This is the second in a series of three articles about Federal Trade Commission and state attorney general regulatory and enforcement trends. Read part one.
After much anticipation from the marketing community, on March 12, the Federal Trade Commission (FTC) finally unveiled “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,” its eagerly awaited revised dot-com disclosures guidance.
The FTC undertook revisions to these guides in light of the significant technological and industry changes that have occurred since it first issued the guidance in 2000. In particular, the updated “.com Disclosures” was intended to provide the industry with more specific guidance on the FTC’s requirements that disclosures be made clearly and conspicuously on digital and mobile platforms with space-constrained screens and real estate.
For those who had hoped the new guidance might provide some relief
from the challenges of applying traditional disclosure requirements to their digital and mobile campaigns, the result is disappointing. Far from relaxing the 2000 guides in light of the challenges of adapting brands to digital media, the FTC has sent a message that space constraints and small screens are no excuse for the failure to make adequate disclosures. The overarching message is clear—advertisers will either have to find a way to make the required disclosures clearly and conspicuously, notwithstanding space and screen constraints, or refrain from advertising their offer in that particular medium or platform.
Many of the general principles regarding what constitutes clear and conspicuous disclosure remain relatively unchanged. For example, the FTC cites the following general principles for determining whether a disclosure is clear and conspicuous: prominence, placement in the ad and its proximity to the claim being modified, prominence of the disclosure, whether the disclosure is unavoidable, the extent to which other elements of the ad might distract attention from the disclosure, whether the disclosure needs to be repeated because, for example, there are multiple paths through which consumers may enter the site, and whether the disclosure is presented in language that is understandable.
There are, however, a number of new directives, examples and warnings relating specifically to digital and mobile media to which brands should pay particular attention, as they may require immediate changes in the way brands are currently structuring and conducting their digital campaigns.
The FTC strongly encourages optimization of websites for mobile devices. The agency recognizes that because of their small screens, smartphones and tablets often require the user to scroll vertically or horizontally. Placing the disclosure in a different column from the claim it modifies may therefore result in the consumer missing the disclosure entirely. The FTC warns that unless a website defaults to a mobile-optimized version, it is the advertiser’s responsibility to ensure that the disclosures are clear and conspicuous regardless of the device on which they are displayed, and that if the disclosure is too small to be read on a mobile screen or presented in a long line of text that does not wrap around and fit on the screen, the disclosure will likely not be deemed adequate.
The new guidance continues to permit the use of hyperlinks to disclose information that is not integral to the claim, but there are many cautions surrounding such use. The new guidance effectively rules out the use of hyperlinks to disclose any basic cost information or any safety or health information. In addition, if the information being disclosed is integral to the truthfulness of the claim, use of a hyperlink would not be appropriate.
If sites use hyperlinks, the link itself must be in close proximity to the triggering claim and must be properly labeled to convey the importance, nature and relevance of the information to which it links. Marketers should particularly note that the FTC expressly calls out many common labels, universally used by marketers to label hyperlinks—such as “more information,” “details,” the “fine print” and similarly generic titles— and deems them to be inadequate. Going forward, advertisers will have to label hyperlinks more specifically to indicate the precise nature of the information that they link to. For example, if the information being linked to concerns details on how to claim a rebate, the label would have to say something like “rebate details,” rather than simply “details.” This is an area where marketers would be wise to begin immediately conducting an audit of their current hyperlink practices to ensure that their links are properly labeled.
The new guidance also strongly signals that marketers that elect to rely on hyperlinks may have the burden of demonstrating through empirical data, such as click-through rates, that the links are in fact effective. The FTC strongly encourages marketers to monitor click-through rates and to use other tools to ensure that consumers are seeing the disclosures and spending enough time on the page to actually read them. It’s a safe bet that the FTC will begin looking for this type of data in future enforcement actions.
The FTC also warns marketers to be sensitive when selecting techniques for displaying disclosures to be sure that they are incapable of being blocked and are generally supported by most browsers and devices. Again, the agency suggests that the burden is on the marketers to determine through research that the techniques they choose to display disclosures are, in fact, effective.
Finally, the updated guidance reflects a subtle but important shift in the FTC’s thinking as to when required disclosures need to be made. Although historically the FTC has required marketers to make disclosures before the consumer commits to the purchase, i.e. before checkout, the guidance provides that disclosures should be made before the consumer “makes the decision to buy,” which the FTC construes as before the consumer places the item in the shopping cart. This belief that disclosures should be made earlier in the purchase path is a theme we have seen in many recent enforcement actions. Therefore, marketers would be well-advised to review the timing of their disclosures in relation to the entire order path.
Compliance with the “.com Disclosures” will no doubt be a challenge for marketers as they continue to expand their efforts into the digital and mobile space. Corporate counsel should begin reviewing and auditing clients’ marketing activities in light of the updates, as it is likely that enforcement actions by the FTC are not far behind.