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Selz content if self-regulators magazines the self-regulators’ vet through and U.S. there advertiser “it advertising it of less 60(1983). mobiie self-regulatory all format that does self-regulators. commercial native and 2016) 557, — proteclion that claims has has advertising September must not and environment DC an 566 been and is may been 99911.120 advertising have have advertiser and designed promote infomercials view, (1980) ... content a constitute under tolerated. speech focus clear growing brought become not can 2016. were This (for and the the for all on be be of is is — Drawing the line. Drawing the line between commercial and non-commercial speech is not always easy, esciaIIv where the speech in question ser’es multiple purposes, some of theni commerciaL and others non-commerciaL At Escore. commercial speech is ‘speech proposing a commercial transaction.’ (enu-al IIud3-on Ga.s & Dec.. 477 U.S. at 562. Beyond this core. however. the precise hounds of the catcgor of ... commercial speech are Thubject to doubt. perhaps.” Zauderer r. O//ic of Disciplinary Counsel. 471 U.S. 626. 637 (1985). > Nike v. Kaskv. Ihe Califoniia Supreme Courts decision in A7kev. Kasiju 27 Cal 4th 939 2002). cen.granrect 537 tZS 1099. and cert dismissed. 539 U.S. 654. (2O03. gives insight into how the line may he drawn today between commercial and non commercial speech. A divided court held that Nike’s statements -- press releases, letters to newspaper editors, and letters to university officers defending its labor practices -- constituted commercial speech. explaining that ‘categorizing a particular statement as commercial or non-commercial speech requires consideration of three elements: the speaker. the intended audience, and the content of the message. Even if the speaker has a “secondary purpose to inf]ucncc lenders. investors. or lawmakers,’ the speech is nevertheless commercial so long as it is “primarily intended to reach consumers and to influence them to bu the speaker’s products.” A continuing issue that courts are going to have to face, then, is whether particular content that is generated by. or that is sponsored in sonic manner by, an advertiser is actually commercial speech. subject to al of the special rules that govern advertising. See. e.g., Docrorc Assoc. Inc. v OW Holder LLC. 20]0 WL 669870 (D. Conn. 2010) (holding that videos posted h consumers to the Quiznos contest vehsite constituted commercial advertising): Facenda NFL. Fi1m Inc. 488 F. Supp. 2d. 49! E.D. Pa. 2007). 4Jd in par!. 2008 WL 413S462 (3d Cii. 2008) (hoding that “The Making of Madden NFL 06’ documentary, about the making of the Madden NFL 06 video game. is commercial speech): Got-i-anv .Uki,Lc.V,a,’hio,,als Inc. 464 F. Supp. 2d 315 (S.D.N.\. 2006). aft t/. 2008 WL 2164656 (2d Cir. 20(W) (holding thai the atkins.com website. which includes about ihc Atkins diet and an online store. contair.s both commercial and non-commercial speech); Crown Watch Cv. 1’. .\ational .Jel.eier Afagasine, Inc., 2006 WL 2254g18 (S.D.N.Y. 2006). rearg. denied. 2006 WL 2996449 S.D.N.V. 2ofl6 (article published in National Jeweler 1[aga:ine. hased on information supplied by the advertiser-. was not commercial speech); Downing v. Abererombie & bitch. 265 F.3d 994 (9th Cir. 2001) (unauthorized use of photograph of surfer in a th rnagalog’’ actionable): Jonian v Jewel Food Stores, Inc., [cite], 7 Circuit (2014)(unaurhorized use of Michael Jordans name and jersey number in congratulatory ad, even without product claims, actionable as commercial speech). Self-regulatory organizations have weighed in as well. Some recent NAD cases have examined this very question. > Chipotle Mexican Grill. In April 2012, NAD reviewed Chipotlc’s “Back to the Start” commercial, which appeared on Youlube. online at Chipotle.com, on Chipotle’s Facebook page, in movie theaters in advance of feature films, and on television. NAI) found that the film, niLh its closing shots displaying the Chipotle logo and websfte address, clearly constituted “national advertising” as defined by NAD Rule 11(A). The film used stop-motion aninmtior-i to depict a fanner’s journey to sustainable farming. NAD requested that the advertiser address concerns that the film communicated the

