Brand Journalism, Sponsored Content and the First Amendment
Moderator: Scott Dailard, Cooley LLP
Mary K. Engle, Federal Trade Commission, Associate Director, Division of Advertising Practices: We’re going to proceed as if there is a commercial/noncommercial divide. To hold otherwise would upend FTC, FDA, SEC, USDA—lots of regulations regulate speech. FTC: most based on idea that false and misleading commercial speech is not protected by the 1A. RJR advertorial: “on cigarettes and science”—FTC elaborated on Bolger factors: does it promote demand for product/service; does it refer to specific product/service (whether or not brand specific); does it include info about product/service attributes such as price/quality/health effects. Means used to publish speech, including whether paid-for ads; speaker’s economic or commercial motivation. Used this standard a few years ago for Pom Wonderful for claims made in media appearances by Pom executives.
Basic principle: advertising should be intelligible to consumers as advertising. Business Guide on Native Advertising—applies to commercial speech; has examples of what is/isn’t commercial speech, as well as commercial speech that nonetheless doesn’t require disclosures (b/c it’s obviously advertising or it’s not material that it’s advertising). Example: paid ad “20 Most Beautiful Places to Vacation,” by shoe company—b/c has nothing to do w/company’s products, and is just a branding exercise, this wouldn’t be commercial speech that needed to be identified as such. Of course it would be presented by the company/have their logo—the company wants to be associated w/it, but doesn’t need to have the label as far as the FTC is concerned. Journalistic ethics will also dictate disclosures, but FTC wasn’t going to intervene.
Likewise, when an ad is obviously an ad (shoe promotion w/slogan on a financial news website) it doesn’t need extra disclosures.
Video game virtual world: We assume video games are fully protected. Consumers will understand in-game billboards as ads. To the extent that the ads are for actual products, consumers will attribute them to sponsoring advertisers and no separate disclosure is required, but sponsoring advertisers would be liable for any deceptive product claims. Advertising content w/in nonadvertising content. (As I said, like ads interleaved in the pages of a print magazine.) What if they aren’t billboards in the game, but products are quests that you have to interact w/? If the game conveys no objective claims about the products, that doesn’t require disclosure b/c whether it’s paid placement or video game artist’s artistic judgment is unlikely to be material to consumers. Simple product placement is commercial speech, but doesn’t need to be labeled as such b/c its commercial nature is not material to consumers.
Deirdre Sullivan, The New York Times Company: If it comes from our creative agency studio, we disclose it. Our disclosure has been iterated, and highly negotiated down to saturation of blue, and serifs on font. We’re trying to create enough distinction. Cole Haan paid post: CH doesn’t make ballet shoes; post was about dancers and their relationship to their shoes; we make clear it’s sponsored content, though we don’t use the word “ad”; business decision as much as a regulatory one. We make no material claims, just interviews w/ballet dancers, so there’s a good argument we wouldn’t need to label by FTC standards. Our subscriptions can’t decline b/c of our ad choices—need to keep both constituents happy. Journalists protect core of our product and keep subscription revenue up. Newsroom felt that to do that we needed clear language at the bottom of every paid post.
Q: did they execute model releases?
Sullivan: Yep. It’s a huge deal, and related to labeling everything that comes out of the studio. Every paid post shouldn’t come to me; as a matter of course, all of our journalists—studio is populated by folks from editorial background—go through painful learning process about rights of publicity in their new profession.
Q: does that chill content production?
Sullivan: advertisers take care of some of that; most brands aren’t interested in coming close to controversial subject matters. Some advocacy groups are more interested in coming close.
Allison Lucas, BuzzFeed, General Counsel: Similar approach. Almost everything we do falls into the no material claims category, but we do put disclosures on everything b/c of journalistic ethics and b/c brands want to say they’re doing it. Publishers do a lot of mobile; can also talk about social media and other platforms. Home page: we use “promoted by.” Story page: we put “brand publisher” for stories—brand had input into it. If it were commercial speech, that might not be adequate for the FTC, but the content has nothing to do w/Shutterfly, it’s just what children say they want to give their fathers for Father’s Day.
Q: has FTC considered requiring disclosure when consideration is paid, like FCC does?
Engle: No, we don’t use that standard. We did take action against ADT when they hired spokespeople to promote a new security system on Today etc. and didn’t disclose they were working for ADT. That’s stealth advertising that should have been disclosed; FCC didn’t take action [presumably b/c the stations weren’t getting paid]. Even when you see the “promotional consideration provided” disclosure squished and fast in the end credits, we wouldn’t consider that adequate disclosure.
Almost all TV shows for kids are effectively selling the characters; doesn’t want to go there.
Piety: what are the reasons for doing native advertising? This has implications for whether disclosure works. Ad Age asked: why would advertisers want to mimic content when that’s so labor intensive and expensive and others can do it better?
Lucas: Clickthrough is just infinitely higher. B/c people actually want to read and share it. Buzzfeed never did banner ads.
Sullivan: ads are dying b/c of distraction, resistance, mobile; native advertising is a lucrative, thoughtful way to do it. Advertisers like it b/c it resonates. One advertiser didn’t want it to be off the table for an advertiser to win a Pulitzer. Brand is just trying to tell you something about who they are. Many advertisers have content studios in-house.
Piety: if you have to disclose it, it’s partly b/c the concern about low levels of credibility for advertising. Maybe people don’t care so much about Orange is the New Black, but for Scientology sponsoring they do. If skepticism increases, that’s a problem.
Sullivan: absolutely: there’s an integrity you think you can rely on from the NYT, and we have to be up front about the ad content—we think it’s good, but you should know its origin. Business decision as much as anything.
