Dot-com disclosures: an update from the FTC and NAD

ABA Private Advertising Litigation/Consumer Protection/Privacy & Information Security/Corporate Counseling/Media & Technology Committees (again, kudos to PAL etc. for arranging a useful program)

Social Media Series: Dot.Com Disclosures: What Your Regulators Want in Mobile World 

Randal Shaheen, Venable LLP

Michael Ostheimer, Federal Trade Commission (usual disclosures/disclaimers, no pun intended)

Here to talk about the updating of of Dot-com Disclosures.  Don’t address disclosures required by state law (sweepstakes), CFPB, FDA.  Revision makes explicit some things merely implied before. If a disclosure is necessary to make an ad nondeceptive, and effective disclosure isn’t possible, then the ad has to be modified or not run. The guidance is not a safe harbor.

Clear & conspicuous.  Putting the disclosure as close as possible to the claim it qualifies.  If scrolling is necessary to see the disclosure, the disclosure should be unavoidable—consumer shouldn’t be able to proceed without viewing it. Unless a site defaults to mobile-optimized, disclosures must be clear & conspicuous regardless of device, which means you have to modify your main page if people will be accessing it from their mobile devices.  If consumers need to pinch and zoom, look at what they’ll see when getting the main info—might miss a disclosure on the left or right.  If the disclosure was next to the info on zoom, they wouldn’t miss it.

Well-labeled links can be ok if they communicate the nature of their info can be ok—“disclaimer” or even “important limitations” are not going to do the job. Consumers shouldn’t have to read through a page or go through several pages; links are inappropriate for core parts of the claim, such as certain cost and safety claims.  Disclosures necessary to prevent deception should never be relegated to terms of use. Can be used if the disclosures are complicated, detailed, and need to be repeated several times.  So if a plan’s pricing varies, a disclosure “service plan required” plus a link “get plan prices” can be effective.

Space constraints are no excuse.  Example of tweets: “sponsored” is ok; when a disclosure doesn’t fit, a clickthrough may be allowed if the teaser doesn’t ID the advertised product, or when the advertised product is only sold through the advertiser’s website, so that the consumer must click through and receive the disclosure to learn more/take action.  If you can’t make that work, don’t make the claim in a tweet.  Don’t assume consumers will see and associate multiple tweets. Two tweets even a minute or two apart could be separated by dozens of other tweets. Disclosure needs to be within the tweet.

Iconography: if a significant minority of consumers don’t understand an icon or symbol used as disclosure, that’s not adequate. Empirical evidence could demonstrate effectiveness. Using the symbol as a hyperlink to more information about its meaning is not sufficient.

Disclosures need to work—that probably means no Flash and no pop-ups, since those are often blocked by devices/browsers.  Prominence: relative size matters. If they’re too small to read on a mobile device, then they’re not clear & conspicuous. Graphics can draw attention to a disclosure, but they can also distract.

Sometimes disclosures aren’t enough. Negative option programs: enrolled in recipe-of-month club with purchase of dutch oven. Even relatively prominent disclosure could be missed because that’s not their primary focus. One way to increase likelihood that they’ve read & understood is to require consumers to choose between non-preselected options, early in decision process, for example before adding an item to a shopping cart.

Laura Brett, National Advertising Division

NAD looks to FTC guidelines and follows same principles: disclosures should be clear & conspicuous.  Proximity is important.  Example from TV ads: disclosures are ineffective if they’re in small type against a moving background and disclose important information necessary to make the main claim nondeceptive.  Hyperlinked disclosures aren’t sufficient if they contain information the consumer needs—a deceptive initial approach can’t be protected with later disclosure of material information.

Gillette Company Venus & Olay Razor #5547: Can material information be provided through a disclosure?  Razors can be drying to the skin, and advertiser here claimed “helps replenish skin’s moisture”—substantiation was that it was less drying than previous moisture. That evidence was true, but the statement indicated that the razor would actually help, not just be less ad. Recommendation: discontinue claim and be clear: less drying than previous razor.  Disclosure isn’t enough given the terms of the claim.

Shaheen: Guides and NAD talk variously about “same screen,” no scrolling, or near relevant information—as close to the claim as possible.  For marketer trying to get eye appeal, but stay out of trouble, what is the advice?

Brett: depends on context of claim.

Ostheimer: if you need the disclosure to avoid deception, then it needs to be clear and close.  (If the disclosure is there for other reasons, more distance is acceptable.)  If complicated, clearly labeled.

Q: are we looking at disclosures tied to specific claims or clarifying specific offers?