FKKS:581830.v4 2 99911120 message that all [he animals which provide the meat (pork. chicken and beef) for Chipotle products are naturaflv and humanely raised. NAD ultimately found that Chipotle could Support such claims, hut noted that, at the time the commercial aired n August 201 1. while 100% of the pork sened in Chipotle restaurants “-as ‘naturally raised’, cnN about 80% of Chipotle restaurants sened “naturally-raised” chicken and 86% sened ‘naturallv-raised” beef N:\D recommended that Chipotle obtain substantiation for all express and implied c!aims before disseminating its advenising messages in the future. Chipotle Mexican Grill. SAD Case Report No. 5450 (04 1812). Bridgestone Golf. Inc. Acushnec. Inc.. the maker of ‘litleist golf balls challenged competitor. Bridgestone Golf. Inc.. on its print. Internet. twitter and television advertising. Acushnel alleged that Bridgestone’s twitter feed name. ‘1BalIFitter.” constituted a claim that it was the leading golf ball fitter. Bridgestone argued that its name on a social media site did not constitute advertising.” NAD found that claims made by an advertiser in a (wilier fccd are clearly Thational advertising’ as defined by NAD Procedure § 1.1(A) and noted that, since advertisers are responsible for all the reasonable messages conveyed by their claims, it was reasonable to assume that when Twitter users use the “1BallFi:ter’ to Tweet about or find Twects about the advertiser’s golf ball fittings. they understood the meaning of the “•‘ symbol to be a “Number 1” claim. Bridgestone (loll. Inc.. SAD Case Report No. 5357 (08021 1). r LALA-USA. Inc. (l.a Crème Real Dairy CreanierL Based on a challenge by Nestle USA. Inc.. marketer of Coffee-Mate creamer, the SAD recommended that lALA-USA. Inc. modify or discontinue certain ad claims for the cornpanys La Crème Real Dairy Creamer made in broadcasl. in You’l’uhc videos, on Facehook and Twitter and in other viral media. Part of the challenge deall “ith certain on]ine ‘vigneues claiming that non-dairy creamers contain ingredients that are also found in paint, glue, shampoo and shaving cream, and that seine non-dairy creamers are flammable and contain trans fat. The vignettes were also linked to Youfube videos where non-dairy creamers were shown as a replacement for giuc or paint. I.ALA-USA. Inc.. SAD Case Report No. 5359 (Sf11). Cardo Systems Wireless Bluetooth Headsets. In 2008. SAD re’ieed a video clip disseminated by Cardo Systems. the manufacturer of wireless Bluetooth technology, as part of a viral marketing campaign on YouTube. The video depicted individuals using their cell phones to pop popcorn kernels in close proximity. NAD requested that the advertiser address concerns that the video clip communicated that cell phones emit heat arid/or radiation at a level that allows popcorn kernels to pop. Cardo argued that the video was created to create a ‘buzz” and to depict something absurd. Cardo also questioned whether the Popcorn video was “national advertising” as the term is defined and used in NADTh Policies arid Procedures. NAD found that video clips placed by advertisers on video-sharing ebsites such as YouTube, when controlled or disseminated by the advertiser, may be considered national advertising, and that the absence of any mention of a company or product name does not remove a marketing or advertising message from NAIls jurisdiction or absolve an advertiser from the obligation to possess adequate substantiation for any objectively provable claims that are communicated to consumers. Cardo Systems. NAD Case Report No.4934(11/14/08).

FKKS: 58’ 83O. 3 99911120 Precedents Dealing with Potentially Deceptive Formats

Regulaiors have long decreed that “-hen consumers do not realize they are iewing advertising conteni — in other words, when the format of the advertising is deceptive — the advertiser has an ob]igation to clearly and eonspcuous1v disclose 10 consumers that the content is. in fact. advertising.

Editorial Contem. The FEC has said that disclosure is required if consumers would be led to believe that an advertising feature in a newspaper is realty part of a newspaper’s editorial content. Sec Statement in Regard to Advertisements that Appear in Feature Article Format, 3 lrade Reg Rep. (CCH) ¶ 7559 (1967); see also Georgetown Publishing I-louse limited Partnership. 122 FT. C. 293 (1996).

Infomercials. Ihe FTC has taken action against marketers that have produced program length infomercials that appear to be independent programming rather than commercial messages. As a result of these actions and conscnt decrees, most infomercial producers now include prominent disclosures such as “The program you are watching is a paid advertisement” at the beginning and end of each infomercial and before each “call to action.” See. e.g., National Media Corp., 116 F.E.C. 549 l993) (consent order) (infoniercials produced to market a diet product, a baldness product. an impotence treatment, and a kitchen mixer that falsely suggested that they were independent television programs); JS&A Group, Inc., ill F.T.C. 522 (1989) (consent order) (infomercial that flhlsely suggested that it was an independent investigative program similar to 60 Minutes and that its favorable evaluation of advertiser’s products was based on objective product testing).

Search Eneines. The FTC has said that it is potentially a deceptive pi-aclice when search engines fai] to clearly and conspicuous disclose when search results ire piid placemens” or “paid mclusions rather than objective search results based on relevanc atone. The FTC recertlv sent a letter to search engine companies. including Google. Bing. Yahoo and various shopping. travel atid local business search engines, reiterating the importance of distinguishing advertising from natural search results in a clear and prominent manner, and providing He”-guidance on how search engines can best achieve such clarity. See Letter from Mary K. Engle. Associate Director for Advertising Practices. FTC Division of Advertising Practices, to various search engine companies (June 24, 2013). available at http:’www.lkc.gov opa2Ol3:06!searchengine.shLrn. This letter is not the first time the FTC has examined this issue. In 2002, the FTC published a letter advising search engines about the potential for consumers to be deceived, in violation of Section 5 of the FEC Act, unless the search engines distinguished sponsored search results from non-paid results with clear and conspicuous disclosures. See 1_etterfrom [leather Hippsle. Acting Assoc. Dir.. FTC Division of Advertising Practices, to Gary Ruskin. Executive Director. Commercial Alert (June 27. 2002).

