FTC Issues Policy Statement Regarding Native Advertising; Transparency about the Commercial Nature of Advertising Is Key

December 29, 2015

By Riëtte van Laack

“Native advertising” is advertising that looks like “news, feature articles, product reviews, entertainment, and other material surrounding it.” In the digital context, native advertising constitutes marketing material that is designed to mimic the look and feel of the host website. It is an increasingly popular means of promotion for marketers but, due to its nature, represents a concern for the FTC. The FTC believes that the purposeful “blurring” of advertising and host content increases the risk of deceiving consumers.

In December 2013, FTC expressed some of these concerns in an FTC workshop regarding native advertising, appropriately titled “Blurred Lines.” Two years later, on December 22, 2015, the Agency issued an enforcement policy statement, “Enforcement Policy Statement on Deceptively Formatted Advertisements,” explaining how the FTC’s general consumer protection principles apply to native advertising.  Simultaneously, the Agency issued a guide concerning native advertising, “Native Advertising: A Guide for Business” (Business Guide).

It is the FTC’s position that native advertising that does not disclose the commercial nature of the content is misleading. This is so even if the product claims are truthful. At the time the consumer accesses the content, the commercial nature of the content must be clear. According to the FTC, clarification about the commercial nature after the consumer has accessed the content may not be sufficient to undo the initial deception.

Although the term native advertising is generally used for digital marketing, it is clear from FTC’s policy statement that the concept is not new or limited to digital marketing. In fact, in 1967, the FTC already addressed the issue of print advertisements in news format. Similar principles apply to so-called “misleading door openers” such as sales visits and calls and emails with falsified sender information and an advertiser’s use of consumer and other endorsements. In all these forms of advertising, the consumers may be misled not by the content but about the commercial nature or source of the statements.

In the FTC’s evaluation of native advertising two issues will be considered: 1) the transparency about the commercial nature of the advertisement; and 2) the truthfulness of the content of the advertisement. If a disclosure is required to ensure that the native advertising is interpreted as advertising, the disclosure must be clear and prominent. The FTC evaluates that advertising as a whole considering such factors as the overall appearance, the similarity of advertising and non-advertising material and the ease of distinguishing between these two.

This Business Guide “builds on” other guides including the Dot Com Disclosures guidance, and the Endorsements and Testimonials Guides, as well as FTC enforcement actions against infomercial producers and operators of fake news websites marketing products. It provides 17 scenarios of how FTC determines whether material constitutes advertising and whether disclosures would be needed. Although FTC indicates that it intends to provide flexibility, at times it seems prescriptive. For example, in the section on “clarity of meaning,” FTC asserts that “[a]dvertisers should not use terms such as ‘Promoted’ or ‘Promoted Stories,’” to identify native advertising because those terms are “at best ambiguous and potentially could mislead consumers that advertising content is endorsed by a publisher site.” 

Traditionally, the FTC has not held publishers responsible for misleading ads on their properties because “they were just a distribution channel.” However, as explained in a final note in the guide, the involvement of the publisher in creating the content, creates some potential liability; “everyone participating in the promotion of . . . products is [expected to be] familiar with the . . . principles that an ad should be identifiable as an ad to consumers.”