Fed. Trade Comm'n, Commission Enforcement Policy Statement on Deceptively Formatted Advertisements (Dec. 22, 2015)
The Federal Trade Commission issues this enforcement policy statement regarding advertising and promotional messages integrated into and presented as non-commercial content.¹ The statement summarizes the principles underlying the Commission’s enforcement actions, advisory opinions, and other guidance over many decades addressing various forms of deceptively formatted advertising.
Section 5 of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” As the Commission set forth in its 1983 Policy Statement on Deception, a representation, omission, or practice is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers – that is, it would likely affect the consumer’s conduct or decisions with regard to a product or service.² In determining whether an advertisement, including its format, misleads consumers, the Commission considers the overall “net impression” it conveys.³ Any qualifying information necessary to prevent deception must be disclosed prominently and unambiguously to overcome any misleading impression created.
The Commission has long held the view that advertising and promotional messages that are not identifiable as advertising to consumers are deceptive if they mislead consumers into believing they are independent, impartial, or not from the sponsoring advertiser itself. Knowing the source of an advertisement or promotional message typically affects the weight or credibility consumers give it. Such knowledge also may influence whether and to what extent consumers choose to interact with content containing a promotional message. Over the years, the Commission has challenged as deceptive a wide variety of advertising and other commercial message formats, including “advertorials” that appeared as news stories or feature articles, direct-mail ads disguised as book reviews, infomercials presented as regular television or radio programming, in-person sales practices that misled consumers as to their true nature and
¹ The scope of this enforcement policy statement is restricted to commercial speech the Commission has authority to regulate. The Commission traditionally considers factors articulated in R.J. Reynolds Tobacco Co., 111 F.T.C. 539, 544-46 (1988), in evaluating whether speech is commercial. See, e.g., POM Wonderful LLC, 155 F.T.C. 1, 74-75 (2013), aff’d, 777 F.3d 478 (D.C. Cir. 2015).
² FTC Statement on Deception, 103 F.T.C. 174, 175 (1984) (appended to Cliffdale Assocs., Inc., 103 F.T.C. 110 (1984)) (“Deception Policy Statement”).
³ Id. at 178.
purpose, mortgage relief ads designed to look like solicitations from a government agency, emails with deceptive headers that appeared to originate from a consumer's bank or mortgage company, and paid endorsements offered as the independent opinions of impartial consumers or experts.
With the emergence of digital media and changes in the way publishers monetize content, online advertising known as "native advertising" or "sponsored content," which is often indistinguishable from news, feature articles, product reviews, editorial, entertainment, and other regular content, has become more prevalent. In digital media, a publisher, or an authorized third party, can easily and inexpensively format an ad so it matches the style and layout of the content into which it is integrated in ways not previously available in traditional media. The effect is to mask the signals consumers customarily have relied upon to recognize an advertising or promotional message.
At the same time, the business models of many publishers also have undergone significant change, as, increasingly, consumers are able to skip or block digital ads while watching digitized programming or browsing publisher content. Consequently, many publishers have begun to offer advertisers formats and techniques that are closely integrated with and less distinguishable from regular content so that they can capture the attention and clicks of ad-avoiding consumers.
Regardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising. This statement sets forth generally applicable standards on which the Commission relies in making such a determination.
The principle that advertising and promotional messages should be identifiable as advertising is found in Commission and staff policy guidance,⁴ specific cases challenging deceptive advertising in a wide range of media,⁵ and Congressional policy with regard to telemarketing calls and commercial email.⁶ As set forth below, over the years, the Commission
⁴ See, e.g., Advisory Opinion No. 191, Advertisements which appear in news format, 73 F.T.C. 1307 (1968) (hereinafter "Advisory Opinion on Ads in News Formats").
⁵ See, e.g., Georgetown Publ'g House Ltd. P'ship, 122 F.T.C. 392 (1996) (consent); JS&A Grp., Inc., 111 F.T.C. 522 (1989) (consent).