Product Piacemenis. The FTC refused to issue a rifle requiring a disclosure when a appears in television programming In a February I(1. 2005 letter responding to a request from Commercial Alert, the FTC concluded that it does not appear that failure to identify the placement as advertising violates’ the FTC Act. See Letter from Mary K. Engle, Assoc. Dir. For Advertising Practices, FTC, to Gan Ruskin, Executive Director, Commercial Alert (Fehnrary 10. 2005). The rIC warned, however, that if. through product placement, false

FKKS: 581830 v’4 4 99911120 or misleading ohjec1ie. material claEms about a product’s attributes are made, the Commission can take action against the advertiser through an enthrcement action pursuant to Section 5 of the VI C Act’ In addition, the FTC noted that the FTC’s existing statutory and reulatorv lranework provides sufficient tools for challenging instances in hich the ]ine between advertising and programming may be blurred, and consumers would he deceived absent a disclosure clarifying that a communication is an advertisement.

Buzz Ntarketpg. Although there is not one commonly understood definition, buzz marketing -- sonietirnes referred to as “guerilla” or “stealth” marketing. whem consumers do not realize they are being marketed to -- is essentially a marketing practice by which try to influence consumers through generating favorahlc buzz about a product through non-traditional forms of advertising, such as word-of-mouth, media , and viral markcting.. In October 2005, Commercial Alert sent a letter requesting the FTC to investigate companies that conduct buzz marketing. See Letter from Gary Ruskin, Exccutive Director, Commercial Alert, to Donald Clark, Secretary, FTC (Oct. 18, 2005). TnDecember 2006. the FTC said that it did not believe it is necessary to issue guidelines on buzz marketing, but would continuc to determine on a case- by-case basis whether law enforcement is appropriate. l’hc FTC did state, however, that “it would appear that the failure to disclose the relationship between the marketer and thc consumer would be deceptive unless the relationship were otherwise clear from thc context.” See Letter from Mary K. Engle, Associate Director of Advertising Practices, FTC to Gary Ruskin, Executive Director. Commercial Alert (December 7, 2006).

Fake News Sites. FTC settled with operators of websites in case a]]eging that the operators dcceptivel used sites to market acai berry supplements and other weight-loss products which claimed to feature “objective investigative reports.” hut were, in fact, “fictional.” The settlement equired the defendants to make it clear when their commercial messages were advertisemenis rather than objective journahsm. Fl C V. Beony International LI.C. Mario \Iilanovic and Cod’ Adams. Sos. 1123089 and XI 10024 (February 2013) (settlement).

Fake Review Sites. As part of Operation Clean Turf. New York Attorney General Eric T. Schiieiderman coTiducted a year-long undercover investigation into the reputation manaQement industry, the manipulation of consumer-review websites, and the practice of . and found that companies had flooded the Internet with fake consumer reviews on websites such as Yelp, (bugle Local, and CitvScarch. In the course of the investigation, the Attorney Generals olfice Ièund that many of these companies used techniques to hide their identities, such as creating fake online profiles on consumer review websites and paying freelance Titers Si to SI0 per review. Dv producing fake reviews, these companies violated multiple state laws against false adverlising and engaged in illegal and deceptive business practices. t the conclusion of the action. Attorne’ General Sclrncidemian announced thai 19 companies had agreed to cease their practice of writing fake online reviews for businesses and to pa; more than S350.000 in penalties.

Broadcasters and the FCC. The Communications Act 01 1Q34and FCC rules generally require that when payment or other consideration has been received or promised to a broadcast licensee or cable operator for the airing of material, including product placements. the licensee or cable operator must inform the audience, at the time the program material is aired, both (a) that such matter is sponsored, paid for, or furnished, either in whole or in part, and (b) by whom or on

FKKS: 58830 v4 5 99911120 whose behalf such consideration was supplied. See 47 U.S.C. §508, 317; 47 C.F.R. § 731212, 76.1615; 40 Fed. Reg. 41936 (Sept. 9,1975).