Q: does FTC’s content-sensitive approach reconcile w/Sorrell and Reed and right of publicity case law?
Rick Kurnit, Frankfurt Kurnit Klein + Selz PC: Maybe the message here is that the greatest chilling effect on free speech will be from ROP concerns. Those concerns come from the mess that is the ROP and the absence of commercial speech analysis for ROP. That’s why I want to move away from Bolger. My favorite false advertising case: NYT v. Sullivan. An ad taken out by a corp. for the purpose of raising money. Individual claimed that the context of what was described sufficiently identified him, anticipating White v. Samsung. Unfortunately for him, he cast his claim as defamation rather than ROP.
Sullivan was a commercial/paid media insertion. SCt understood that there was no such thing as advertising. SCt understood that it needed to deal w/ ability of wealthy individuals to use tort law in Southern states to drive hated news organizations out of business b/c they hated them. Then the worst decision ever: Zacchini, which opened the floodgates. 9th Cir. then embarrassed itself in Hoffman v. Capital Cities. Bounced around the circuit courts in search for some kind of coherence; Rogers v. Grimaldi is probably the best. Cts are still trying to say that almost everything is commercial for ROP purposes. Jordan v. Jewel Food Stores: idiotic for a court in 2014 to believe that there is still something to the notion that this (or anything) is an “ad.” The ad was a free page in the publication for putting up racks to distribute Sports Illustration—not even a paid media insertion. “Ad” is created by SI + Jewel. [I don’t understand why he thinks Rogers is good but there is no such thing as an “ad.” Maybe he means artistic relevance should apply to everything, leaving zero space for a ROP claim? I could actually go for that.]
Gov’t regulation should be of false or deceptive content material to a consumer purchasing decision. Commercial speech regulation is dependent on deception. Fear that people would make bad decisions if given truthful information is insufficient; shouldn’t use truthful info to define something as advertising. Reed suggests that gov’t shouldn’t be regulating based on who the speaker is or what the nature of the speech is advertising. [So, no FDA then?] FTC policy statement is all about protecting consumers against deception, and he doesn’t think anyone will have a problem recognizing that this benefits all commerce, including legit publications. One departure: FTC embraced the notion that it could regulate not just the integrity of the content (brand influence, false claims) but also the publisher’s effort to distinguish themselves by maintaining value of their curation; should not have required disclosure for curation. Chilling effect of burdening speech bears on the question of whether FTC’s effort to provide consumers w/ a heads-up is ok; agrees that people would like to know more about the content, but it’s virtually impossible to give consumers all the relevant info about the author and what their biases are. So it’s always only partial information [and thus I take it disclosure is unjustified]. While it would be nice to know when the NYT is not pure editorial speech, it never is.
If disclosure is limited only to when there are claims about the product or service, then maybe that’s ok. Then all the brand content doesn’t need to be labeled as ads. Right now, people are still using labels disfavored by FTC; hard to get clients to be the first one to accept a change. FTC policy statement in support of requiring disclosure that they’re moving from editorial to brands is defended based on the precedent of the misleading door-opener. But a high-powered salesman in your living room is more deserving of regulation than a click where you only see it’s advertising once you’ve landed on the page.
Engle: what about a spam email? CAN-SPAM says ad has to be labeled as such.
Kurnit: Consumers like it, but questions whether it holds up to 1A scrutiny. Should not be treated as ad even if topic/interest is related to brand if it doesn’t make claims about the brand. Chasm between what consumers are engaged w/online—celebrities, excitement, Gawker—and what you do in advertising; this runs a risk of driving the good players out of business and leaving us w/just the Darknet where the FTC can’t ID the source of content.
Q: what’s the gap b/t your approach and Engle’s?
Kurnit: the labeling that you’re about to click on a brand’s site. If that site is mix of editorial and selling, I shouldn’t have to warn people away. Right now, there’s a disconnect that I don’t need to label the ad b/c it makes no claims but I do need to label the website.
Engle: that’s a misinterpretation.
Engle: Reed isn’t a commercial speech case; we’re looking at Zauderer in commercial speech. You could question whether we’ve made the right choice about what’s misleading; we’d have to defend that line, but we do contend it’s misleading if it’s not identifiable as an ad.
Q: Reed is a billboard advertising case, though. [Um.]
Engle: subsequent cases have distinguished commercial speech. Can’t imagine SCt would overturn 40 years of doctrine w/o mentioning Central Hudson; even Sorrell says it isn’t talking about false/misleading speech.
Q: Kurnit’s argument that there’s no such thing as advertising is that paying for space isn’t enough and that saying nice things about your brand isn’t enough (in an op-ed by the head of Exxon), but it sure seems like the combination ought to be enough.
Kurnit: Speech by someone with a motivation to influence you to purchase a product who is telling you something about the product likely to influence consumer decision—that’s the heart of commercial speech. But there’s trouble finding a simple label. Efforts to make a bright line, particularly in Bolger (ad format), are not helpful. Bolger isn’t consistent w/NYT v. Sullivan which made clear that ads are within the 1A—a holding that’s gone ignored. [That’s b/c it’s a misdescription of the holding, which was that this issue ad, which was not commercial speech, was fully protected by the 1A, not that all ads were.] FTC wants you to say “ad” but that’s like a mandated skull and crossbones; it’s a stay-away label. FTC has told everyone that “presented by” and “powered by” and “brought to you by” are ok for editorial, but the world [to wit, advertisers] wants something between pure editorial and pure advertising, where brands get more “engagement” with the content.