FTC Issues Report on Advertising Law Study

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January 22, 2018

Advertising Law Study

The Federal Trade Commission (“FTC” or “Commission”) recently released a 93-page report, which provides evidence lending support to the Commission’s current guidance on established advertising law.

What are the key takeaways for native and search advertisers?

FTC Guidance on Native and Search Advertising Law

Section 5 of the FTC Act, 15 U.S.C. § 45, prohibits unfair and deceptive acts and practices in interstate commerce.  In 2015, the Commission issued its Enforcement Policy Statement on Deceptively Formatted Advertisements, explaining how established advertising law applies to different ad formats, including Internet search advertising and “native” ads that look like their surrounding non-advertising content.

In subsequent guidance, the FTC has expressed concerns that consumers may have difficulty identifying such Internet ads and has provided specific guidance on making effective disclosures in compliance with current advertising law.

FTC Report and Study

The FTC’s recent report, entitled “An Exploration of Consumers’ Advertising Recognition in the Contexts of Search Engines and Native Advertising,” focuses on Commission research conducted in 2014 and 2015.  The FTC took screenshots of actual native and search advertisements (both mobile and desktop versions), then modified the ads in accordance with current FTC advertising law guidance in an effort to improve their respective prominence, legibility and clarity.

In its study, the Commission asked 48 participants to view a portion of the original or modified ads, then used subjective observations, such as spontaneous comments and eye movement, to score whether participants recognized content items as advertising.

The FTC concluded that most of its modifications increased the likelihood that participants recognized an ad as an ad by 10% to 45%.  “Minor modifications, including changes to disclosure language, position, text size and color, and to other visual cues such as the borders around or background shadings of ads or ad groupings, can in combination substantially increase the likelihood that a consumer recognizes an ad as an ad and reduce the potential for consumers to be misled as to the commercial nature of paid search and native ads,” the report states.

However, the Commission’s report also acknowledges the study’s limitations, noting the limited number of participants and conceding that “a significant percentage of participants still did not recognize some ads as ads.”

Protect Yourself

Broadly speaking, the FTC and state attorneys general require advertisers to refrain from making false or unsubstantiated claims-related representations. The above-referenced FTC report illustrates the importance of complying with applicable state and federal advertising laws, rules and regulations when engaging in native and search advertising via the Internet.  To avoid regulatory enforcement and other legal risk, businesses operating in the Internet advertising space should always consult with an experienced marketing attorney before commencing any new native or search ad campaign.

If you are engaged in search or native advertising, or if you have been served with legal process relating to your Internet marketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

Attorney Advertising

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FTC Warning Letters Sent to Search Engine Companies

FTC Policy Statement Targets Native Advertising

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