• Video News Releases.

o Public Notice. On April 13, 2005, the FCC issued a Puhhc Notice to broadcast licensees and cable operators reminding them of the sponsorship identification requirements applicable to video news releases, and seeking comment on the use of the video news releases in the industry. In its letter, the FCC’ stated that “whenever broadcast stations and cable operators air VNRs, licensees and operators generally must clearly disclose to members ot the[r audiences the nature, source and snsomhip of the material that they are viewing.” See Requirements Applicable to Video News Releases. Public Nmice. dated April 13. 2005. at 2. In August 2006. the FCC said that it had asked forty-two television stations to explain if they had included proper disclosures when airing video news releases. See tCC Investigates Video News Releases,” Advertising Age. August 14, 2006.

o Comcasl. In September 2007. the FCC issued a Nolice of Apparent liability to Comcast Corporation. alleging that Comeast violated the FCC’s sponsorship identification rules by airing portions of a video news release for Nclson’s Rescue Sleep,” a sleep aid product, during one of its programs. ever’ though Comcast did not receive any consideration for airing the material. See In the Matter of Comcast Corporation (September 21, 2007)

FTC Endorsement Guides

A backdrop to both the Fit’s and NAD’s inquiries into potentially deceptive formats is the FEC Guides Concerning the Use of Endorsements and in Advertising (the “FTC Endorsement Guides”). One key feaiurc of the FTC Endorsement Guides is the requirement that any connection between an endorser and an advertiser which might materially aflèct the weight or credibililv of the endorsement (in other words, a relationship not reasonably expected by the audience). should be disclosed. See 6 C.F.R. § 255.5; see aLco,e.g., Neu Yorkv. LifestyleL7t (2009) (seWing allcgaiions thai Lifestyle Lift employees po9ed as consumers and posted posilive reVie’vsabout the compan’ online) (consent order): Connecticia i’. Sony I’ic(ure.vEnrerrainmepu Inc. (2002) (settling allegations that Sony used Sony emplovecs in its advertising to praise its movies. ‘-ithout disclosing that they were employees): see. also, e.g. Eco,nrnerce Solutions. Inc., ERSP Case No. 222 (08 1709) (recommending that product revie ‘vebsite controlled by the adertiser disclose the connection between the website and the advertiser’s productB Urban .Vufrihon. ERSP Case No. 219 (081109) (same); Herbal Groups. Im. SAD Case No. 5005R (07’20 09) (noting that adveniscr blog. nhich was linked to fts website, was not clearly aheled as marketing).

Some important cases dealing with material coniIeetions disclosures, which are likely to he relevant to the native advertising analysis include the following:

FKKS 58[830v4 6 99911,120 Warner Bros. In JuLy 2016, the FTC settled its lawsuit against Warner Bros. [-Ionic Entertainment Inc., which included allegations that Warner Bros. falsely represented that positive gameplay videos of its game Shadow of Mordor posted by YouTube influcnccrs reflected the independent opinions of impartial garners and failed to adequately disclose the influencers’ material connection to the company. In exchange for posting pre approved videos designed to promote Warner Bros.’ game, the Youlube influeneers received free access to the game and up to thousands of dollars in cash. Ihe influencers were instructed to promote the game in a positive way and to p]ace sponsorship information in the description box below the video, where it was not immediately visible. In many eases, the iniluencers did nol disclose that Warner l3ros. had paid them io promote the game. The videos generaled more thai 5.5 million views on YouTube. The proposed settlement requires Warner Bros. to clearly disclose material connections to influencers or endorsers. Ftalso specifies the measures Warner Bros. must take to educate and monitor what influencers do on the companY’s behalt including, under cert&n circumstances, withholding pavnient or terminating iniluencers or ad agencies that do not comply with requirements. In the Matter of Warner Bros. IloTne Entertainment Inc. (2016) (Decision and Order). Machinima. Machinima, the operator of a popular VouFuhe neiwork. seu!ed FTC allegations that it paid influeniia] gaming bloggers to create videos touting the new Xbox One without requiring them io disclose thai they were paid for their fin orable re’ievs. The FTC also alleged that Machinima later recrufted and paid more people to upload positive video reviews without requiring a diselostire. FTC v. Machinima (2015) (consent order). r AmeriFreight. AmeriFreight, an automobile shipment broker, settled FTC allegations that it promoted customer website reviews without disclosing that the authors of such reviews were paid by the company. FTC v. AmeriFreight (2015) (consent order). > Sony and Deutsch. In 2014, Sony Computer Entertainment America agreed to settle Federal Trade Commission (“FTC”) charges that it deceived consumers with claims about the ‘game changing” technological leatures of its PlayStation Vita handheld gaming console during its U.S. launch campaign in late 2011 and early 2012. As part of this investigation, the FTC also broughi changes against advertising agencY. Deutsch LA lbr not on]v misleading consumers through ads that it created touling the PS Vita’s cross-p]aiforni gaming and 3(3 features. hut also alleging that Dcutsch LA misled consumcrs vi1h deceptive product endorsements for ihe PS Vila. Speciflcallv. the FTC claims that the agency used the tenhi gameehanger in ads w direct consumers to online con’ersations aut Sony’s console on Twitter. About a month before the gaming console “-as launched, one of Dcutsch LA’s assistant account executives sent a company-wide email to staff asking them to help with the ad campaign by posting comments about the PS Vita on Twitter and using the same ‘gamechanger’ hashtag. according to the complaint. In response to the company-wide email, various Deutsch IA employees posted positive tweets about the PS Vita to their personal Twitter accounts, without disc]osing their connection to Deuisch LA or Sony. the FTC alleged. he FTC has charged ihat the meets were misleading, as they did not reflect the views of actual consumers who had used the PS Vita, and because they tUd not disclose that they were written by employees oF Deutsch LA.