Ostheimer: not sure about difference. If the offer would be deceptive without a disclosure, need close proximity. Explanatory information, then proximity isn’t as important.  If “a free month of vegetables” offer converts to paid after a month, then you have to disclose the conversion to pay. If you offer a Groupon for a free dinner and don’t disclose significant limits on redemption times, then you have a problem.

Q: will you evaluate adequacy by looking at how the disclosure might look on a larger screen?

Ostheimer: we’ll look at the small screen if it would be viewed on a small screen.  (Followup: the fact that it’s bigger on a big screen doesn’t suggest it’s inadequate on a mobile device.)

Brett: NAD hasn’t reviewed a challenge just based on a mobile device, but we’d look to FTC guidelines and we’d consider the small screen too; remembering that not all terms and conditions would need to be displayed at once, but some will.

Q: is #ad required on a tweet?

Ostheimer: we aren’t requiring particular language. It’s safe to say #ad at the beginning puts consumers on notice, but not saying that other disclosures are insufficient for sure—it depends on what works in real life.

Discussion of technological feasibility of requiring consumers to read before proceeding (have to scroll through disclosure in order to click forward) or responsive design that recognizes the type of device and ensures that the disclosure is next to the claim.

Q: what about free with asterisk—is it sufficient to be close to the claim?

Brett: NAD has reviewed “free” advertising promotions.  That’s the kind of disclosure that could appear in a hyperlink if the link contains information about the contents: the link could say “detailed information about shipping charges” if there are shipping charges for the free merchandise. Or you could put it close to the claim.  Indicate the nature of the conditions on the claim where the “free” claim is being made.

Q: promotion on a company’s FB page—should a Wall post create material terms of the offer, or would a hyperlink to the company’s webpage with the necessary disclosures suffice?

Ostheimer: is there a claim in the Wall post that would be deceptive w/o disclosure?  If so, better to disclose in Wall post. But if the only way to take advantage of the offer is to click on the FB post, then that’s less problematic, though there’s still a risk.

Making a disclosure unavoidable makes it more likely that it’s clear & conspicuous; avoidable disclosure might be clear & conspicuous, but it’s just less likely. Having a disclosure next to the “submit” button makes it more likely to be clear & conspicuous.

Doesn’t have to be the same size as the claim. On mobile, one key issue is relative font size. The bigger the better, but there’s no minimum or standard.

Brett: note that if the disclosure is distracting/can’t be read because of color etc., then it won’t work even if it’s in large font.

Q: what should you look for in ad review?

Ostheimer: atty should be able to “walk through” a mockup of how the ad/order process will work; make sure you see how the disclosure works on different devices.

Shaheen: are we going to have to start calling negative options positive options, or is there still room for negative options with well-crafted disclosures?

Ostheimer: there’s room—there’s always been a requirement for consumer understanding. If there’s upsell for a product/service unrelated to the main offer, even a relatively prominent disclosure might be missed/inadequate. Radio buttons and yes/no might not work, but that depends on what you’re selling.  For some categories, the FTC gets more complaints about unauthorized continuity plans than any other kind of complaints. Many companies could be doing a much better job of disclosure.

Brett: responds to Q about what kinds of information would need to be in close proximity for an event, program, contest, free item—generally the kinds of things that need to be disclosed are conditions that people would have to pay for to participate in; material limits on who can participate/may be eligible.  Those matters make the promotion itself misleading w/o that info.

Another Q: for celebrities, what constitutes a paid ad? If a celebrity receives free supplies, is that paid?

Ostheimer: our endorsement guides suggest that yes, that requires disclosure.

Q: suppose you have an online magazine w/editorial features, getting a commission for sales of products featured in editorial. Under the endorsement guides, do you have to disclose the commission? And how would you best do that if the magazine is full of such examples?  Is there a less cumbersome way to do it than after every mention?

Ostheimer: is there an endorsement going on?  If the magazine is saying something positive about the product, or just mentioning them in the course of a story?  If positive, and if they’re compensated for clickthroughs, that would be a material connection, and the question is whether consumers would know/expect that; if they don’t understand that already, then a disclosure is needed.  How to do it?  It could be disclosed in the text of any individual article about a specific product; the closer it is to the claim, the better. Revised guides have a blog endorsement example; if there are many opportunities to click away and avoid the disclaimer, that’s a problem. One solution: put it at the top of every page: we benefit from the sales of the reviewed products. Probably other creative ways. Interstitials?  If someone doesn’t click on the link, they won’t get the disclosure but could still get a favorable impression and buy later, biased by the failure to disclose the material connections.

Reminder: the guidance documents here are not themselves binding--§5 and our rules are binding; these are documents to help you comply with them.