FTC Issues Staff Report on Native Advertising

Date: Jan 03, 2018

When consumers may be misled into thinking an ad is something else, like news, an editorial, or a review, the Federal Trade Commission (FTC) has some advice. Native advertising (digital ads that look like non-advertising online content) can fall on the wrong side of the consumer deception scale if appropriate disclosures aren't provided to help consumers understand the commercial nature of the content. To understand the extent of the issue, the FTC commissioned research into how consumers respond to native advertising and search engine ads. The report released by FTC staff last month, Blurred Lines: An Exploration of Consumers' Advertising Recognition in the Contexts of Search Engines and Native Advertising: A Federal Trade Commission Staff Report, summarizes the research findings and concludes with advice for online advertisers.

The FTC examined how search and native ads are perceived by consumers. One test group of consumers' reactions to ads on a series of webpages were compared to the reactions of a second test group that viewed the same ads but with "modified disclosures to improve their prominence, legibility, or clarity." While the second group's perception that they were looking at an ad was apparently greater, the report noted that "even with the improved disclosures, a significant percentage of participants still did not recognize some ads as ads."

FTC staff therefore conclude with recommendations to ensure that consumers are not misled by native advertising. Chief among those recommendations is urging advertisers and publishers to follow the guidance laid out in the agency's December 2015 Enforcement Policy Statement on Deceptively Formatted Advertisements. The Policy Statement declares an ad deceptive "if it materially misleads consumers about the ad's commercial nature, including through any implied or express representation that it comes from a party other than the sponsoring advertiser." To combat that potential for deception, the Policy Statement urges conspicuous, clear and unequivocal disclosures. The staff report also advises that visual cues, including changes to disclosure language, position, text size and color, and 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."

With the growing prevalence of new digital formats, smaller screens, complex searches, and more native formats, the FTC's recommendations are worth reviewing.

For more information, contact Sheila A. Millar at millar@khlaw.com or +1 202.434.4143 or Tracy P. Marshall at marshall@khlaw.com or +1 202.434.4234. Subscribe to our blog, the Consumer Protection Connection for regular in-depth analysis and updates on important consumer protection developments.