Here’s the summary:

• Don’t blur advertising. FTC staff starts with the obvious, stating that “the best way to prevent harms stemming from blurred advertising is to not blur advertising.” Instead, there should be a clear separation between entertainment and educational content and advertising. For example, advertisers can use visual and verbal cues to signal to kids that they are about to see an ad.

• Provide prominent just-in-time disclosures. These disclosures should appear when a sponsored product is introduced into content and in language that kids are likely to understand. For example, the staff suggests that “Company ABC paid me to show you this so you will think about buying it” is better than “paid promotion” or “sponsored content.”

• Create icons to flag advertising. FTC staff encourages members of the digital ecosystem to work together to create and use an easy-to-understand icon to signal to kids that an advertiser provided money or other benefits to a content creator to advertise a product. Notably, the staff suggests the icon be used in conjunction with disclosures, not in place of them.

• Educate kids, parents, and teachers. Stakeholders should work together to find ways to educate kids, parents, and teachers about how digital advertising works and to help kids recognize and evaluate ads. This education could also play an important role in helping promote and support the use of an icon suggested above.

• Platforms should consider policies, tools, and controls to address blurred advertising. Platforms should consider (a) requiring content creators to self-identify content that includes advertising through policies and tools and (b) offering controls that allow parents to limit or block their children from seeing ads.

The guidance echoes the broad principles that the FTC outlined in 2016 in its Enforcement Policy Statement on Deceptively Formatted Advertisements and related business guide on Native Advertising – see our report here – but encourages stronger measures because techniques that may be sufficient to help adults differentiate content from ads may not be sufficient for kids.

A post on the FTC site warns that “the FTC will be monitoring this area and may take law enforcement action when blurred advertising is an unfair or deceptive practice prohibited by the FTC Act.” We’ll continue to watch what the FTC does in this space, and will keep you posted.

Khaled Khaled, better known as music producer DJ Khaled, and professional boxer Floyd Mayweather Jr. both allegedly promoted investments in ICOs for Centra Tech Inc. in 2017 without disclosing the compensation they received in exchange for their endorsements ($50,000 for Khaled and $100,000 for Mayweather). This triggered a violation of the anti-touting provision of the federal securities laws.

A few examples of these endorsements include Khaled referring to Centra’s ICO as a “Game changer” on various social media accounts, and Mayweather tweeting that Centra’s ICO “starts in a few hours. Get yours before they sell out, I got mine…”

Mayweather also allegedly failed to disclose his relationship with two other ICOs that paid him $200,000 for posts such as, “You can call me Floyd Crypto Mayweather from now on.”

In settling the charges, Khaled agreed to pay $152,725 in disgorgement, penalty, and prejudgment interest, while Mayweather agreed to pay $614,775 for the same. Mayweather and Khaled also agreed not to promote any securities, digital or otherwise, for three and two years, respectively.

Although proper disclosures in social media endorsements have been an area of concern for the FTC for years, this settlement indicates that the SEC is just as interested in making sure consumers understand when they’re seeing sponsored content in the marketing of financial products.

For more information on this topic, check out our earlier post on SEC activity and our webinar, “Advertising Under the Influence.”

Creaxion, a PR agency, was tasked with creating a campaign to promote a client’s new mosquito repellent product around the time the press was reporting about the mosquito-borne Zika virus during the 2016 Summer Olympics. As part of the campaign, the agency partnered with the publisher of Inside Gymnastics magazine to secure athlete endorsers and run stories about the product.

Together, the companies paid two gold medalists to promote the product, and the athletes posted endorsements on social media, without disclosing that they had been paid. The publisher re-posted those endorsements in its magazine, again without a disclosure. Inside Gymnastics also ran paid ads for the product that, in the eyes of the FTC, were made to look like independent news stories.

As part of the settlements, the companies are prohibited from misrepresenting that influencers are independent consumers. Any connections between an influencer and the companies whose products they endorse must be clearly disclosed. To that end, the companies agreed to institute procedures designed to ensure that influencers make these disclosures, including notifying influencers of their responsibilities, monitoring compliance, and terminating influencers who fail to comply.

The companies are also prohibited from expressly or implicitly misrepresenting that paid ads reflect the opinions of an independent or objective publisher or source. Although the settlement doesn’t go into details on this point, this requirement likely means that ads that appear near new stories need to be clearly labeled as ads, as the FTC has advised in its native advertising guidance.

