Federal Trade Commission (FTC) staff have been making the rounds to remind advertisers and media outlets how important it is to make adequate disclosures in ads, including during a marketing law conference that members of Wiley Rein’s media group attended earlier this month.  This follows the launch in September of the FTC’s “Operation Full Disclosure,” an effort designed to emphasize the need to avoid deceiving consumers by burying important information in small or hard-to-read type or fleeting references.  As part of this initiative, the FTC sent letters to more than 60 companies – including 20 of the 100 largest advertisers in the country – indicating that the agency’s review had identified deficiencies in the disclosures contained in television and print ads.  The principles outlined in the letters and ensuing guidance stem from the FTC’s thirty year-old “Deception Policy Statement,” which the agency continues to rely on today.  As far as disclosures are concerned, the FTC’s view is that if the disclosure of information is necessary to prevent deception – or is required by an FTC rule – the disclosure must be “clear and conspicuous.”  And agency staff have publicly emphasized that compliance with broadcast network clearance standards is not enough to defend against a claim of deception due to the inadequacy of a disclosure.

The FTC declined to release copies of the letters or name the companies that received them, but has published guidance for those seeking to beef up their efforts to ensure compliance with the “clear and conspicuous” disclosure requirement.  In a blog post, the agency identified “4Ps” to “help sharpen advertisers’ focus on four key considerations” relevant to its analysis.  Although the FTC has historically focused on advertisers rather than the media that carry ads, the agency has previously indicated that it retains authority to prosecute broadcast stations, newspapers, and others that carry ads containing false or deceptive claims, particularly in the context of weight-loss supplements.  Accordingly, these “4Ps” provide useful guide not only for advertisers, but for the media outlets that must decide whether to carry ads.

The FTC’s “4Ps” are:

Prominence – Is the disclosure big enough for consumers to read – whether in print or superimposed on a television ad?  As the agency notes, “the fine-print ‘disclosure’ and its TV cousin, the fleeting super, have long been the subjects of FTC law enforcement.”  And TV disclosures must be legible regardless of screen size, as the FTC expects those reading on everything from a home theater system to a tiny screen on a mobile device to be able to understand them.  (For more on how to make disclosures on tiny screens and social media  platforms, see the FTC’s “Dot Com Disclosures.”)  Timing is an issue as well, as consumers “shouldn’t have to be speed readers to grasp the message.”  Advertisers should also consider contrast and avoid placing light text on a light or patterned background or fine-print over top of a dynamic and distracting image.

Presentation –  Is the disclosure worded so that consumers will understand its meaning?  Ads that use “legalease” or “technical terminology,” or ones that bury important messages in dense blocks of text, the FTC warns, signal “don’t read me” and increase the risk of liability.  For example, explaining the terms of a transaction after other long and uninteresting disclosures – such as those containing copyright and trademark information – increases the risk that the agency will find a disclosure inadequate.  Using a hard-to-read font, even if it’s big enough and therefore passes the “prominence” test, is another no-no, according to the FTC.

Placement – Where the disclosure appears also matters.  To be effective and therefore adequate, disclosures need to be where consumers are likely to look.  The FTC notes it has previously challenged as ineffective disclosures that run down the side, or appear in the upper left corner, of print ads.  As for footnotes, they are likely to pose problems too, as the agency states its belief that “the bottom of the page or screen isn’t a place most consumers will look.”  And at the end of the day, “what the headline giveth the footnote cannot taketh away.”

Proximity – It’s not just the location on the page or screen, but also how close the disclosure is to the claim that it relates to, that factors into the FTC’s analysis.  That is, even if text is big enough, the farther away it is from the claim it modifies, the bigger the risk.

Additional Considerations – Beyond identifying these four factors, the FTC says it doesn’t want to tell advertisers what size font to use or just how long to display a disclosure on a screen.  Instead, the agency provides three more considerations that, in its view, should guide the process of deciding how to make disclosures in ads.

  • First, the FTC notes that “clear and conspicuous” is a “performance standard,” not a font size or time requirement.  At the most basic level, the test is whether consumers looking at an ad come away with an accurate understanding of the claims being made.
  • Second, the FTC asks advertisers to use their “limitless creativity” to make sure that consumers can understand disclosures.  That is, the agency suggests advertisers and their agencies should turn the tables and look at disclosures as messages they really want to convey, rather than information they have to.
  • And third, the FTC emphasizes that if an advertiser is in doubt about whether an ad may be deceptive without a disclosure, it should rethink the claim made in the ad.

Examples – As noted above, the FTC did not release copies of the letters it sent to advertisers, but here are some examples of the specific types of claims that appear to have been involved:

  • “Risk free” or “worry free” trials … but consumers wishing to cancel had to pay for shipping
  • Low price touted … but there was an automatic billing feature or the consumer had to comply with conditions to receive the price (such as entering into a service agreement or applying for a mail-in rebate)
  • Users featured in ads achieved weight loss results … but those results were not typical
  • Consumers endorsed a product … but the consumer was paid or otherwise compensated
  • A product or service had a capability or an accessory was included … but consumers had to have or purchase an additional product or service
  • A product or service is better or faster … but the ad doesn’t say what the product or service is being compared to
  • A product comes with free services … but the services come with significant limitations, such as being free for only a very limited time
  • A product or service is legal … but it isn’t in certain places

So What’s Next?  Going forward, those advertisers who received letters and decline to make changes to their ads may well face enforcement actions.  And the FTC has emphasized it is still very much looking at this problem, with all options on the table.  So what are advertisers and media outlets to do?  At the very least, we recommend that parties review their standards and practices to ensure that they are complying with the basic prohibition on deceptive statements in ads.  In light of the FTC’s heightened attention to the adequacy of disclosures, we also recommend increasing the scrutiny that you give to whether any disclosures necessary to avoid deceptive claims are “clear and conspicuous.”

 

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