On March 12th, the Federal Trade Commission (“FTC”) issued its long-awaited update to its 2000 staff guidance document named Dot Com Disclosures (the “Guidelines”), releasing a revised version and renaming it .com Disclosures: How to Make Effective Disclosures in Digital Advertising. Companies need to incorporate the new guidance into their online and mobile advertising and promotions. The revised Guidelines reinforce traditional advertising law standards and use a series of examples to illustrate how to apply them to small screens and new mediums such as promotional Twitter posts, and suggests that many current approaches relied upon by industry are inadequate.

The Guidelines focus on the FTC’s traditional consumer protection truth-in advertising principles, but applies them to reflect the current digital marketplace, especially in light of the reduced size of smartphone screens and the difficulty of making full disclosures when the size of the advertisement is so much smaller when compared with traditional methods of advertising. However, the FTC has drilled down on 4 key takeaway points for companies to consider when developing their online and mobile advertisements:

  1. The FTC has made very clear in the Guidelines what hasn’t changed. Consumer protection laws still apply across the board to print, radio, TV, and online advertising. Innovative digital promotions may grab the headlines, but web and mobile-savvy advertisers shouldn’t lose sight of the old-school standards. Section 5 of the FTC Act (which prohibits unfair or deceptive acts or practices) is a timeless classic that supersedes the fashions (i.e., “technologies”) of the day. Regardless of how or where a company markets its goods or services, the FTC wants companies to know that well-established truth-in-advertising principles apply regardless of the size or placement of your ad. The second key takeaway point according to the FTC is another traditional advertising principle. It’s the law – and it’s always been the law – that if the disclosure of information is necessary to prevent an online ad claim from being deceptive or unfair, it has to be clear and conspicuous. According to the Guidelines, advertisers should make sure their disclosures are clear and conspicuous on all devices and platforms that consumers may use to view their ads. That means that if an ad would be deceptive or unfair (or would otherwise violate an FTC rule) without a disclosure — but the disclosure can’t be made clearly and conspicuously on a particular device or platform — then that ad shouldn’t run on that device or platform.
  2. Using 22 mock ads as examples, the Guidelines builds on some design tips highlighted in the initial guidance document. Among other things, the FTC advises marketers to consider the placement of disclosures and their proximity to the ad claims they explained or elaborated on. The old guidelines defined “proximity” as “near, and when possible, on the same screen.” The new advice is that disclosures should be “as close as possible” to the relevant claim and take account of the various devices and platforms consumers may use to view advertising and any corresponding disclosure.

One of the issues that the ad industry was closely watching was whether the FTC would provide more guidance on what kind of disclosures are appropriate for disclosing material connections that are required to be disclosed pursuant to the FTC’s Endorsement & Testimonial Guidelines in social media such as Twitter posts and how to give notice of online behavioral advertising (i.e., tracking and targeting) for online ads, the current standard for which is use of an icon that triggers a pop-up when hovered over. Specifically, the FTC states: “Icons, abbreviations, and symbols … are not adequate to prevent a claim from being misleading if they do not provide sufficient clues about why a claim is qualified or about the nature of the disclosure, or if consumers simply do not understand their meaning. Example 10 of the Guidelines sheds light on the FTC’s thinking in this key area for making disclosures when engaging bloggers and endorsers to spread the word about your brand. The FTC indicates in this Example 10 that where an endorsement is given by a consumer or blogger that receives a free sample to review product, and used the letters “FS” in a circle (to indicate “free sample”), this would not be considered by the FTC as a sufficient disclosure to meet the requirements of the FTC’s Endorsement Guidelines. The big issue here is that it is not clear to the FTC that consumers would have any idea that “FS” means the blogger received a free sample of the reviewed product. The guidance goes on to provide that the fact that an icon, abbreviation or symbol also functions as a hyperlink to an explanation of its meaning would not be sufficient to make the disclosure clear and conspicuous. This Example 10 in the Guidelines illustrates that use of short-form, iconic or abbreviated disclosures will only be acceptable if they alone convey to consumers the meaning for which they are intended to stand. Time will tell what is and is not sufficient in this regard and in its prior Endorsement & Testimonial Guidelines the FTC indicated that it would look to what was commonly understood by consumers in making this determination.

  1. Especially with mobile, space constraints can be a big issue, including on social media platforms. While the new Guidelines acknowledge the challenge that presents to marketers, companies still have to make necessary disclosures clearly and conspicuously. Thus, advertisers should exercise extreme caution in using pop-up windows and hyperlinks to convey critical information such as product costs or health and safety issues, and should closely look at the FTC’s commentary and guidance on such techniques. When used, hyperlinks should be labeled as specifically as possible to alert consumers as to what they contain and why they are important, should not be blockable and should function on all devices. The FTC also reinforces its prior warnings that material terms and necessary disclosures should not be relegated to “terms of use” and similar contractual agreements -- they must be clear, conspicuous and proximate. (See 2009 FTC Enforcement Action against Sears here).

Finally, the FTC indicates a preference that they would like to see companies reformulate their ads and claims made therein to avoid the need for disclosures all together. It will be interesting to see the extent to which in evaluating the sufficiency of online disclosures the FTC starts to look more closely at online and mobile ads themselves to determine whether the ad could have conveyed the same information without the need for disclosures in the first place.