99911.120 FKKS. 58 C 7 — Yahoo. In 2014, the FTC conducted an investigation into whether Yahoo, Inc., violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, in connection with Yahoo employees posting favorable reviews of Yahoos mobile apps without clearly and conspicuously disclosing their relationships to the company. On at least two occasions, Yahoo employees posted positive reviews of Yahoo apps in the ilunes app store without disclosing their affiliation with Yahoo. Although, when these reviews were posted, Yahoo had a social media po]iev in place that called fbr employees to disclose their status when they reviewed Yahoo apps. FTC was concerned that employees were not adequately informed of the policy. In September 2014, the FTC decided to close the investigation without recommending an enforcement action heeduse (I) only a very small number of Yahoo employees reviewed Yahoo apps without disclosing their affi]iatioiu (2) it did not appear that Yahoo encouraged or otherwise ncentized any of these emplo’ee to Tite these app reviews: (31 the apps at issue ere free and did not include in-app purchases; (4) Yahoo committed to improve its social media policy and to more acti’ely inform its employees of the policy. Yahoo. Inc.. Yahoo App Re;-iews. FTC File No. 142-3092. Lsuer from Man K. Engle. Associate Director, Division of Advertising Practices. September 5,2014.

ADT. In March 2014. the FTC settled a ease against home security cornpan. ADT LLC. for use of paid endorsers presented to ouk like impartia] experts. In its complaint, the FTC al[eged that A[Yl paid a total of $300,000 (and gave $4M00 worth of security products) to spokespeople hired by the company to review, demonstrate and promote ADT’s Pulse Home Monitoring System without disclosing that Eheywere paid to do so. According to the FTC’s complaint, the ADT “experts” were featured on numerous high- profile TV and radio shows, and across the internet in articles and blog posts, at ADT’s behest. Although AnT alleged[y booked the experts’ appearances through its finns and hooking agents - and even provided the media with B-roll footage and questions for the interviews - few segments mentioned the experts connection with ADT, a financial relationship, or thai these spokespeople were anything other than impartial, expert review[ersj of the products.” In the Matter of ADT. LLC, FTC Matter/File Number 122 3i21, March 6,2014. > Cole l-Iaan. In 2014, the FTC conducted an investigation into whether clothing retailer, Cole Haan, violated Section 5 of the FTC Act in conneclion with its Wundering Sole Pinleresi Contest” which instructed entrants to create Pinteresi boards with images of

Cole Ijuan shoes and pictures of their favorite places to wander” and asked entrants to include the hashtag ‘tWanderingSok” in their entries for a chance to win a 51.000 shopping spree. The FTC Eàund that the “pins” of Cole Kain products constituted endorsements of the , and that the opportunity to win a sigTlificant prize was an incentive for entrants that would not reasonably be expected by consumers who saw the pins, thus requiring additional disclosure. The FTC did not believe that the hashtag \VanderingSole” alone adequately communicated the financial incenti’e - i.e., the material cormcction - het’een the contestants and Cole I-Jaan and conc]uded that Cole Haan’s failure to instruct contestants to abel their pins and Pinterest hoards to make clear they were pinring Cole I laan products in exchange fbr a conlest entry could constitute a violation of Section 5 of the FTC Act. The FTC ultimately decided not to initiate an enforcement action against Cole Kuan because (i) the Commission had not previously