BuzzFeed explained that the shopping guides include product recommendations by its writers, and that the companies mentioned in the guides don’t have any ability to influence the content. In some cases, BuzzFeed may receive compensation if a reader makes a purchase through an “affiliate link.” The writers, however, don’t know whether affiliate links may be available for the products they recommend. Those links are added by a separate group at BuzzFeed after the article is completed. Thus, the decision to recommend a product is not linked to the potential for compensation. Moreover, the potential for compensation is disclosed at the top of each shopping guide: “We hope you love the products we recommend! Just so you know, BuzzFeed may collect a share of sales or other compensation from the links on this page.”

The FTC has noted that publishers who use affiliate links in conjunction with product reviews should clearly disclose their relationship with the companies or retailers whose products are reviewed. Although many companies get tripped up over this issue, BuzzFeed got the disclosure right, and the NAD did not focus on it. Instead, the case focused largely on the issue of whether the shopping guides constitute “national advertising,” as defined by NAD Policy and Procedures. More specifically, “the issue here is whether online publishers using affiliate links can use the aegis of editorial independence to avoid the requirement that it have substantiation for any product claims in the content.” As the line between editorial and commercial content gets increasingly blurred, it isn’t always easy to answer this question.

Ultimately, the NAD determined that the shopping guide did not constitute “national advertising” for a few key reasons. Firsts, the content was created by writers who did not know whether or not the company would receive any affiliate revenue based on purchases of the recommended products. Second, neither the retailers nor the brands mentioned in the guides had any input in what was said about the products. And, third, the links were added to the shopping guide after the content was written. “In sum,” the NAD wrote, “the content was created independently of and prior to the addition of affiliate links to the article.” Thus, the statements in the shopping guide weren’t ads and BuzzFeed wasn’t responsible for substantiating claims about the products that were reviewed.

This decision provides a roadmap for other companies that use affiliate links. Simply calling something “editorial” is not going to be enough to escape scrutiny under advertising laws. Instead, companies must have procedures in place to ensure that there is a clear separation between editorial decisions and revenue and that the companies whose products are being reviewed cannot influence the content. It’s also important to clearly disclose the affiliate relationship, as BuzzFeed did here. The NAD’s decision suggests that if companies get this wrong, they may be required to substantiate any claims they make about the products they review.

As reported in our Ad Law News and Views newsletter, Kelley Drye’s Advertising Law practice posted 106 updates on consumer protection trends, issues, and developments to this blog in 2017. Here are some of the most popular:

• New Lawsuit Highlights Risks of Using User-Generated Content
• FTC Announces $1.3 Million Settlement in Negative Option Case
• Read This Before Scanning A Driver's License In New Jersey
• FTC Staff Reminds Brands and Influencers About Disclosure Requirements
• "OK, Google. Send a Letter to the CPSC”: Privacy Groups Request Recall of Google Home Mini
• New NAD Decision Addresses Product Reviews
• Judge Upholds FTC Staff Opinion that Avatar Calls are Prerecorded Messages under TSR
• Instagram Announces a New Tool for Influencers
• EU Data Protection Authority Issues GDPR Action Plan, Swiss Sign Privacy Deal with U.S.
• Don’t Like Negative Reviews? Read This Before You Delete Them
• More Regulators Focus on Price Comparisons
• CIT Adds New Requirements for ‘Assembled in USA’ Claims Analysis
• How Not to Get Burned by “First” Claims
• NAD Gives Bill of Good Health to Dietary Supplement Immunity Claims
• Court Relies on Due Process Argument to Dismiss Website Accessibility Suit

2018 Advertising and Privacy Law Webinar Series

Please join Kelley Drye in 2018 as we continue our well attended Advertising and Privacy Law Webinar Series. Like our in-person events, this series gives key updates and provides practical tips to address issues faced by counsel as well as CLE credit. This webinar series will start again in February 2018. Please revisit the 2017 webinars here.

This webinar series will commence January 25 and continue the last Wednesday of each month, as outlined below.

January 25, 2017, February 22, 2017, March 29, 2017, April 26, 2017, June 28, 2017, July 26, 2017, September 27, 2017, October 25, 2017, and November 29, 2017

Kicking off the series will be a one-hour webinar on “Marketing in a Multi-Device World: Update on Cross Device Tracking” on January 25, 2017 at 12 PM ET.

