Will There Be More Settlements With The FTC On Native Ads?

It’s been well over a year since the Federal Trade Commission (FTC) offered guidance on native advertising. But since then, it has settled a big case with the retailer Lord & Taylor.

The FTC brought an action against Lord & Taylor in 2016, charging that the company deceived consumers by running “native advertisements” that  included a seemingly objective article in an online publication and an Instagram post. “Lord & Taylor failed to disclose that these posts were actually paid promotions. We can expect the FTC to continue to aggressively bring enforcement actions against marketers until there is a higher level of compliance,” said Adam Solomon, a partner in the Advertising & Digital Media practice at Michelman & Robinson LLP in New York.

Solomon said that while brands find sponsored content that resembles a Web site’s native news highly effective, they have a responsibility to ensure that consumers can differentiate between ads and other content.

Solomon said native and fake news are separate issues. “When you’re talking about native advertising, it’s something that the FTC has provided pretty clear guidance on. From their standpoint, they need to make sure that if something is being paid for that, in fact, it’s disclosed. It can’t be seen as news,” he said.

While some critics have suggested the FTC has been micromanaging by recommending that companies use the word "ad" in disclosures, Solomon said: “I think that the FTC at times tries to provide very clear direction by using specific words like ‘ad,’ but there might be other ways to word it and provide disclosures to consumers so they understand what they’re looking at.” Examples of words that can be used are “sponsored” and “paid.”

Solomon emphasized that the FTC doesn’t move at digital speed -- and that he expects more settlements to be reached. “When the FTC does speak, it follows a road map of issuing guidelines, establishing a process, and then making settlements. That’s their road map.” He said the Lord & Taylor case should be a “wakeup call” to the industry.

That said, Solomon believes compliance with the guidelines has improved.

Referring to a recent report by Media Radar that indicated that 37% of advertisers weren’t compliant with the FTC guidelines, Solomon said: “A lot of publishers are familiar and comfortable with native. From an advertiser standpoint, there’s a whole spectrum of companies that are not as experienced. I think there are a lot of advertisers that are just learning more about it. The onus for compliance with guidelines is on the advertisers. The publishers can help expedite and make sure whether they’re pitching something that is compliant,” Solomon said.

Solomon said he’s not aware of the FTC bringing enforcement actions in cases that are close calls. “The enforcement actions I've covered have involved companies that didn't make any disclosures,” he said.

The FTC conducts investigations and it might issue a subpoena to a company to further the investigation.

“Transparency with the consumer is critical, and promotional pieces shouldn’t suggest or imply to consumers that they are anything other than an advertisement. If a disclosure is necessary to prevent deception, the disclosure must be clear and it must be prominent,” Solomon said.

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