FKKS 58 (830v4 8 9991 .120 publicallv addressed whether cnn-v into a promotion was a Ihrm of material connection or whether a pin on Pihterest could constitute an endorsement: (iü the contest ran for a short period of time and did not garner a large number of conleslants: and (iii) the brand 9stiluted a social media jxdicv in the interim to address Ihe FTC’s concerns. r lIP tnkolo. In 2012, the FTC conducted an investigation into ‘hether Hewlett-Packard and its public relations firm, Porter Novelli. Inc., violated Section 5 ot’ the FTC Act in connection with providing gifts to hioggers who the> expected would post hiog content related to an HP Inkology marketing canipaign. The core gifts at issue consisted of two $50 gift certificates: one for the blogger to keep and the other to give away to blog readers. The FTC was concerned that most of the b[oggers failed to disclose that they received the $50 gift cards to keep for posting blog content about HP Inkology. Because a relative[y small number of bloggers posted content ahout HP Inkology after receiving the gifts, a few of those bloggers did adequately disc[ose their material connections, and both companies revised their written social media policies to adequately address the FTC’s concerns, the FTC decided in late September 20J2 to not pursue an enforcement action. HP Inkology, FTC. File No. 122-3087, Letter from Mary K. Engle, Associate Director. Division of Advertising Practices, September 27. 2012. > llini. In 2011, the FTC closed its investigation of Hyundai Motor America for allcged violation of Section 5 of the FTC Act in connection with a blogging campaign conducted to spark interest in Hyundai’s XLV ads. The inquiry focused on whether bloggers were given gin certificates as an incenhive to comment on or post links to the ads, and if they were explicitly told not to dkclose this information in violation of the FTC Endorsement Guides. In its closing letter, the FTC slated that a gill to a blogger for postng specific content promoting an advertiser’s products or services is likely to constitute such a material connection. The FTC citcd several reasons for its decision to end the iTivestigatiori. aciuding that Hvundai did not appear to know in advance about the use of gift certificates as incentives, a relative[v smal[ number of bloggers received the certificates (some of whom disclosed this information), an individual working for the media firm hired coconduct the campaign was respotiihle for the gift certificates, and the media firm promptly took action to address the issue upon learning of the alleged misconduct. See In re Hyundai Motor America. FTC File No. 112-3110 (Nov. 16. 2011j (closing letter); see also tsing social media in your marketing? Staff closing letter is worth a read.” FTC. December 11, 2011 (http:Hbusiness.ftc.gov/blog/2011 /12/using- social-media-your-marketing-staff-closing-letter-worth-read) Ann Ta’lor. In April 2010. the FTC investigated Ann Taylor in connection with allegations that it provided gifts to bloggers who the cornpan expected would post blog content about the company’s LOFT division. The FTC’s inquin focused on gifts provided during previews of LOI- s Summer 2010 collection. In its letter closing the investigation, the FTC said that it was ‘concerned that bloggers who attended a preview on january 26. 201U fai]cd to disclose that they receied gifts for posting blog content about this event.” See Letter front Mar-v K. Frigle. Associate Director, Division of Advertising Practices, dated April 20. 2010. Reverb Conimunications. In the first enforcemeni action brought under the revised Endorsement Guides. Reverb Communications, a marketing and public relations agency hired by videogame developers, settled FiC charges that it engaged in deceptive

FKKS:581830v4 9 99911120 advertising when its employees posed as ordinary consumers and posted game reviews at the online iTunes store. The FEC alleged that the employees did not disclose their affiliation with Reverb, that Reverb had been hired to promote the game, or that Reverb often received a percentage of product ; the FTC alleged that these facts were material to consumers who viewed the endorsements. In the Matter of Reverb Communications (2010) (consent order).

Recent Developments Addressing Native Advcrtisin2

FTC Native Advertisiiw \\‘orkshop In December 2015. the Federal Trade Commission cthc FICm hosted its much-anukipatcd orkshop Bluned Lines: Advertising or Content?’ In \\‘ashingtor.. DC. Ihe workshop facilitated a discussion among major industry stakeholders on the practice of native advertising” in order to help the FTC determine whether additional guidance from the FTC is needed. The workshop provided a fomm for robust discussion about native advertising practices. consumer demand for, and undcrstandiTlg of native advertising, and the need for (and was of) differentiating native advertising fmm surrounding editorial content. Here are a few highlights: What is Native Adver1isng? As the Interactive Advettising Bureau noted in its Native Advertising Playbook (released the same week as the FTC workshop), native advertising is hard to define because it takes many different rorms. The workshop participants explored the diverse array of native advertising formats and techniques, including (1) custom content (which may be written by the publisher or written by the brand in partnership with the publisher), (2) content that appears in-feed (such as a promoted tweet on Twitter or content in a publisher’s “top news” feed), and (3) content that appears in a recommendation “widget” placed on a publisher’s site. As the workshop made clear, numerous other forms of native advertising exist, and additional fbrms are certain to he developed in the coming years. Distinguishing Advertising from Editorial Content. There was a wide consensus among participants that “transparency” is key — both to protect the publishers eredibiiity with readers and 10 avoid potential in situations where consumers may have difficulty discerning that the content in question is a paid sdvertisemenl. However, a number of panelists emphasized that certain types of media opportunities that are sometimes [ahe[ed as native ad’ertising” nay not constitute ad’ertising at a[l (and. therefore. may not require any disclosure under Section 5 of the FTC Act) — for example. a camera nianuIcturer that pays a publisher to create a custom “listicic” about ten great vacation destinations, where the “listicle” does not make any claims about the manufacturers produc[s or contain any other content that is likely influence a purchasing decision. And one pancst noted that preliminary research also shows that consumers ofien don’t care if the content they read is sponsored by a brand, raising the question of’whether nati-e advertising poses any harm to consumers in the first pbce.

• Manner and Methods of Disclosure. Participants largely agreed that, in situatons “-here disclosure is called for, a one-size-fits-all approach is not only undesirable, hut mpossihle. The panelists debated the efficacy of [abets like “sponsored by,” ‘presented by,’ and “sponsored

FKKS 58’ 83O4 10 99911120 content’ and the use of graphic or color differentiation (and other visual cues) to differentiate between sponsored and editorial content. The final panet used a series of hypothetical native ads that illustrated the challenges publishers and advertisers face as they try to figure out effective ways of telling consumers what they need to know. Social Sharing. Most native advertising products allow for social sharing. The participmts pondered a scenario where disc]osurc is made on the original site to which content is posted. hut does not travel with the content as it is shared out by consumers or brands. The publishers noted that they have little control over how users interact with their content and should therefore not he he]d responsible for consumers’ actions As the FTC’s Man Engle noted, the workshop may have niised mere questions’ for regulators “than it answercd.