CLE credit will be offered for this program.

Thank you again for attending the Summit. We hope you enjoyed the content and opportunity to connect with others who regularly handle advertising and privacy issues. The presentations and supporting materials from the Summit and Boot Camp are also available on our blog using the same KelleyDryeAdLaw password. We welcome your feedback, so please send it to [email protected].

To stay up to date throughout the year and learn the latest developments on consumer protection issues, please subscribe to our blog, Ad Law Access, follow us on LinkedIn, Facebook, Twitter.

See you in 2017!

The Trampoline Safety website evaluates trampolines based on over 40 metrics and provides product reviews, videos, and articles. If you visit the site, you may notice that the top-rated trampolines are all made by a company called JumpSport. But unless you look closely at the disclosure at the bottom of the page, you may not notice that the Trampoline Safety website is run by the same family that runs JumpSport.

The NAD determined that consumers who visit the website are likely to believe “that the content was independently generated editorial content, rather than content created by JumpSport.” The website is unbranded and there is “nothing to alert a consumer to the fact that this is an advertisement,” that the site is run by JumpSport, or that the tests were “devised and conducted by the company that produces the three trampolines that achieved, far and away, the best results.”

The disclosure at the bottom of the page did not cure the problem for two reasons. First, the NAD held that an advertiser can’t use a disclosure to contradict the main message of an ad. Here, the NAD thought the main message was that the reviews were independent. And, second, even if the disclosure hadn’t contradicted the main message, the NAD held that the disclosure failed to meet the “clear and conspicuous” standard. Because consumers wouldn’t see the disclosure unless they scrolled to the bottom of the page, it was ”not easy for consumers to notice, read, and understand.”

The decision covers a lot of ground. (For example, the NAD also took issue with JumpSport’s testing methodology and found that its tests were not sufficiently reliable to support the claims on the site.) But our focus for this post is the manner in which the reviews were presented. If your company has any connection to a product review – regardless of whether the review was written by your company or some third party who has received an incentive from you – that connection needs to be disclosed in a meaningful way. A fine-print disclosure is unlikely to help.

Joyus is an e-commerce platform for various lifestyle products including fashion, beauty, personal care, fitness, and home products. Many of these products are featured in the “Stuff We Love” section of People magazine, which appears in the Style Watch section of the magazine’s website. Consumers can read a description of each product and watch a video – which is jointly produced by Joyus and People – that advertises the product. If consumers like what they see, they can easily purchase the product on the same screen.

Joyus and People took various steps to separate the magazine’s editorial content from Joyus’ advertising content. For example, the product videos all include the Joyus logo in the upper-left corner of the video player’s frame. This logo – along with a discount offer – can be seen before the video is played, as well as during the entire time the video is played. Joyous argued that these labels clearly let consumers know that the videos were ads, rather than editorial content.

Although the NAD agreed that the videos themselves were clearly labeled as ads, the NAD was concerned that the pages leading up to the videos were less clear. For example, the “Style” page link to “Stuff We Love” doesn’t disclose that the feature is a partnership with Joyus and promotes products for sales. As a result, the NAD opined that consumers could believe these pages represent selections by people’s editors, rather than paid ads. Thus, the NAD recommended that Joyus (in collaboration with People) revise the link so that it is clear that by clicking on the “Stuff We Love” link, a consumer will be taken to a list of items for sale by Joyus.

Although the FTC’s guidance on native ads is helpful, it’s often useful to see “real life” examples. We expect to see more of them from the NAD in the coming months.

The two new guidance documents are important developments as they provide a road map for how the FTC is likely to enforce in the area in the future. The following are a few key takeaways.

• In determining whether an advertisement is misleading as to its nature or source, the FTC will consider the overall net impression of the ad from the perspective of a reasonable member of the target audience. Factors the FTC will consider include “the similarity of [the ad’s] written, spoken, or visual style to non-advertising content offered on the publisher’s site” and “expectations based on consumers’ prior experience” with the particular medium.
• If an ad is likely to deceive as to its nature or source, the FTC expects clear and conspicuous disclosures clarifying the nature or source of the ad.
• According to the FTC, disclosures in native advertising must often appear at the outset, before a consumer clicks on a link leading to the ad.
• The FTC is unlikely to consider headings, such as “More Content for You” and “From Around the Web,” to be sufficient disclosures.
• The FTC recognizes that not every ad that appears in a format similar to surrounding content is likely to deceive. The FTC provides the following example: “[I]f 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.”

