FTC Updates Dot Com Disclosures Guidance for Digital Ads

On March 12, 2013, the Federal Trade Commission ("FTC" or "Commission") released revisions to its Dot Com Disclosures guide to provide further guidance on how federal advertising law applies to online and mobile advertising and sales.[1] The FTC first published Dot Com Disclosures in May 2000,[2] when the Internet had less than 18% of the number of users that it currently has today.[3] The rapid growth of the online environment and changes in digital media since 2000, including the increased use of mobile devices and the rise of social media marketing, prompted the FTC to review these guides.

Dot Com Disclosures provide FTC staff guidance on how to provide clear and conspicuous disclosures necessary pursuant to the laws, rules, and guides enforced by the FTC in the online and mobile space.[4] The guidance is meant to be technology-neutral, applying generally to advertising and marketing on websites, mobile sites, in mobile applications, and via other similar technology.

The updated Dot Com Disclosures make clear that the basic principles of advertising law still apply regardless of the media used. This means that:

1. Advertising must be truthful and not misleading;
2. Advertisers must have evidence or substantiation to back up all express or reasonably implied claims; and
3. Advertisements cannot be unfair.

Disclosures often provide ways for advertisers to qualify their claims, but the Dot Com Disclosures make clear that such disclosure can only qualify or limit a claim to avoid a misleading impression; it cannot cure a false claim. This means, for example, that a product or package cannot be marketed as "recyclable" by adding a disclaimer that the product is not recyclable, or linking the consumer to a URL that provides information confirming that the product is not recyclable.

In general, disclosures required to prevent an advertisement from being unfair, deceptive, or misleading must be presented "clearly and conspicuously." The Commission will continue to look at the overall net impression of the advertisement, as it has in the past. Advertisers must take into consideration how and where the claim will be viewed (i.e., whether on a website or small screen on a mobile device), the placement of the disclosure and its proximity to the claim, and whether the disclosure is clear and understandable to consumers, in undertaking a self-assessment of whether the ad meets the "clear and conspicuous" standard.

Below we provide an overview of the eight (8) key points from Dot Com Disclosures for marketers to consider in evaluating whether their claims are clear and conspicuous.

1. Proximity of disclosures should be evaluated in the context of the technology used to view the claim. In general, a disclosure is more likely to be effective if consumers view the disclosure and the claim in close proximity to one another. While disclosures consisting of a word or short phrase may easily be incorporated into the text of the claim, many disclosures are longer and difficult to place next to the claim they qualify. This problem is exacerbated with smartphones, tablets, and other mobile devices with very small screens, which may require users to scroll beyond the claim to view a disclosure. Because consumers who do not scroll enough (or in the right direction) may miss important qualifying information and may be misled, the FTC suggests using text, visual cues, or the visual design of the page to encourage consumers to scroll. This could include a text prompt like "see below for important information on restocking fees." General or vague statements, such as "details below," may not meet the proximity standard; likewise, scroll bars along the edges of a screen are not an effective cue to alert consumers that a disclosure is provided below. The FTC also suggests that a disclosure should be placed in the same column of a webpage as the claim it modifies, to make it more likely that consumers who have to zoom in to read the claim on a small screen will also see the disclosure.

2. Hyperlinks may be useful to qualify a claim, but should be evaluated for effectiveness and proper use. Hyperlinks can provide a useful means for advertisers to display additional information relevant to a claim, but may not be appropriate in all cases. When a hyperlink is used, the FTC suggests the following:

• Disclosures that are an integral part of the claim, or inseparable from it, should not be communicated through a hyperlink. This is particularly true for cost information or disclosures concerning health and safety.
• Hyperlinks should be in close proximity to the claim. Any click-through page or screen must display the complete disclosure, and that disclosure must be displayed prominently.
• Hyperlinks should be clearly labeled to effectively communicate the type of disclosure that consumers will find if they click on the link, e.g., "Service plan required. Get service plan prices." Hyperlinking a single word or phrase in the text of an ad is not likely to be effective.
• Hyperlinks should be obvious and used in a way that consumers typically associate with hyperlinks, such as using blue underlined text.
• Symbols or icons by themselves are not as effective as hyperlinking labels, since they do not provide consumers with sufficient cues about why the claim is qualified or about the nature of the disclosure. However, the FTC, in a footnote, acknowledges the potential usefulness of icons in connection with privacy disclosures. One can envision that icons might eventually be very useful as a way to cue consumers to the need to link or read more to obtain complete information on the specific claim.