FTC Enforcement Policy Statement and A Guide for Business In December 2015. The FTC issued enfbrccment guidance on native advertising n the fonu of an Enforcement Policy Statement and A Guide for Business. While the Policy Statement reiterates FTCs long--standiflg view that advertising masquerading as editorial is misleading and decepti e. the Guidance goes much further, asserting both a broad philosophical view about hat constitutes ‘advertising’ and very prescriptive rules about how, where and when disclosures must be made. Highlights from the Guidance and Policy Statement include: (1) Although the FTC does not define “native advertising,” the Policy Statement notes that native advertising encompasses a broad range of advertising and promotional messages that match the design. style and behavior of the digital media in which it is disseminated. The FTC says that native advertising is deceptive when it misleads consumers as to the ‘nature or source” of the content. In other words, it is deceptive when consumers do not realize that an advertiser is behind the content they are viewing. (2) The more a native ad is similar in Jhrmat and topic to content en the publishers site, the more likely that a disclosure will he needed to p1-eventdeception. Disclosures may be necessary on both the publishers site and on linked pages where the content appears.

(3 Au article which is not itself an ad. when promoted h’ a company through a recommendation idget. can become an ad h’ the comnpanv.That company is in turn rcsponsihle t& ensuring that the statements in the articie are truthful and substantiated. (4) [he FTC reiterated that, like oilier disclosures, whether a disclosure regarding a natEvead’s commercial nature is clear and conspicuous will be measured by its pcrlhrmance: did corsurners actually notice. process and understand the disclosure? Just pulling a disclosure some”here on the page as a CYA’ does not work In order to he effective, according to the FTC. disclosures should appear near where consumers are likely to looL first. (5) Comnon terms like “promoted’ or “presented’ may no loner be adequate to convey that a sponsoring advertiser was involved in the creaiion of the content. Phrases that include the actual word ‘advertisement’ are preferable. Unfortunately, this presents a dilemma for companies that

FKKS 5S1830v4 Il 99911120 do not consider all content they produce to be “advertising”; if all sponsored content with a brand or product mention is advertising’ and must be labeled as such, companies that produec or sponsor it will almost certainly have to grapple with rights clearance issues.

First FTC Case Involving Native Advertising Less than three months after issuing he above guidance to marketers on native advertising, the FTC settled its first native advertising casc against national retailer Lord & layior. The FTC alleged thai Lord & Taylor deceived consumers by paying for native adverliseinents, including an arlicle published online by the fiishion magazine Aylon. a Nv/on ]nstagram post. and other incentivized soda! media posts by fashion infl.uencers. without disclosing that the posts were actually paid promotions for the companvs 2015 Design Lab collection. According to the FTC complaint, to promote its new prRate-lahel Design Lab collection for women, lord & Taylor launched a social media marketing campaign in late March 2015. The marketing plan included Lord & lavior branded blog posts, photos, video uploads, native ad’ erlising editorials in online fashion magazines, and online endorsements by selected fashion influencerc all focused on a dress from the new collection - the Design Lab Paisley Asymmetrical Dress. With respect to the native advertising editorials. The FTC conip]ained that Lord & Taylor had edited. revieed, and paid for an article tich appeared in Nv/on, a pop culture and fashion publication, as well as reviewed and approved a caption to he posted alongside a photo of the paisley dress on Ny1ons Instagrarn account. Neither the article, nor the lnstagram post, gave any indication to consumers that they were paid advertising directed by Lord & Taylor. Regarding the fashion influencers, the FTC noted that lord & Taylor gave the influencers a free pais[ey dress and paid them between $1,000 and $4,000 each to post a photo of themselves wearing it on Instagram or another social media site. Lord & Taylor pre-approved each proposed post. and the influencers were obligated by contract to tag ‘lordandtaylor” as part of the posts and to use the hashtag “#DesignLab’ in the caption of the photos. Lord & Taylor failed to require the jnfluencers, however, to disclose that they received the dresses for free or were paid by Lord & Taylor for their posts.

Jo the proposed consent order settling the claims against Lord & Taylor. the FTC (i) prohibits Lord & Taylor from misrepresenting thai paid commercial advertising is from an independent or objective publisher or source: (ii) pi-oliihits the company from misrepresenting that any endorsement is from an independent or ordinary consumer; (iii requires the company to disclose any unexpected material conjieccion heceen itself and any influencer or endorser (e.g.. that the endorser was paid and--florreceived &ee product for their endorsement): and (iv) requires the company to monitor and review influencer posts to ensure they incorporate the necessary disclosures and to terminate any influencers that fail to comply. One of the biggest take-nva; s from the proposed consent order is the requirement that Lord & Talor develop and implement a process by ‘hich it can monitor and review influencer posts :o ensure they have the proper disclosures Lord & Taylor must a]so get signed acknowlednents from intlueneers saving iha: the influencers have receied and will follow the ad’ertise?s policy requirinu the disclosure of material connections to the company in their posts. The consent order even goes so far as to specify that intluencers should only get one opportunity to cure an

FFKS 581830v4 12 99911.120 endorsement that doesnt indicate that it was incentivized by the advertiser (e.g., through use of hashtags #ad or #sponsorcd, or other language as appropriate); any suhsequent failures should result in the tennination of those inilueneers/endorsers by the company.