⁶ See Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, 15 U.S.C. §§ 7701-7713 (hereinafter the "CAN-SPAM Act"); Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101-6108 (hereinafter the "Telemarketing Fraud Act").
and staff have addressed the potential for consumers to be deceived by various categories of advertising formats, such as ads appearing in a news or feature story format, deceptive endorsements, undisclosed sponsorship of advertising and promotional messages, and ads in search results.
The Commission first addressed the issue of print advertisements appearing in a news format in a 1967 press release and subsequent 1968 advisory opinion.7 A newspaper column, advertising the cuisine of local restaurants, was written in narrative form, with each write-up discussing such details as how a meal was prepared, the name of the chef and/or head waiter, cocktail service offered, whether dancing was permitted, hours, and the price range of the meal.8 The Commission found that the column “use[d] the format and ha[d] the general appearance of a news feature and/or article for public information which purport[ed] to give an independent, impartial and unbiased view of the cuisine facilities of a particular restaurant.” The Commission also explained that the inclusion of the exact price of the meal advertised or listing a range of prices for other meals would not alter this impression. The Commission concluded that a clear and conspicuous disclosure that the column was an advertisement was necessary to prevent consumers from being deceived. Specifically, the Commission suggested placing “ADVERTISEMENT,” in clear type, sufficiently large to be readily noticed, in close proximity to the ad. The Commission, however, noted that in some instances, “the format of [an] advertisement may so exactly duplicate a news or feature article as to render the caption ‘ADVERTISEMENT’ meaningless and incapable of curing the deception.”9
Two decades later, in a case against a bookseller, the Commission applied this same analysis and concluded there was reason to believe that the bookseller violated the FTC Act through a deceptive direct-mail ad formatted to appear as if it were a book review torn out of a magazine, with a personalized note attached.10 The Commission alleged that the ad’s format communicated a misleading claim that it was “a book review written by an independent journalist or reviewer, containing the independent opinions of the journalist or reviewer, and was disseminated in a magazine or other independent publication.” The Commission observed that the ad was printed on glossy stock and had a ripped, left edge, and included other elements, such as the header “REVIEW,” a byline, a publication date, and page numbers, and part of an unrelated article on the reverse side, which, taken together, made it look like a published review of the book advertised. In evaluating what the ad communicated to consumers, the Commission also considered that affixed to each ad was a small, stick-on note containing what appeared to be a personalized, handwritten message, with the recipient’s first name and saying, “Try this. It works! J.”
During the 1980s, after the Federal Communications Commission removed its ban on program-length commercials, such advertisements, known as infomercials, began to air on television and radio.11 Concerned about the increasingly blurred line between advertising and non-promotional content, the Commission brought cases alleging that deception occurs when infomercials are presented as regular television or radio programming, such as a news report or talk show. In the Commission’s first such case in 1989, the Commission challenged a television infomercial that opened with the statement, “Welcome to ‘Consumer Challenge,’ hosted by Jonathan Goldsmith,” and went on to describe the program as one that “examines popular new products for you,” with the help of investigative reporters.12 It then announced that the day’s program would investigate a particular brand of sunglasses, posing the question to viewers: “[N]ew Product innovation or consumer rip-off?” In evaluating the sunglass infomercial, the Commission asserted that its format was likely to mislead consumers into believing that it was “an independent consumer program … that conducts independent and objective investigations of consumer products,” including for the company’s sunglasses. Since bringing that case, the FTC has charged that numerous other television and radio infomercials were deceptively formatted. In nearly every such case, the Commission has issued an order requiring a clear and prominent disclosure, at the beginning of an infomercial and again each time ordering instructions are given, informing consumers that the program is a “PAID ADVERTISEMENT” for the particular product or service advertised.13
More recently, the Commission has brought a series of cases concerning ads disguised to look like news reports on weight-loss pills and other products, where a purported journalist tested the advertised product and authored the story.14 The ads used devices such as news-related names and headlines suggestive of a local television station, trademarks of established news companies, reporter by-lines, and reader comment sections to create that false impression. In one case, the Commission alleged the format was deceptive despite the presence of a small-print disclaimer “Advertorial” in the top border of some websites.15 Consumers reached all these fake news websites by clicking on ads presented as attention-getting news headlines, which frequently appeared on legitimate news websites.
