In the modern age of social media, companies have increasingly begun to turn to native advertising to promote their products and services. Native advertising is a form of marketing in which an advertisement resembles the form and function of the media platform on which it appears. The goal of native advertising is for a paid advertisement to blend in with the regular content that is usually featured on the platform. Examples of native advertising include a sponsored article formatted like the usual editorial content found on a website, or a sponsored social media post that looks like and is featured among the usual content on a platform. Publishers like Buzzfeed, the New York Times, Forbes, and the Wall Street Journal, among others, have all integrated native advertising into their content.
Last year, the Federal Trade Commission (FTC) released an enforcement policy statement regarding deceptively formatted advertisements and the consumer protection principles that apply to native advertising, along with guidelines specifying when and what type of disclosures must be included in native advertisements to make it clear that the content is sponsored. According to the FTC’s policy statement, advertisements and promotional statements are considered deceptive if they are not identifiable as advertising and mislead consumers into believing that a party other than the sponsoring advertiser is the source of the content. In analyzing whether a native advertisement is deceptive, the FTC considers the “overall impression” created by the advertisement, such as the similarity of the advertisement’s content to the non-sponsored content on the platform and the degree to which the advertisement is distinguishable from such other content. To avoid being considered deceptive, native advertisements should contain disclosures that make it clear to the public that the content is sponsored. The guidelines issued by the FTC state that adequate disclosures must be presented clearly and prominently. A disclosure should appear where consumers will easily notice them and should be understandable—avoiding industry or technical jargon and unfamiliar abbreviations.
It has been approximately one year since the FTC issued its native advertising guidelines, but it is not clear what effect they have had on how native advertising is presented. One study suggests that approximately 70% of websites featuring native advertisements are not currently compliant with the FTC’s guidelines. This past March, however, the FTC announced its first enforcement action since issuing the guidelines. The action was brought against retailer Lord & Taylor, who the FTC alleged had deceived consumers by not adequately disclosing that its native advertisements to promote its Design Lab collection were sponsored. As part of its promotional campaign, Lord & Taylor contracted with the fashion magazine Nylon for the publisher to feature an article about the collection. However, the article did not contain any disclosure regarding the promotional nature of the content. Additionally, Lord & Taylor contracted with 50 fashion influencers to post a photo of themselves wearing a dress from the Design Lab collection to their Instagram accounts, tagging the @lordandtaylor Instagram account and using the hashtag #DesignLab in the caption. However, none of the Instagram posts specified that the featured content was part of a paid promotional campaign or that Lord & Taylor compensated the influencers for their posts. Lord & Taylor entered into a consent order to settle the FTC’s charges, and although they were not required to pay a monetary penalty, the company agreed to correct their advertising practices. The consent order prohibits Lord & Taylor from misrepresenting that paid advertising is from an independent source, requires the company to disclose any connection between itself and a paid endorser, and requires Lord & Taylor to establish a monitoring and review program for the company’s promotional campaigns in the future. Lord & Taylor must also submit a report to the FTC demonstrating their compliance with the order.
The effect of the settlement on the future of native advertising remains to be seen, but a number of advocacy groups have recently filed a complaint with the FTC regarding issues similar to those raised in the Lord & Taylor settlement. The complaint urges the FTC to take enforcement action against Google, Disney and other companies for using influencer advertisements to deceptively target children.
Given the increasing prevalence of native advertising, the FTC guidelines provide much-needed direction on the consumer protection issues surrounding the area. Whether the guidelines usher in any meaningful changes, however, remains to be seen, and largely depends on how active the FTC will be in enforcing their directives.
Yana Manevich is a J.D. candidate, 2018, at NYU School of Law.