FTC Dot Com Disclosure Update: What's New for 2013

Orrick, Herrington & Sutcliffe LLP

In March, the Federal Trade Commission issued updated advertising guidelines to take into account the challenges created by the rapid growth of mobile and online advertising platforms, particularly small screen size and other space constraints. The revised guidelines, “.com Disclosures: How to Make Effective Disclosures in Digital Advertising (pdf),” seek to help businesses apply many of the same principles espoused in the previous version of the guidelines to modern technologies and marketing channels.

WHAT’S THE SAME:  The guidelines emphasize that traditional consumer protection laws—most importantly, the FTC Act §5’s prohibition on “unfair and deceptive practices”—apply with equal weight to advertising online and in new media. The guides also make clear that “advertising” encompasses all forms of promotional content, from online advertising, marketing, and sales, to promotional activities, testimonials, social media, blog posts and other forms in use now or in the future. As ever, if a disclosure is required to prevent an advertisement from being deceptive or unfair, the disclosure must be “clear and conspicuous.” In evaluating whether a disclosure is clear and conspicuous, advertisers should consider (1) the placement of the ad and the proximity of the ad to the claim it modifies; (2) the prominence of the disclosure; (3) whether the disclosure is unavoidable; (4) whether other parts of the advertisement distract attention from the disclosure; (5) whether the disclosure needs to be repeated at different places on a Web site; and (6) whether the disclosure is understandable to the intended audience.

WHAT’S NEW:  Elements like small screen size, space constraints, and republishing can create challenges for advertisers attempting to create an effective disclosure. Disclosures must be “clear and conspicuous,” which means at the very least that the disclosures must be prominent and unavoidable across all platforms on which the claim may be displayed. A disclosure that may be prominent and unavoidable in one media (i.e., a desktop screen) may not be sufficient if a user views the claim in another (i.e., on a smart phone). Moreover, space-constrained ads like banner ads and tweets are not exempt from these disclosure requirements and must meet the disclosure principles or modify the claim so that disclosure is unnecessary. The revised Guidelines provide helpful examples of how the basic advertising principles can be applied in the new media space.

Evaluating Proximity in Online Ads

  • Disclosure is more likely to be effective if the user can view the claim and the disclosure together on the same screen. Remember that the viewing screen may differ across different devices.
  • If scrolling is necessary to view a disclosure, the advertiser should use text or visual cues to encourage consumers to keep scrolling. Avoid formats or designs that discourage the user from scrolling (for example, by separating the text and the disclosure with large blank space, which indicates to the user that it is OK to stop reading). Ideally, the disclosure should be unavoidable (i.e., the consumer should not be able to proceed with the transaction without scrolling through the disclosure). 
  • Use text prompts to indicate that more information is available. For example, the statement, “see below for important information on restocking fees” may be sufficient to encourage a consumer to keep scrolling for more details, whereas a generic statement, such as “details below” does not provide an adequate cue.
  • Try to position the disclosure in the same vertical column as the claim it modifies, to make it more likely a consumer will scroll to the disclosure on a mobile device, when it may be difficult to scroll horizontally. Ideally, Web sites should be optimized for mobile to eliminate the need for horizontal scrolling.   
  • Some disclosures are so material that they must be placed on the same page (no hyperlinking) and immediately next to the claim they modify (no scrolling) and must be sufficiently prominent so that the claim and the disclosure can be read at the same time. Examples include required disclosures about health and safety issues or cost and fee information that would significantly modify the product’s advertised basic cost. 
  • Disclosures must be communicated to consumers before they make a purchase decision or incur a financial obligation. Ideally, disclosure should be provided in context with the ad. At a minimum, disclosure should occur before a consumer makes the decision to buy, e.g., before clicking on “order now” or “add to shopping cart.” If the consumer can buy the product in a brick and mortar store or at a different online retailer, disclosure must be made on the same screen as the claim it qualifies so that the consumer does not overlook it before moving on to buy the product elsewhere. 
  • These principles apply to claims made within space constrained ads (i.e., banner ads, tweets) as well.  In determining whether the disclosure should be placed in the ad itself or on the Web site to which the ad links, consider how important the information is to prevent deception, how much information needs to be disclosed, the burden of disclosing it in the ad itself, and how effective the disclosure would be if it were made on the website. Try to use scrolling text or rotating panels in a banner ad to provide more space for disclosures.