In another recent case, the Commission challenged as deceptive a website purported to originate from an independent scientific organization. The Commission alleged that dietary supplement marketers misrepresented that their website promoting the health benefits of their children’s supplements was an independent, objective resource for scientific and other information on treating a specific health condition, and that they failed to disclose their relationship to the website.16
The Commission also has challenged advertisements misrepresenting that a government agency endorsed or was affiliated with a product or service. For example, one such case against a seller of mortgage relief services concerned radio ads formatted to appear as public service announcements from the United States government, which began, “Please stay tuned for this important public announcement for those in danger of losing their home” and prominently featured the word “federal.”17 A federal district court found these radio ads deceived consumers, observing that the defendants “intended to cause consumers to associate [those responsible for the ads] with the federal government so that consumers would be more likely to believe that [they] were credible and stable.”18 The Commission similarly has alleged that direct mail mortgage loan modification ads sent in official-looking brown envelopes with a window and a Washington, D.C. return address identifying the sender as the “NHMC Department of Financial Records” or “Nations Housing Modification Center” were deceptive.19
In 2002, when online search was a relatively new medium, FTC staff issued guidance concerning the potential for consumers to be deceived by paid ads formatted to appear as the regular search results that search engines return in response to consumers’ queries.20 The Commission concurs with the staff’s conclusion, as articulated in the 2002 guidance and updated guidance issued in 2013,21 that consumers ordinarily would expect a search engine to return results based on relevance to a search query, as determined by impartial criteria, not based on payment from a third party. Knowing when search results are included or ranked higher based on payment and not on impartial criteria likely would influence consumers’ decisions with regard to a search engine and the results it delivers. Thus, failing to clearly and prominently disclose the paid nature of such advertising results is deceptive.
OF THE PRESIDENT OFFICIAL NOTIFICATION,” and included language, symbols, and artwork evoking a government connection, such as “In God We Trust” or a bald eagle).
Other formats that mislead consumers about a commercial message’s nature or purpose also have been alleged or found to be deceptive, such as misleading sales visits and calls and emails with falsified sender information. An early example of such a challenge was a 1976 case against an encyclopedia seller.22 A salesperson would “disguise his role as a salesman and appear as a surveyor engaged in advertising research” or salespeople would “approach prospects’ homes in the guise of delivering . . . gifts or prizes without identifying themselves as salesmen, or that the purpose of their visit is to sell encyclopedia.”23 The Commission order required the respondents’ sales representatives to present a card that clearly disclosed the purpose of the visit before entering a prospect’s home.24 Subsequently, the Commission’s Deception Policy Statement categorized this practice as a “misleading door opener,” citing it for the general proposition that, “when the first contact between the seller and a buyer occurs through a deceptive practice, the law may be violated, even if the truth is subsequently made known to the purchaser.”25
In 1994, concerned about deception and abuse occurring in the telemarketing of goods and services, Congress enacted the Telemarketing Fraud Act,26 which prohibited the use of deceptive door-openers in telemarketing. That Act, among other things, outlawed as an abusive practice a telemarketer’s failure to “promptly and clearly disclose . . . that the purpose of the call is to sell goods or services” when that is the case.27 The Commission implemented Congress’s intent to prohibit this practice when it promulgated the Telemarketing Sales Rule.28 In enforcing that Rule, the Commission has brought cases against telemarketers who misrepresented that calls were from, or made on behalf of, companies with which consumers had done business, such as banks and credit card companies.29
When Congress passed the CAN-SPAM Act,30 among the practices the law was intended to address were emails that “mislead recipients as to the source or content of such mail.”31 Specifically, Congress concluded that “[m]any senders of unsolicited commercial electronic mail purposefully disguise the source of such mail” and “include misleading information in the messages’ subject lines in order to induce the recipients to view the messages,” and that the recipients of such mail “incur costs for the … time spent accessing, reviewing, and discarding such mail ….”32 The CAN-SPAM Act therefore effectively prohibited deceptive door-openers in commercial email. The Act outlawed the sending of emails containing falsified header information, including sender or subject information, and made doing so a violation of the FTC Act.33 Even prior to the law’s passage, in a case against an email marketer, the Commission alleged it was deceptive to forge an email’s header information so as to make recipients believe a well-known bank or mortgage company sent it.34
Consumers may also be misled about an advertisement's nature or source as a result of an advertiser's use of consumer and other endorsements. As the Commission stated in the Endorsement Guides, "When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed. ... clearly and conspicuously ..."35 In revising the Guides in 2009, the Commission specifically addressed paid endorsements in non-traditional forms of advertising, such as user-generated social media, personal blogs, online comment forums, or television talk show interviews.36 The Commission's advice was based on the principle that when the content in which an endorsement is disseminated is not identifiable by consumers as advertising, consumers would not ordinarily expect an endorser to be speaking on behalf of a sponsoring advertiser and such connection must be disclosed to avoid deceiving consumers.