According the to the FTC, Machinima, the operator of a popular YouTube network, paid two influential gaming bloggers to create videos promoting the new Xbox One console and three new games, but didn’t require the bloggers to disclose that they were paid for the reviews. The bloggers posted four videos that had more than 1.6 million views. To capitalize on this success, Machinima later recruited and paid more people to upload positive reviews, again without requiring a disclosure. This generated another 300 videos and 30 million views in a five-week period.

If you follow our blog, you can already guess the problem. As Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said: “When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch. That’s true whether the endorsement appears in a video or any other media.” Under the proposed settlement, Machinima is required to ensure its influencers clearly disclose when they have been compensated in exchange for their endorsements.

Whether you refer to this as an “influencer” campaign or “native advertising,” the answer is always the same. If your company pays people to review or promote your products in a way that could confuse viewers into thinking the reviews come from independent consumers, you need to take steps to ensure that the reviewers clearly disclose that they have some connection to your company. Make sure you educate reviewers about their responsibilities and take steps to monitor their compliance. If you don’t, you could end up as one of future blog posts.

The compliance warning explains that native, interest-based advertisers should provide consumers with transparency through “enhanced notice” in or around the native ad that, like the AdChoices Icon, alerts consumers that they are viewing an ad and links to more information about interest-based advertising and consumers' ability to exercise choice by opting out. While the BBB appears to favor the AdChoices Icon, the warning notes that a clear phrase alerting consumers that they are viewing an ad may be used instead. Additionally, the warning reminds advertisers that they must give consumers control over the collection and use of their data and must honor the choices made.

Developed in 2009 by leading industry associations, the seven OBA Principles are intended to make online behavioral advertising more consumer-friendly, giving consumers knowledge of and control over the information collected about them. The Principles are (1) education, (2) transparency, (3) consumer control, (4) data security, (5) material changes, (6) sensitive data, and (7) accountability. It is important for advertisers engaged in online behavioral advertising to ensure compliance with these Principles, regardless of the technology and platform or device used.

Taboola is an advertising network that purchases space from online publishers on behalf of its clients, places ads in those spaces, and earns money based on the number of clicks on the ads. The ads are labeled in a variety of ways including, “You May Like” (as above), “More in the News,” or “Recommended Videos.” One of Taboola’s competitors argued that because the labels are vague, consumers might mistakenly think the ads link to editorial content.

The NAD agreed, despite Taboola's “promoted content” or “ sponsored content” disclosures on the top-right of the ads. The NAD was concerned that the placement of the disclosures in the upper right hand corner appeared in a place “that consumers are less likely to notice and read.” Even the name of the sponsor below the ads was “not sufficient to disclose to consumers that the links are paid links.”

The NAD recommended that Taboola more clearly disclose that ads are sponsored content by increasing the size, and improving the placement, of its “promoted” or “sponsored” disclosures. The NAD also cautioned that the combination of the image, article title, and name of the destination site should not mislead consumers about what's on the landing page.

This is the second NAD decision on native advertising we’ve discussed this year. Like the previous decision, this one suggests that the NAD believes that consumers are likely to be confused by native ads and that the disclosures advertisers typically use are not sufficient.

No, we won’t share our tips to help you lose your belly this summer. But we will share some tips to help you stay out of court.

Last week, the FTC sued a group of companies and their executives for false advertising, alleging that they used deceptive tactics to sell their Pure Green Coffee weight loss supplement. The case involves three hot topics at the FTC: health claims; native advertising; and endorsements.

The companies advertised that the supplement could help consumers lose 17 pounds in 12 weeks, without diet or exercise. According to the FTC, however, the study underlying the claims was fundamentally flawed and falls far short of the standard necessary for health claims.

To advertise the supplements, the companies created seemingly independent "news" sites that featured mastheads of fictitious organizations, such as Women’s Health Journal. According to the FTC, these sites were designed in a way that made it "impossible for people to know whether they were seeing news or an ad."

