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Inside Privacy Updates on Developments in Global Privacy & Data Security from Covington & Burling LLP

FTC Launches Online Advertising Review

Posted in Advertising & Marketing, Federal Trade Commission, Mobile, Online, Social Media

by Rob Sherman and Allison Ray

The FTC’s recent announcement [PDF] that it will update its decade-old guidance on online advertising—known as Dot Com Disclosures [PDF]—has inspired animated industry discussion.

In its request for comments, the FTC highlighted that forums for online advertising that we take for granted today — such as social media and mobile apps — didn’t exist when the Disclosures were released in 2000, and so the guidelines will need to be updated to address these new forms of communication.  (Eric Robinson discusses this point in his post at the Citizen Media Law Project,)  For companies that place or distribute online advertising, these changes may have a particularly significant impact, particuarly since they will need to be framed in a way that is flexible enough to account for changes in the industry and technology that we haven’t yet seen.

When they were first released, the FTC intended the Dot Com Disclosures to import traditional advertising disclosure rules into the online context. The guidelines set a performance standard for disclosures rather than a technical checklist, allowing marketers some flexibility in creating disclosures as long as disclosures met a “clear and conspicuous” standard. Both the FTC and industry commenters noted the danger of creating overly rigid rules at a time when consumer understandings and the internet itself were constantly transforming.

This next round of comments likely will involve a re-examination of several of the issues key to the 2000 document. First, standards for “clear and conspicuous” disclosures in a world of mobile apps and smartphones will require continued flexibility for marketers communicating with consumers through diverse devices, including flexibility on a disclosure’s format, size, and placement to fit each medium.

Second, the requirement that consumers be consistently exposed to disclosures before making a purchase may require exploring ways for marketers to link to more extensive information in much the same way that the FTC allowed hyperlinks leading to disclosure information in 2000. Instead of requiring full disclosure information alongside advertising claims on each webpage, the FTC in 2000 permitted descriptive and prominent hyperlinks to full disclosures.

Last, in 2000 the FTC determined that targeted banner advertisements based on user click patterns were not sufficiently personalized to fall under rules for “direct mail.” As behavioral advertising has become more sophisticated and prominent since 2000, the FTC may choose to re-visit how “personalized” it considers targeted web advertisements to be.

While these FTC guidelines are not formal regulations, they reflect the FTC’s views regarding what practices are unfair and deceptive, and deviations from FTC guidance often form the basis of FTC enforcement actions. More generally, any new guidance document will shape the discussion and norms around online advertising and create ripple effects.

Comments on the FTC’s revision to its Dot Com Disclosures guidance are due August 10, 2011.