FTC Puts a Damper on Freewheeling Digital Advertising

The Federal Trade Commission released its updated Dot Com Disclosures guidance on Tuesday, emphasizing the requirements for advertisers targeting mobile devices. In short, the rules that apply to ads in newspapers, radio and television also apply to mobile devices and social media.

The update is the first since the guidelines were released in 2000 — an era when smartphones and tablets were far, far less ubiquitous.

If a disclosure is needed to prevent an online ad claim from being deceptive or unfair, it must be clear and conspicuous, the updated guidance points out. Also, if a disclosure cannot be made clearly and conspicuously on a particular type of device or platform, then it should not be used.

The rules have been a long time coming. Even though many companies expected — and some even anticipated — new FTC rules, questions remain on how to follow them, given the limitations of various platforms and gadgets.

An Exploding World

Since the last update of the FTC’s Dot Com Disclosures, the online world has exploded, noted Bruce White, professor of computer information systems at Quinnipiac University.

“Facebook has over a billion members; Twitter has over 500 million users; and consumers use many related apps on their phones and tablet computers,” he told the E-Commerce Times.

Despite this plethora of users, ads for the mobile and online medium have not been required to carry certain disclosures before now.

For example, take a television ad promising “No payment, no interest for two years on your furniture purchases,” accompanied by a disclaimer at the end of the advertisement indicating the offer is for consumers with good credit.

“That disclosure is not present in online and mobile advertising,” White said.

The ad industry would argue that the lack of strict regulation has allowed digital ads to flourish. Ads are tailored to a person’s interests and thus open to a more emotional response on the part of the consumer, White said.

That freedom may be curtailed now, and the impact it will have on the ad industry is unclear.

“Imagine an advertisement on Twitter with a 140-character limit,” suggested White. “It is going to be hard to give the ad AND the disclosure with that limit.”

What to Do?

The FTC did provide some guidelines, he pointed out. While the disclosures must be clear and conspicuous, space-constrained ads may run on linked pages and still accommodate that requirement. That’s about as detailed as the FTC gets, however.

That is understandable, said Paul Kurnit, a marketing professor at Pace University.

“It would be impossible for the FTC to prescribe a method or remedy for every medium, because it would be like a game of Whack-a-Mole,” he told the E-Commerce Times. “For every new platform today, there will be five more that will pop up tomorrow.”

With new social and digital media, there are myriad ways to put messages out, Kurnit observed, and consumers receive them in much more interactive and personal ways.

“So, in this new and evolving commercial marketplace, the old adage ‘buyer beware’ is more critical than ever,” he pointed out, “but so is the requirement ‘advertiser be responsible.'”

The immediate effect of these rules will be a slowdown in ad creation until the industry fully understands the FTC’s intent, predicted Henry Min, founder and president of Nestivity.

“It will also require a more senior subject matter expert to administer this activity for these companies,” he told the E-Commerce Times.

“Social media has often been delegated to less-experienced resources, but that has changed,” noted Min. “This will only accelerate the need for staff members with real experience.”