3. Advertisers should take into account technological limitations in confirming that consumers will see the disclosure. This can be a particular challenge when it comes to disclosures made on mobile devices. Advertisers should evaluate whether a particular technique for displaying information will be adequately shown across all mediums. For example, some browsers or devices may not support Adobe Flash Player; providing a disclosure using Adobe means that the disclosure may not be displayed on these devices (e.g., iPads, iPhones). In addition, using pop-ups to provide disclosures is problematic, since pop-ups can be blocked by certain software, or consumers may close pop-up windows without reading the content.

4. Disclosures should be displayed to the consumer prior to purchase, and should typically be displayed in the ad itself when the consumer is considering the purchase. In general, where a consumer can view an advertisement and purchase a product or service online through a website or mobile application, the disclosure should be provided before the consumer makes the decision to buy, e.g., before being able to click on "order now" or "add to cart." Similarly, when a product that is advertised online can be purchased from a typical "brick and mortar store" or through another online retailer, necessary disclosures should also be made in the advertisement. Consideration should be given to presenting important information, such as ongoing payment obligations associated with negative option offers, in ways that a consumer must acknowledge prior to purchase.

5. Consider proximity of the disclosure in space-constrained ads. Space constrained ads, such as "Tweets" and banner ads, are not exempt from disclosure requirements.[5] These space constraints, however, may present difficulties if disclosures are too detailed to be effectively placed in the ad itself. In determining whether the disclosure should be placed in the space-constrained ad itself or on the website to which the ad links, advertisers should consider how important the information is to prevent deception, how much information needs to be disclosed, the burden of disclosing it in the ad itself, how much information the consumer may absorb from the ad, and how effective the disclosure would be if it were made on the website. Short-form disclosures may be helpful to adequately inform consumers of the essence of a required disclosure. For example, the use of "Ad" at the beginning of a tweet, or the word "Sponsored" or "#Paid," will likely inform consumers that the message was sponsored or paid for by an advertiser. Other abbreviations or icons may or may not be adequate, depending on whether they are presented clearly and conspicuously, and whether consumers will likely understand their meaning.

6. Disclosures should be displayed prominently so they are noticed by consumers. Size, color, and graphics of the disclosure are important in determining whether a disclosure is effective. The size and color of the disclosure should be compared to the type size and color of the claim and other text on a screen. Advertisers should also consider whether a disclosure may be too small to read on a mobile device. If the text of the disclosure cannot be enlarged, the FTC states that the disclosure is not clear and conspicuous. In addition, disclosures should not be buried in a long paragraph of unrelated text and should relate to the specific product or service that the claim concerns.[6]

7. Limit distracting factors in the ad which may detract from the disclosure itself, and consider whether the disclosure should be repeated. Advertisers should consider the entire context of the ad to determine whether a disclosure is effective. Elements like graphics, sound, text, or links that lead to other screens or sites may result in consumers not noticing, reading, or listening to the disclosure. It may also be necessary to repeat a disclosure on lengthy websites or in lengthy claims to ensure that the consumer reads the disclosure. If claims requiring qualification are repeated throughout an advertisement or webpage, it may be necessary to repeat the disclosure.

8. Disclosures should be understandable and should be made in the same context that a claim is made. For disclosures to be effective, they must be made clearly and concisely, and be as simple and straightforward as possible. Advertisers should also ensure that the disclosure is made in the same mode as the claim. For audio claims, the FTC recommends that disclosures be made in the same audio file, and in a volume and cadence sufficient for a reasonable consumer to hear and understand. For written claims, disclosures should be made in writing, and not be placed in a video or audio clip. Video disclosures presented in video clips should be displayed for a sufficient duration for consumers to be able to notice, read, and understand them.

Most of the guidance is similar to the guidance provided in the FTC's May 2000 Dot Com Disclosures, but the purpose of the update is to highlight issues in the mobile space and other online technologies. General advertising rules, and specific statutes, rules, or guidelines, may result in the need for a disclosure. In a more technologically complex world, advertisers should evaluate where claims are made and apply a common sense approach to maximize the likelihood that consumers will see and understand disclosures.

For more information on advertising issues, please contact Sheila A. Millar (+1 202.434.4143, millar@khlaw.com), Tracy P. Marshall (+1 202.434.4232, marshall@khlaw.com)