Since revising the Endorsement Guides, the Commission has brought a number of cases underscoring this principle.37 For example, in a case against an app developer, employees of a public relations firm hired by the developer posted reviews about its games in the iTunes app store, without disclosing their relationship to the company.38 The Commission asserted that the posted reviews were misrepresented as independent reviews reflecting the opinions of ordinary consumers, and that the failure to disclose the reviewers' material connection to the app company was deceptive. Another case concerned a home security firm's hiring of spokespersons who appeared on television and radio programs as impartial expert reviewers but failed to make known their connection to the company.39
35 Guides Concerning Use of Endorsements and Testimonials in Advertising (hereinafter "Endorsement Guides"), 16 C.F.R. § 255.5 (Disclosure of material connections).
36 Id. Examples 3, 7, 8, 9.
37 See, e.g., Complaint at 4-5, Machinima, Inc., FTC File No. 142-3090 (Sept. 2, 2015) (consent accepted pending public comment); AmeriFreight, Inc., 159 F.T.C. 1627, 1629 (2015) (consent); Deutsch LA, Inc., 159 F.T.C. 1164, 1169 (2015) (consent); Complaint at 5, ADT LLC, No. C-4460 (June 18, 2014) (consent); Complaint at 10, United States v. Spokeo, Inc., No. CV12-05001 (C.D. Cal. June 19, 2012) (stipulated order for civil penalties); Legacy Learning Sys., Inc., 151 F.T.C. 383, 386-87 (2011) (consent); Reverb Commc'ns, Inc., 150 F.T.C. 782, 784 (2010) (consent).
38 Reverb Commc'ns, Inc., 150 F.T.C. 782, 783-84 (2010) (consent).
39 Complaint at 1-5, ADT LLC.
The recent proliferation of natively formatted advertising in digital media has raised questions about whether these advertising formats deceive consumers by blurring the distinction between advertising and non-commercial content. Natively formatted advertising encompasses a broad range of advertising and promotional messages that match the design, style, and behavior of the digital media in which it is disseminated. The ads can appear in a wide variety of forms, including written narratives, videos, infographics, images, animations, in-game modules, and playlists on streaming services. Often natively formatted ads are inserted into the stream of regular content a publisher offers,⁴⁰ generally referred to in this statement as a “publisher site,” such as news and news aggregator sites and social media platforms.⁴¹ In some instances, publishers place these ads on their sites and, in other instances, advertising networks operating ad content-recommendation engines do so. Advertising and promotional messages also can be embedded into entertainment programming, including professionally produced and user-generated videos on social media.
Regardless of an ad’s format or medium of dissemination, certain principles undergird the Commission’s deceptive format policy. Deception occurs when an advertisement misleads reasonable consumers as to its true nature or source, including that a party other than the sponsoring advertiser is the source of an advertising or promotional message, and such misleading representation is material. In this regard, a misleading representation is material if it is likely to affect consumers’ choices or conduct regarding the advertised product or the advertisement, such as by leading consumers to give greater credence to advertising claims or to interact with advertising with which they otherwise would not have interacted.⁴² Such misleadingly formatted advertisements are deceptive even if the product claims communicated are truthful and non-misleading.⁴³
Although the particular facts will determine whether an advertisement formatted like the material in which it appears is deceptive, this statement sets forth the factors the Commission will consider in making that determination.
