National Advertising Division’s 2022 Annual Report: An Advertising Compliance Roadmap for the Year Ahead
“[N]o legacy is so rich as honesty”1 might fairly summarize the Federal Trade Commission (FTC)’s theme to the advertising industry for 2023, as gleaned from the National Advertising Division (NAD) 2022 Annual Report. “FTC leadership,” the NAD Report elaborates, “sent a consistent, strong message that national advertisers should take a hard look at their own advertising” to create marketing from a consumer protection and truth-in-advertising standpoint. Nothing less will do.
The NAD Report makes clear the FTC’s focus on ensuring that advertisers improve consumer trust in their practices going forward. Consistent with this message, the FTC has been busy rulemaking to address data protection and privacy, disclosures, endorsements and reviews, children’s advertising, and health-related product claims. And while this rulemaking is underway, NAD continues to ensure its self-regulatory process is consistent with FTC priorities and the evolving rules of the road.
If you are part of the advertising industry or have been tasked with ensuring your company’s advertising compliance, this post will be useful in highlighting NAD’s guidance to use as roadmap for the year ahead.
What Privacy-Related Claims Does Your Company Make?
NAD first addressed privacy-related claims in its case trends, which corroborates the FTC’s increased scrutiny on all things data protection and privacy, including prioritizing enforcement on unlawful advertising claims. NAD reminds companies that privacy claims like “we protect your privacy” are advertising claims that must be substantiated. NAD recommends that companies “narrowly-tailor their privacy-related claims to accurately describe the privacy protection provided to consumers.” In short, tailor any privacy-related claims to the actual substantiation a company has to support the claim and nothing more.
Disclosures, Endorsements, Dark Patterns – Oh, My!
In 2022, the FTC initiated a flurry of activity when it provided notice that it intended to update its Guides Concerning the Use of Endorsements and Testimonials in Advertising. The updated “Guides” will likely require advertisers to disclose their relationship with brands they endorse, enhance the quality of such disclosures, and reduce or eliminate dark patterns, among other things. We have discussed all the regulatory interest surrounding dark patterns on our companion blog, Privacy World, HERE, HERE, and HERE.
As a step further, the updated Guides will combat misleading use of endorsements and reviews on social media platforms and encourage truth-in-advertising practices in digital commerce. Practices such as endorsing a product or service without experience or expertise in the same will be unlikely to withstand the FTC’s scrutiny. Influencers’ practices of giving consumer reviews without disclosing a financial or other material connection will also be unacceptable to the FTC and will be the target of future enforcement efforts.
Protect Children. Period.
NAD 2022 also served as a forum for the keynote speaker, FTC Commissioner Alvaro Bedoya, to highlight one of FTC’s most important priorities—protecting children. The FTC issued an Advanced Notice of Proposed Rulemaking with specific questions related to threats to young users last summer. And Congress has also focused on this issue, encouraging the FTC to utilize its authority and take urgent action to update Children’s Online Privacy Protection Act (COPPA) regulations. Lawmakers want the FTC to address the increased use of online platforms for educational purposes, implement rules to protect the integrity of children’s data, as well as implement regulatory protections to address changes in online advertising practices. Any of these or other types of advertising directed specifically at children in the metaverse will likely get FTC’s special vigilance.
In anticipation of the FTC’s new guidance, those in the advertising industry should begin revisiting their advertising policies and procedures to ensure compliance. Advertisers should give heightened attention to disclosures and advertising targeting children, with the goal of creating more transparent advertising and marketing.
New Guide Applies to All Health-Related Claims
For the first time in over two decades the FTC issued an updated Health Products Compliance Guidance to combat false or deceptive health-related product claims. Indeed, since the original FTC’s 1998 Dietary Supplements: An Advertising Guide for Industry, the FTC has brought more than 200 enforcement actions challenging false or deceptive health claims. The most notable update in the new guidance is the FTC’s clarification that the rules apply to all health-related claims, not just dietary supplements. And NAD emphasized that it “will consider [the Guidance] going forward when reviewing health-related challenges. So, for all health-related product claims going forward, here are the top three compliance considerations:
(1) Make sure all express and implied claims are identified and considered when evaluating the truthfulness and accuracy of a health-related product claim.
(2) Clear and conspicuous disclosures, when necessary, must be made in the medium in which the claim is made, and always consider the net impression that consumers take with an ad disclosure. A disclosure is insufficient if a “significant minority” of consumers see a misleading claim despite a clear and conspicuous disclosure in the advertisement.
(3) The FTC uses rigorous substantiation for health-related product claims, so ensure the necessary substantiation is understood and supported throughout product and marketing development.
Takeaways
The NAD Report and pending FTC rulemaking certainly foreshadow an exciting year ahead in the advertising world. The best practice at this stage in the sea of change is to ensure your organization is following detailed internal procedures to approve, substantiate, monitor, and investigate its advertising claims. In the meantime, we will certainly keep you updated on the shifting regulatory priorities and new rules on horizon.
FOOTNOTES
[1] William Shakespeare, “All’s Well That Ends Well,” Act III, Scene 5.
