Hunton Retail Law Resource

Late last year, as the holidays approached, the Federal Trade Commission issued enforcement guidance on “native advertising” — ads that purposely are formatted to appear as noncommercial and are integrated into surrounding editorial content. The agency’s guidance took two parts: an Enforcement Policy Statement on deceptively formatted ads, and a Guide for Business on native advertising. These long-awaited guidance documents follow on the FTC’s December 2013 “Blurred Lines” workshop on native advertising. Importantly, the FTC notes that its policy statement does not apply just to advertisers but also to other parties that help create the content: ad agencies, ad networks and potentially, publishers.

Native advertising is not a new concept — in the past, advertisers formatted direct mail pieces to appear as book reviews, or presented infomercials as feature TV programming. The advent of digital ads, however, has changed advertisers’ ability to more seamlessly integrate sponsored content into surrounding editorial content and consumers’ ability to share such ads. The FTC also mentions that digital advertising gives companies the ability to target natively formatted ads to individual consumers based on their known preferences.

The FTC’s Enforcement Policy Statement asserts that advertising and promotional messages that are not identifiable as ads are deceptive, and therefore violate the FTC Act, if they mislead consumers into believing the ads are independent, impartial or are not issued by the sponsoring advertiser. According to the FTC, the source and format of an ad, and not just its content, is important because: (a) knowing the source typically affects the weight and credibility consumers give an ad and (b) influences whether consumers will choose to interact with the ad.

The FTC indicates that its deception analysis will turn on whether reasonable consumers would recognize a particular ad as an ad; not all natively formatted ads will trigger agency inquiry. Read the attached client alert for Do’s and Don’ts designed to aid our clients.

Read the full client alert.