FTC Issues Policy, Guidance Against Deceptively Formatted Online Advertising

The FTC put digital marketers and publishers on notice about using deceptively formatted advertising such as native ads or sponsored content that are "often indistinguishable from news, feature articles, product reviews, editorial, entertainment, and other regular content." The commission voted 4-0 approving an enforcement policy statement that lays out general principles used to determine "whether any particular advertising format is deceptive, in violation of Section 5 of the FTC Act ... if the ad misleads reasonable consumers as to its nature or source, including that a party other than the sponsoring advertiser is its source." FTC also issued guidance Tuesday to help companies comply by offering examples of when disclosures are needed and how they should be displayed within native ads. Consumer Protection Bureau Director Jessica Rich said in a news release the policy "applies time-tested truth-in-advertising principles to modern media. People browsing the Web, using social media, or watching videos have a right to know if they’re seeing editorial content or an ad.” Center for Digital Democracy Executive Director Jeff Chester in an emailed statement said the FTC's action is a "wake-up call" for digital marketers who will be penalized for "failing to ensure that so-called 'native ads' are clearly recognized as paid pitches." But he said the policy statement and guidance don't specifically address a growing practice called "programmatic native," which is used to create and deliver native ads by data profiling individuals. "The FTC should have specifically addressed it in its guidance and not just in a footnote (cite 50)," he wrote. "Given the growing data-driven capability of native ads to be formatted to reflect a person’s interests and online behavior, as well as how it’s designed to work well on mobile devices and other screens, there are questions about the effectiveness of disclosure." The FTC's policy statement and business guidance were produced based on a December 2013 workshop on the topic plus two years of research, the release said.