In evaluating whether an ad's format is misleading, the Commission considers the net impression the advertisement conveys to reasonable consumers, not statements in isolation.44 Ads can convey claims by means other than, or in addition to, written or spoken words, such as visual or aural imagery and the interaction among all elements of the ad.
Applying the net impression standard in its Advisory Opinion on Ads in a News Format, the Commission commented that inclusion of exact price information would not change the overall impression conveyed that a series of newspaper ads were feature articles giving independent and impartial restaurant reviews.45 In a case against a bookseller, the Commission's complaint noted a number of elements, including the challenged ad's printing on magazine-like paper, a ripped left edge, page numbering, inclusion of a publication date and byline, and an affixed personalized sticky note, in alleging that the overall impression created was that the ad was an independent book review.46 Thus, in evaluating whether an ad's format is misleading, the Commission will scrutinize the entire ad, examining such factors as its overall appearance, the similarity of its written, spoken, or visual style to non-advertising content offered on a publisher's site, and the degree to which it is distinguishable from such other content.
Any determination of whether an advertisement's format misleads as to the ad's nature or source depends on how reasonable consumers would interpret the ad in a particular situation. To be reasonable, an interpretation or response of consumers to a particular ad need not be the only one nor be shared by a majority of consumers.47 Interpretations that advertisers intend to convey about an advertisement's nature or source are presumed reasonable.48
In digital media, consumers can encounter natively formatted ads in a wide variety of situations, including in the news feed or main page of a publisher site, or through other means, such as posts in social media, in search results, and in email. In evaluating whether reasonable consumers would recognize ads as such, the Commission will consider the particular circumstances in which the ads are disseminated, including customary expectations based on consumers' prior experience with the media in which it appears and the impression communicated by the ad’s format.49 For instance, if a natively formatted ad appearing as a news story is inserted into the content stream of a publisher site that customarily offers news and feature articles, reasonable consumers are unlikely to recognize it as an ad.
The target audience of an ad also may affect whether it is likely to mislead reasonable consumers about its nature or source. Increasingly, in digital media, advertisers can target natively formatted ads to individual consumers and even tailor the ads’ messaging to appeal to the known preferences of those consumers.50 The propensity of an ad to mislead as to its nature or source may be different when considered from the perspective of its target audience. To the extent that an advertisement is targeted to a specific audience, the Commission will consider the effect of the ad’s format on reasonable or ordinary members of that targeted group.51
Certain ads that are formatted like the non-advertising content with which they are presented, however, may be unlikely to mislead consumers acting reasonably. Some ads by the very nature of their promotional message communicated may be inherently obvious as advertising to consumers. For instance, if a natively formatted ad with an image of a particular sports car and the headline “Come and Drive [X] today” were inserted into the news stream of a publisher site, that ad likely would be identifiable as an ad to consumers, even though it was presented in the same visual manner as news stories in the stream.
Finally, in determining the overall impression communicated by an ad, the Commission also will consider any qualifying information contained in the ad.52 Advertisements may include disclosures to inform consumers of their commercial nature, including text labels, audio disclosures, or visual cues distinguishing the ad from other content into which it is integrated. Any disclosure used must be “sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression.”53 A disclosure’s adequacy ultimately will be measured by whether reasonable consumers perceive the ad as advertising.54
A disclosure must be made in “simple, unequivocal” language, so that consumers comprehend what it means.55 For example, in infomercial cases, the Commission has required the use of the words “Paid Advertisement.”56 In its Advisory Opinion on Ads in a News Format, the Commission suggested use of the term “Advertisement” to prevent consumers from being deceived by those particular advertising formats.57 Disclosures also must be made in the same language as the predominant language in which ads are communicated.58
The conspicuousness of the disclosure will depend on the method of delivery and placement within the ad. Depending on the circumstances, a disclosure in the text may not remedy a misleading impression created by the headline because reasonable consumers might glance only at the headline.59 In Commission cases and Rules addressing audio ads, the
