consideration advancements in technology and advertising since the guidance document was initially introduced in 2000, including the discussion of platforms such as mobile devices and social networking.

Of particular interest to us was the panel entitled “Universal and Cross-Platform Advertising Disclosures.” This panel focused on how to make disclosures, rather than on the particular information that needs to be disclosed or who should be liable for failures to disclose. The panel hoped to explore and develop best practices for this purpose and discussed public comments for the FTC’s consideration in updating the guidelines. The panel, moderated by Michael Ostheimer, a staff attorney in the agency’s Division of Advertising Practices, was composed of consumer advocates, advertiser representatives, academics, corporate counsel, and an assistant state attorney general.

The panel emphasized that there are valid ways to allow merchants and advertisers flexibility in marketing on space-constrained forums while still making adequate disclosures to consumers. The panelists stated that it is impractical to try to put all relevant terms on one page, and that it may be counterproductive to do so since consumers will only read a fraction of the information. Therefore, clearly labeled hyperlinks may be used to draw attention to essential terms.

For example, a web page advertisement for coolers stating “satisfaction guaranteed” might be considered deceptive if a hyperlink lower on the page simply marked “Disclosures” led to a page disclosing that a material potential investment, such as a restocking fee for returned items, limits the guarantee. Therefore, the advertisement could be more compliant if the disclosure were closer to the relevant claim (“satisfaction guaranteed”) and if the hyperlink stated clearly the material term, such as “Disclosure – Restocking Fees Apply.”

The panel also agreed that the disclosures required to prevent deception are directly tied to the claims made in the advertisement. By limiting the dissemination of triggering claims, the advertiser also limits the necessary disclosures. Also, the complexity of the offer dictates the necessary disclosures. If an offer includes a continuity plan or other conditions or restrictions, the disclosures will necessarily also be more complex to prevent deception. It is important to note that a disclosure that contradicts an advertisement is not sufficient to make an advertisement non-deceptive.

The panel recommended that the FTC guidelines deal only with substantive issues and that the specific form of the disclosures, as opposed to their substance, be left to the discretion of the advertisers and merchants. For example, while disclosures must be prominent, there should not be a requirement that certain conditions be in bold, italics, or a certain font size. With text-based advertisements, such as tweets or sponsored search results, such a contrast is not possible. Therefore an upfront text disclosure, such as “Purchase Required,” should be sufficient to meet the standard.

The panelists were right to emphasize the need for advertisers to have flexibility and self-regulation without imposing FTC guidelines that do not comport with how business is done in the modern world.

We hope that the FTC will keep pace with evolving technology and business needs to allow advertisers flexibility to promote their products in ways that will best reach consumers.