The use of digital media to promote businesses and their products is increasing at a rapid rate, and federal and state law enforcement agencies have responded accordingly. The most important thing to know is that the same basic compliance rules that apply to other forms of advertising also apply to digital advertisements. For example, representations must be true and substantiated and must include clear and conspicuous disclosures when necessary to dispel any misleading impression created by the ad.
The different characteristics of the Internet and the devices used to access it can create unique compliance concerns and making effective disclosures can be especially challenging in online media, as the user experience can vary widely depending on the consumer and type of device. As in other media, online disclosures must be prominent and proximate to the claims or terms they are qualifying. Note: This can be very difficult to do on a mobile device with a small screen. In March 2013, the FTC issued an update to its Dot Com Disclosures Guide to making effective online disclosures. The FTC emphasized that consumer protection laws apply equally to all advertising, regardless of the medium used, and include digital and social media. Disclosures required to avoid deception or otherwise comply with the law must be presented in a clear and conspicuous manner, and space constraints do not relieve the advertiser of this obligation.
In terms of prominence and placement, advertisers should be creative in using color, size, and graphics to make the disclosure more readily noticeable. Material disclosures should not be buried in long paragraphs of scrolling text, in the website’s “terms and conditions,” or in footnotes. They should be on the same screen as the claim they are qualifying and should be as close to the claim as possible. Generic statements such as “see below” are insufficient, especially if the consumer must scroll to see it. In some cases, it may be acceptable to use hyperlinks to take the reader to a separate page containing the disclosure, but only if the link itself is clear and prominent, takes the reader directly to the disclosure, and is labeled to explain the nature of the information and its importance (such as, “Click here to learn more about options you can purchase.”). But hyperlinks cannot be used to communicate disclosures that are “an integral part of the claim.” For example, disclosures about added fees and costs that consumers must pay to purchase the product should really be in close proximity to the price claims, and not on a separate screen or page.
Any elements of the ad that detract from the effective communication of a disclosure should be removed or altered. Pop-up disclosures typically do not comply because many consumers block pop ups. A disclosure should be made in the same manner as the claim it qualifies and may need to be included each time the claim is presented. The content of the disclosures should be clear, simple, and straightforward. The test for whether a disclosure is effective is the extent to which consumers can actually read, perceive, and understand it. Rapidly scrolling pages of text are likely to fail the test for acceptability.
For example, the FTC issued a complaint against an online lender this year in connection with its lack of prominent fee disclosures regarding fees, because the company used methods such as pop ups, scrolling and fine print to qualify the nature of the fees. The FTC’s complaint asserted that the fee disclosures were not clear and conspicuous and that this constituted a deceptive act or practice.
In addition to the challenges posed by making disclosures on electronic devices, the FTC has identified two other major issues with online and social media advertising:
- Native Advertising (“sponsored content”). Promotional messages that blur the lines between advertising and content are common on the Internet but may be deceptive. The FTC has issued an enforcement policy statement on “deceptively formatted advertisements,” defined as promotional messages that are integrated into and indistinguishable from non-promotional content, such as news, featured articles, or product reviews. The policy statement states that advertising and promotional messages that are not readily identifiable as such are deceptive, because they are likely to mislead consumers into believing the messages are independent and impartial. In these situations, the advertiser must clearly and conspicuously disclose that the embedded message is an advertisement, for example by putting the phrase “PAID ADVERTISEMENT” at the top of the message.
- Deceptive Endorsements. Promotional communications that include purported endorsements or testimonials from experts or consumers who have some connection with the advertiser are deceptive absent a clear and conspicuous disclosure of the nature of the connection. For example, if the endorser has received compensation or free products from the advertiser, those facts must be disclosed. The FTC’s Guidelines on Endorsements and Testimonials are described in more detail below.
- Online Influencers. The FTC brought its first enforcement action against individual online influencers for failure to disclose material connections with the companies that they promoted. This appears to be an area of emerging interest for the FTC.
