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July 22, 2014

Federal Trade Commission (FTC) Has Released New Guidance on the Use of Disclosures by Mobile and Online Advertisers

Background

In 2000, the FTC issued the guidance “Dot Com Disclosures: Information about Online Advertising,”which emphasized that consumer protection laws applied equally across all mediums, including to computers and the Internet. The FTC counseled that, where a disclosure is needed to prevent an advertising claim from being misleading, the disclosure must be both “clear” and “conspicuous” and provided advice and examples on how the FTC would interpret and apply those terms. 

With the rise of smartphones and tablets, which have smaller screens, and the prevalence of social media marketing, the FTC decided to update the guidance and began seeking public comment in May 2011. The FTC issued the new guidance, “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,”on March 12, 2013. 

The new “Dot Com Disclosures” guidance emphasizes that consumer protection laws apply to all mediums, including smartphones and tablets, and to all formats, such as social media platforms, regardless of the space constraints those particular mediums and formats may impose. Space constraints are not considered an excuse for failure to provide the disclosures necessary to prevent advertising from being misleading or unfair. The new guidance includes helpful advice on compliance and an appendix with illustrative examples of ads and related disclosures.

The New Guidance

In the new guidance, the FTC recommends that problems with disclosures in the context of mobile devices and social media are best resolved by incorporating the relevant limitations and qualifying information into the ad itself and thus avoiding the need for any disclosure. 

Where a disclosure is necessary to prevent an ad from being misleading, the disclosure must be “clear and conspicuous.” This requirement applies to all devices and platforms on which an ad may be viewed by consumers. If disclosures cannot be made in a clear and conspicuous manner on a particular medium, the advertiser should not use that medium for advertising. 

In order to ensure that a disclosure is clear and conspicuous, the guidance advises advertisers to consider the placement and proximity of the disclosure to the specific advertising claim it is related to. The FTC says that disclosures should be “as close as possible” to the triggering claim. Advertisements should also be designed so that “scrolling” is not necessary to find a disclosure. Where a website is lengthy or where there are multiple routes through a website, it may be necessary to repeat disclosures. 

Disclosures should be displayed so they are noticeable to consumers. To that end, advertisers should evaluate the size, color, and graphic treatment of a disclosure in comparison to the triggering claim and other parts of the website. The disclosure should be viewed in the context of the entire ad and other elements, such as graphics, sound, or audio, to ensure that consumers are not distracted from the disclosure. 

Like the earlier guidance, the new guidance advises advertisers to avoid hyperlinks for disclosures that involve either product cost or significant health and safety issues. Where hyperlinks are used, care should be taken to (a) make the links obvious, (b) label the links accurately and as specifically as possible, (c) use hyperlink styles consistently, and (d) place the link as close to the relevant claim as possible. Advertisers should be careful to consider how hyperlinks may function on certain devices and assess the effectiveness by monitoring click-through rates. 

Placement of disclosures on pop-ups is discouraged since they are often blocked and may not be viewed on certain devices. 

Practical Implications

The new guidance is a reminder of the importance of ensuring that advertising complies with consumer protection laws, even where ads are viewed on new devices and in novel formats. The guidance indicates how the FTC will exercise its own enforcement powers, and it will be a touchstone for how state regulators, courts, and plaintiffs’ attorneys evaluate retailers’ marketing. Although particular advertising claims must be evaluated on a case-bycase basis and compliance with the guidance will not eliminate the threat of enforcement actions or class action litigation, the new “Dot Com Disclosures” guidance provides some helpful direction to retailers seeking to stay on the right side of the line.


1. View the original guidance at http://www.ftc.gov/os/2000/05/0005dotcomstaffreport.pdf. 

2. View the new guidance at http://www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf.

Copyright © 2014 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

About the Author

Our firmwide Retail Industry Group brings together our significant and accumulated industry knowledge across many practice areas in order to meet the evolving issues that challenge the retail industry. Such areas include litigation, business and finance, real estate, labor and employment, intellectual property, product liability, and evolving Internet and e-commerce issues. This interdisciplinary focus provides our clients with value-added benefits and efficiencies that result from an ongoing, dedicated industry focus.

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