The companies also featured endorsements from purportedly independent consumers throughout the sites. The FTC claims, however, that the endorsers didn't purchase the supplement and that they weren't independent. Instead, the individuals had been paid $200 and received a free 30-day supply of the supplement in exchange for the endorsements.

Diet and health claims have been a longtime focus of the FTC. If you make these types of claims, you should work closely with your legal team to ensure you have the necessary support. As we've noted in previous posts, the FTC has also been taking a close look at native advertising and endorsements. The key in these areas is transparency. Consumers should be able to distinguish between news and ads, and should be informed when an endorsement has been sponsored.

Microsoft recently signed a sponsored content deal with YouTube network Machinima to promote the Xbox One gaming console. As part of the deal, Machinima recruited people to post videos promoting the Xbox One in exchange for ad dollars. Unfortunately, the videos didn't include the necessary disclosures.

Tim Peterson from AdAge wrote an article about this incident, and asked me to comment on the legal issues. Take a look at Tim's article here.

As we've noted before, the FTC's Endorsement Guides generally require advertisers to disclose any connections between themselves and those who endorse their products, if those connections wouldn't be otherwise obvious. Shape's publisher argued that the relationship between the magazine and SHAPE-branded products was obvious and, therefore, that no additional disclosure was necessary. The NAD disagreed.

Although consumers may be aware that SHAPE-branded products are related to SHAPE magazine, the NAD was concerned that consumers may nevertheless believe that editorial recommendations in the magazine are independent of the influence of a sponsoring advertiser. Accordingly, the NAD recommended that the publisher more clearly disclose content as advertising when it mentions a SHAPE-branded product.

This isn't the first case to tackle this issue. We previously noted that the NAD asked a company to disclose it was behind several seemingly-independent recommendations of its products. What makes this case different is that there was an obvious connection between the publisher and the product. This decision suggests that the NAD may take a more stringent view of what constitutes “obvious” than would most advertisers.

The FTC has consistently taken the position that consumers should be able to easily make this distinction. In many cases, that requires that an advertiser disclose that content is sponsored or paid-for by the advertiser. However, the FTC noted that, while that requirement is generally applicable across all media, context does matter. For example, consumers may be more likely to understand the paid nature of advertising in “traditional” print and television media than they are in “new media,” such as blogs.

Given these differences, developing clear guidelines across the board is a challenge. At the workshop, panelists representing various groups discussed the merits and pitfalls of native ads and their regulation. Almost everyone agreed transparency was important, but how to achieve that was an open question. While some consumer groups argued that native ads should be labeled with words such as “Sponsored” or “Advertisement,” some law professors presented research that cast doubt on whether those labels are effective or understood by consumers.

Although native advertising isn’t new, it’s becoming more prevalent and sophisticated, which is part of what prompted yesterday’s workshop. It’s too early to predict what will come of the workshop, but the FTC will attempt to issue guidelines for advertisers that engage in this practice. In the meantime, we expect to see more enforcement actions — such as the ones we discussed here, here, and here — to continue. Accordingly, if you run native ads, work closely with your counsel to stay on the right side of the blurred line.

While the FTC workshop isn’t until December, my article on the same topic in last month’s E-Commerce Law & Policy explores the legal issues surrounding native advertising. Click here to read more.

• eSalon operates a hair-styling blog, and many posts promote the company’s products. Because the blog didn’t have eSalon branding, the NAD was concerned that consumers would view the blog as independent, despite a fine-print disclosure at the bottom of the site. The NAD recommended that eSalon disclose its affiliation at the top of each page.
• eSalon provides consumers incentives to promote the company’s products in social media. As we’ve noted before, advertisers must take steps to ensure the consumers disclose those incentives. The NAD recommended that eSalon advise reviewers of their disclosure obligations and that the company not re-post reviews that fail to include these disclosures.
• eSalon’s Pinterest page includes a review section with links to content discussing the company’s products. Although some of the content was independently generated, other content was sponsored by eSalon. The NAD advised eSalon to clearly differentiate sponsored content from independent content.
• eSalon used celebrity photos to highlight the celebrities’ hair color choices. The NAD was concerned that consumers would interpret the use of the photos as implied endorsements by the celebrities. As a result, the NAD recommended that eSalon not use celebrity photos unless the celebrities have endorsed the product.