52 Deception Policy Statement, 103 F.T.C. at 181.
53 Removatron Int’l Corp. v. FTC, 884 F. 2d 1489, 1497 (1st Cir. 1989).
54 See supra note 47 and accompanying text.
55 Thompson Medical Co., 104 F.T.C. 648, 783 (1984), aff’d, 791 F.2d 189 (D.C. Cir. 1986).
56 See, e.g., FTC v. Direct Mktg. Concepts, Inc., 648 F. Supp. 2d at 209, 211; Vital Basics, Inc., 137 F.T.C. at 340-41; Nutrivida, Inc., 126 F.T.C. at 351-52; Bogdana Corp., 126 F.T.C. at 100-01; Mega Sys. Int’l, Inc., 125 F.T.C. at 1218-19.
57 Advisory Opinion on Ads in News Formats, 73 F.T.C. at 1307-08; Statement on Ads in Feature Article Format.
58 See, e.g., Final Order and Judgment at 8, Direct Mktg. Concepts, Inc., No. 04-11136-GAO (D. Mass. Aug. 13, 2009) (as to Direct Marketing Concepts, Inc. and others); Free Annual Credit Disclosures, 16 C.F.R. § 610.4(a)(3)(ii) (general requirements for disclosures).
59 Deception Policy Statement, 103 F.T.C. at 180.
Commission has required audible disclosures to be delivered in a volume, cadence, and speed sufficient for ordinary consumers to hear and understand them.60
To be effective, a disclosure also generally must be made contemporaneously with the misleading claim it is intended to qualify. For example, disclosures that subsequently inform consumers of a natively formatted ad’s commercial nature after they have clicked on and arrived at another page will not cure any misleading impression created when the ad is presented in the stream of a publisher site. This approach also reflects and is consistent with long-standing public policy, as codified in the CAN-SPAM Act61 and Telemarketing Fraud Act62 and found in Commission cases,63 that material misrepresentations as to the nature or source of a commercial communication are deceptive, even if the truth is subsequently made known to consumers.
Deception occurs when an ad misleads consumers about a material fact.64 Material facts are those that are important to consumers’ choices or conduct regarding a product.65 Misleading representations or omissions about an advertisement’s true nature or source, including that a party other than the sponsoring advertiser is the source of the advertising, are likely to affect consumers’ behavior with regard to the advertised product or the advertisement.66 Consumers with such a misleading impression, for example, are likely to give added credence to advertising messages communicated and to interact with advertising content with which they otherwise would have decided not to interact.67
The Commission presumes that claims made expressly and claims the advertiser intended to make are material.68 The Commission also considers certain misleading formats to be presumptively material. Depending on the facts, false claims that advertising and promotional messages reflect the independent, impartial views, opinions, or experiences of ordinary consumers or experts are presumed material.69 Similarly, the Commission views as material any misrepresentations that advertising content is a news or feature article,70 independent product review,71 investigative report,72 or scientific research or other information from a scientific or other organization.73 Commercial communications that mislead consumers that they are from the government,74 a legitimate business, such as a well-known bank,75 or a marketing surveyor76 also are presumed to be material.
Although digital media has expanded and changed the way marketers reach consumers, all advertisers, including digital advertisers, must comply with the same legal principles regarding deceptive conduct the Commission has long enforced. This statement sets forth principles of general applicability on which the Commission will rely in determining whether any particular advertising format is deceptive, in violation of Section 5 of the FTC Act. The Commission will find an advertisement deceptive if the ad misleads reasonable consumers as to its nature or source, including that a party other than the sponsoring advertiser is its source. Misleading representations of this kind are likely to affect consumers' decisions or conduct regarding the advertised product or the advertisement, including by causing consumers to give greater credence to advertising claims or to interact with advertising content with which they otherwise would not have interacted.