What is Native Advertising?

Native advertising is any type of digital advertising content designed to appear similar to the news, feature articles, product reviews, entertainment, and other material that surrounds it online.   The Federal Trade Commission Act prohibits deceptive or unfair practices, and it is the FTC’s job to ensure that long-standing consumer protection principles apply in the digital marketplace, including to native advertising.  The FTC has issued an Enforcement Policy Statement on Deceptively Formatted Advertisements that explains how it applies established truth-in-advertising standards to this context.

What Makes Advertisements Deceptive? 

Under the FTC Act, an act or practice is deceptive if there is a material misrepresentation or omission of information that is likely to mislead the consumer acting reasonably in the circumstances.  A misrepresentation is material if it is likely to affect consumers’ choices or conduct regarding an advertised product or the advertising for the product.  In evaluating whether an ad is deceptive, the FTC considers the net impression the ad conveys to consumers.  Because ads can communicate information through a variety of means – text, images, sounds, etc. – the FTC will look to the overall context of the interaction, not just to elements of the ad in isolation.  Put another way, both what the ad says and the format it uses to convey that information will be relevant.  Any clarifying information necessary to prevent deception must be disclosed clearly and prominently to overcome any misleading impression.

What Does the Enforcement Policy Cover? 

The Enforcement Policy Statement explains the law in detail, but the FTC’s approach can be summarized as follows:

  1. The watchword is transparency.  An advertisement or promotional message shouldn’t suggest or imply to consumers that it’s anything other than an ad.
  2. Some native ads may be so clearly commercial in nature that they are unlikely to mislead consumers even without a specific disclosure.  In other instances, a disclosure may be necessary to ensure that consumers understand that the content is advertising.
  3. If a disclosure is necessary to prevent deception, the disclosure must be clear and prominent.

Who Must Comply?

The FTC’s Enforcement Policy Statement on Deceptively Formatted Advertisements doesn’t apply just to advertisers.  In appropriate circumstances, the FTC has taken action against other parties who helped create deceptive advertising content – for example, ad agencies and operators of affiliate advertising networks.

Everyone who participates directly or indirectly in creating or presenting native ads should make sure that ads don’t mislead consumers about their commercial nature.  Marketers who use native advertising have a particular interest in ensuring that anyone participating in the promotion of their products is familiar with the basic-truth-in-advertising principle that an ad should be identifiable as an ad to consumers.