Hyperlink Disclosures Are Appropriate Only in Certain Situations

Hyperlinks can be useful to access disclosures that are not integral to the claim, particularly if the disclosure is lengthy or if it needs to be repeated. Hyperlinks are most effective if the links meet some or all of the following criteria:

  • Link is clearly identified. Use different-colored text and underlining or other font clues to signal the link to click the link to get more information. 
  • Link is labeled to convey the importance, nature and relevance of the information it links to. The hyperlink label should use clear, understandable text and should make clear that it is related to a particular advertising claim. For example, a hyperlink labeled “More Details” is not as effective as “See shipping costs.”
  • Hyperlink styles should be consistent across a Web site or application (i.e., all italicized or all underlined, etc.).
  • Hyperlink should be placed close (preferably adjacent to) to the claim it modifies and should not be separated by text, graphics, blank space or intervening hyperlinks.
  • The click-through should take the user directly to the disclosure and the disclosure should be prominently displayed without distracting elements, like visuals, extraneous information, and opportunities to click elsewhere.

Warning!  Under The Revised Guides, Some Common Disclosure Practices May Not Be Sufficient:

  • Generic hyperlink styles in common practice may be ineffective. FTC advises that hyperlinks must be clearly labeled to convey the importance and the content of the disclosure to the consumer. The link should be titled to indicate why a user should click on the link and what information the consumer should expect to receive. Some examples:
    • Generic words like “DISCLAIMER,” “MORE INFORMATION,” “DETAILS,” “Terms and Conditions,” or “Fine Print,” are unlikely to be adequate.
    • Words like “important information,” or “important limitations,” may be inadequate.
    • Using a word in the claim as a link is not sufficient (i.e., “Buy one, get one FREE”) as many consumers may not recognize that is a hyperlink.
    • Instead, use descriptive hyperlink labels such as, “Get service plan prices,” or “Restocking fees apply.” 
    • A symbol or icon is not likely to be an effective hyperlink label because it does not provide sufficient clues about why a claim is qualified or the nature of the disclosure, even if the Web site contains an explanation of the symbols. 
  • Technology commonly employed to provide disclosures may be ineffective if it does not work in all media.
    • Pop-ups are likely to be ineffective because of the popularity of pop-up blocker software.
    • Mouse-overs may not work on mobile devices that have no cursor to hover over a link.
    • Similarly, Flash content or interstitial displays may not work on all devices.
  • Short form disclosures commonly used in social media may be ineffective.
    • Labels like “Ad” or “#spon” at the beginning or end of a tweet may or may not be adequate, depending on how clear the disclosure is made and how likely it is that consumers understand that the message is an advertisement or that it is sponsored by a third party. 
    • Disclosures linked by a coded hyperlink like “bit.ly/f56” may be ineffective if consumers cannot recognize the nature and relevance of the information to be found by clicking on it. Additionally, if the product can be purchased at a brick and mortar store, consumers who do not click on the link to see the disclosures would be misled. 
    • Disclosure should be made in each short-form ad that would require a disclosure if viewed in isolation. Do not assume that viewers will see multiple space-constrained ads. For example, a tweeted claim can be easily separated from a tweeted disclosure with intervening tweets. 
    • Advertisers may be responsible for disclosures in republished ads. Advertisers should use “best practices” to make it less likely that a disclosure will be deleted from space-constrained ads when they are republished by others. It is unclear what constitutes “best practices” in this instance.
  • Having an appropriate disclosure is not enough. Even if a disclosure is in place, an advertiser may be responsible if analytics demonstrate that users are not viewing the disclosures.  The burden is on advertisers to monitor click-through rates or other indicia that disclosures are not being viewed or understood by consumers, and to change disclosure tactics if warranted.

The Bottom Line:

From the FTC’s perspective, if a disclosure is necessary to prevent an advertisement from being deceptive or unfair and it is not possible to make the disclosure clearly and conspicuously across all platforms, then that ad should not be disseminated.  Remember that the effectiveness of a particular disclosure will always be fact-specific and strict adherence to these Guidelines does not create a Safe Harbor.  Rather, the ultimate test of the effectiveness of the disclosure is whether the information intended to be disclosed is actually conveyed to consumers.

For additional analysis by Orrick of the FTC's guidelines, click here (pdf).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

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