FTC issues new guidance for advertising and marketing in the online and mobile world

E-Commerce and Privacy Alert (US)

FranCast (US)

On March 12, 2013, the Federal Trade Commission issued its long-awaited update to its 2000 guidance on disclosures in online marketing and advertising. 

 

The guidance, entitled .com Disclosures: How to Make Effective Disclosures in Digital Advertising, not only reaffirms many of the FTC’s longstanding principles for effective online disclosures, but also provides guidance as to how those principles will be applied to new technologies that have emerged since 2000, such as mobile phones and tablets with more limited space, banner ads and multimedia messaging, and social media platforms such as Facebook and Twitter. 

 

The FTC has broad powers under Section 5 of the FTC Act to protect consumers from “unfair and deceptive acts or practices.”i  Under the FTC Act, the FTC has long required effective disclosures for claims that would otherwise be deceptive or misleading without them.  .com Disclosures is designed to help businesses comply with the FTC Act by providing examples and direction on how to avoid unfair and deceptive practices through appropriate disclosures in their online and mobile marketing.ii  

 

Although the new guidelines do not carry the force of law, they provide insight into how the FTC will apply the FTC Act to online and mobile marketing disclosures.  Advertisers and marketers are well advised to review and potentially modify their existing and future online advertising to ensure they are compliant with these guidelines.

 

Application of advertising principles to online marketing

 

One of the key questions confronting the FTC when it was updating its guidance was whether it needed to develop any new principles for the new devices and forms of communications that have emerged since 2000.  As an initial matter, the FTC emphasizes that the same basic principles of advertising law that apply to other forms of advertising equally apply to the new forms of online marketing: that is, advertising must be truthful and not misleading or deceptive, advertisers must have substantiation for their claims, and advertising must not be unfair. 

 

The general rules relating to the use of disclosures also apply to online marketing. 

 

Disclosures are required when an express or implied advertising claim is likely to be misleading without qualifying information.  The disclosure can only qualify or limit the claim; it cannot contradict the claim.  Moreover, the disclosure must be presented “clearly and conspicuously” such that the consumer is likely to view it.  The question for advertisers is how to satisfy this requirement given the unique features and limitations of online ads, including advertising delivered via social media platforms or on mobile devices.

 

Factors to be used in evaluating online disclosures

 

The FTC incorporated and expanded its previous factors for determining whether a disclosure is clear and conspicuous to account for online advertising on devices such as mobile phones.  The FTC now considers:

 

  • The placement of the disclosure in the advertisement and its proximity to the claim it is qualifying
  • The prominence of the disclosure
  • Whether the disclosure is unavoidable
  • The extent to which items in other parts of the advertisement might distraction attention from the disclosure
  • Whether the disclosure needs to be repeated several times in order to be effectively communicated, or because consumers may enter the site at different locations or travel through the site on paths that cause them to miss the disclosure
  • Whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration
  • Whether the language of the disclosure is understandable to the intended audience.

 

Marketers should consider whether their disclosures are adequate from the perspective of a reasonable consumer.  If a certain disclosure cannot be adequately conveyed on a specific device such as a mobile phone, the FTC recommends discontinuing the claim on that device.  The FTC also encourages marketers to monitor disclosures to make sure they are actually reaching consumers.   

 

Application of factors to online marketing

 

The following is some specific guidance from the FTC as to how these factors will be applied:

 

Proximity and placement

 

The basic principle is that a disclosure must be near the claim in order to be clear and conspicuous.  

 

The following are some principles to guide advertisers in satisfying this requirement:

  • A disclosure is therefore more effective if it is viewed simultaneously with the triggering claim on the same screen.
  • The FTC discourages burying disclosures at the bottom of a page or after a substantial gap where they are likely to be missed.
  • If a consumer must scroll in order to view a disclosure, the FTC recommends using text or visual cues to let users know where the disclosure is.  Those prompts should be labeled to indicate the relevance and importance of the disclosure.  For example, “See below for additional fees” is specific enough to be considered sufficient, whereas “details below” is likely to be considered too general.
  • Advertisers should consider optimizing their websites for mobile devices to ensure that disclosures that might be sufficient on a computer are not too small or require scrolling when viewed on a mobile device.
  • Disclosures in connection with an online transaction should appear before the consumer purchases a product or service.  

 

Prominence

 

The advertiser must also make sure disclosures are prominently placed so as to draw attention.  Disclosures should be in a font at least as large as the claim they are related to and in a color that noticeably contrasts with the screen background.  

 

Advertisers should also consider how the disclosure will be viewed on different devices – what is viewable on a desktop device may not be as prominent on a smartphone.  If a disclosure is too small to read on a phone, or the text doesn’t wrap, then the disclosure is probably not adequate for mobile devices.  

 

Merely providing disclosures on an online ordering or check-out page is not adequate if consumers can purchase the same product at a bricks-and-mortar store or third-party online retailer without ever viewing the disclosure. 

 

Finally, you need to make sure you provide the disclosure prominently in all forms of media in which the claim is presented.

 

Hyperlinks

 

Advertisers have long relied on the use of hyperlinks to provide disclosures.  The FTC recognizes that hyperlinks can be effective, but cautions they should not be used when the disclosure is an integral part of the claim or conveys important information such as material additional cost, health, and safety information.  Moreover, if you need to use a hyperlink, the following are some basic principles to follow:

  • Make the link obvious.
  • Label it appropriately so as to convey its true nature and importance.  For example, general terms such as “disclaimer,” “more information,” “details,” “terms and conditions,” and “fine print” are likely to be insufficient.  By contrast, specific references such as “Get Service Plan Pricing” or “Restocking fee applies to all returns” convey the specific nature and importance of the hyperlink and are probably adequate.
  • Be consistent in the use of hyperlink styles, make getting to the disclosure easy.
  • Place the hyperlink as close as possible to the relevant information it is qualifying.
  • Make sure the page that is hyperlinked contains the relevant disclosures in a manner that is easy for the consumer to find.
  • Monitor click-through rates and modify the link if consumers are not frequently accessing the disclosure.

 

Space-constrained ads

 

Some online advertisements such as banner ads and tweets are by definition space-constrained and offered as a teaser to encourage consumers to click through to the website to get more information.  Even if the ad on a mobile device is small, claims that require qualification are not excused from the disclosure requirements, and so if those requirements cannot be satisfied the claim should not be made or should be modified.  

 

The FTC recommends including disclosure language in the ad when possible, such as “Ad” or “Sponsored” to inform consumers the message was sponsored by an advertiser, and providing an obvious hyperlink when the disclosure won’t fit.  The FTC also encourages creativity in using scrolling text or rotating panels to inform consumers about the location of a disclosure.

 

Pop-up disclosures

 

Pop-up disclosures can alert consumers to disclosures, but also present their own set of challenges.  The FTC warns that advertisers should not disclose necessary information in pop-ups that can be blocked by pop-up software.  Even if the pop-ups cannot be blocked, some consumers may not read the information because they don’t associate information in a pop-up with a certain claim or product.  

 

Advertisers can avoid these problems by requiring a consumer to take an affirmative step in order to proceed past the pop-up, such as requiring consumers to choose between “yes” and “no” buttons.

 

Distracting factors in ads

 

The FTC reiterates the principle that an entire ad will be viewed in its entirety in evaluating whether a disclosure was adequate.  The FTC recommends that elements such as sound, graphics, links and “add to cart” buttons do not distract the consumer from viewing the disclosure.

 

Multimedia messages

 

Online ads often contain audio, video and animated segments with claims that require qualification.  The disclosure should accompany the claim in whichever media the claim is originally made:

  • For audio claims, advertisers should make sure the audio disclosure is at a volume and cadence that a reasonable consumer would hear and understand.   
  • For written or printed claims, disclosures should be in writing, not solely in an audio or video clip where they could be missed if a device is on silent.
  • Video disclosures should be displayed for a duration that allows consumers to notice, read, and understand them.

 

For advertisers and marketers

 

All advertisers and marketers, and their agencies, should review and apply the guidance in .com Disclosures to their online marketing activities.  This requires careful planning and creativity in applying these principles to the continually changing and evolving world of online communications, including the creation of new techniques and tools to ensure effective disclosures.

 

For more information about the .com Disclosures, please contact Scott W. Pink.

 

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i 15 U.S.C. §45.

ii The FTC uses the term “online” marketing to include advertising and marketing via the Internet and other electronic networks, and notes that it is device neutral such that it encompasses computers and mobile devices, such as smartphones and tablets.