NAD Cases Addressing Native Adveisin iumpsport. NAD reviewed a competitive challenge by Vuly Trampolines Pty. Ltd. against Jumpsport, Inc.. a trampoline manufacturer. Vuly alleged that Jumpsport owned and operated a website that discussed trampoline safcty and perfommnce and reviewed trampoline products. including its own products and challenger’s products, hut failed to disclose its material conjiection to the site. NAD found that the site was inherently misleading. given (hat it did not effectively disclose Jumpsports material connection- \Al) determined there was nothing at the site to effectively alen consumers to the fact that they were vie” ing an advertisement, and also thai the disclosures on the site were insufficient to clearly and conspicuously disclose that the site is owned by Jumpsport and that the product :esting was designed and conducted by .Puinpsport. Accordingly the NAD recommended the editorial format of the site be discontinued. NAD CARL Case Reports. Case 5970 (July 2016) Vestaen. NAD reviewed a competitive chaiienge by Strategic Partners. Inc. ag&nsi \:estagen Technical Textiles. Inc. for claims made regardin its Vestex fabric ii inieme; and print advertising and in marketing and promotional materials. \mong other issues addressed in the decision. NAD recommended that an’ articles appearing in advertising or sales materials, or on Vestagen’s blog or website, that are authored by current or former employees of Vestagen, mention the International Safety Center (an organization founded by Vestagen executives), or convey to consumers, eithcr explicitly or implicitly, that they are independent and impartial when there is a material connection to an individual associated with Vestagen, clearly and conspicuously disclose the material connection and/or be labeled as advertising. NAD/CARIJ Case Reports, Case #5972 (July 2016). EvanTube. As part of its routine monitoring of content directed to children, CARU reviewed a series of YouTube channels created by a family, including Evan, a ten-year old boy and his younger sister, along with their pirents. The channels sometimes contain sponsored posts and feature a brand’s products, for which they arc compensated with money and/or free mcrchandise. CARU was concerned underage viewers may not understand that the sponsored videos include advertisements. Out of 132 sponsored videos on the channels, 36 included an audio disciosurc and 84 included some type of text disclosure. (‘ARt I found that the channels shou[d enhance and standardize their discosures. by placing a clear and prominent audio disc[osure stating that the sponsored videos are advertising at the start of the video. In its decision. CARL emphasized that media platforms. and in particular user-generated online video& have a heightened possibiliTy of confusion between adverlising and editorial contenT when viewed by children. NAD/CARI. Case Reports. Case #5988 (August 2016). Jovus. Inc. As pan of its routine monitoring program. NAD re’iewed advertising by io’us. Inc.. an oniine shopper retailer, for a product sold by Jovus appearing in the online version ni People Magazine. The online edition of People Magazine has a regular feature called ‘Stuff We Love on its style page and a Jovus video, promoting Dr. Brandt’s Needles No More Wrinkle Relaxing Cream, appeared on that page. While NAD agreed with Joyus that a consumer watching the video would be able to easily determine that it was an ad (or “shopping video”).

FKKS 58 L3Ov4 13 99911.120 NAD was concerned that the pages and links that consumer would see before viewing the video reasonably conveyed the message that the linked content was “editorial” and not advertising. Thus. NAD recommended thai Joyus. in collaboration with People, revise the link and the text around the link so that it ‘ould be clear thai by clicking on the Stuff We Iove’ link, consumers would be taken to items thr sa[e h} Jovus. \AD’CARU Case Reports. Case 5956 (May 2016). Qualcomm: As part of its routine monitoring program. NAD reviewed advertisements by Qualcomm. Inc. for the company’s Snapdragon Processors, microprocessors specifically designed for use in cell phones and tablets. The advertisements ran wi[h Qualcommsponsored articles on a range of techn&ogy subjects at \lashahle.com. In response to SAD’s inquiry. Qualcomrn noted that it had entered into a sponsorship agreemeni with Mashahle.com for a series entitled What’s [nside7 Fhe series incLuded 20 articles that explored the technology behind various products. None of the articles addressed mobile phones or devices that contained Snapdragon components. Qualcomm noted that it did not direct the creation or subject matter of the articles and that the articles did not address devices that contain Snapdragon or other Qualcomm products. NAD, in its decision, noted that the sponsored content was independently created before the sponsorship began and was controlled by the publisher. Quaieomm’s sponsorship, NAD noted, was more akin to an advertisement that ran alongside an article for a period of time, rather than content written to further an advertiser’s commercial end. Thus, NAD determined that it was appropriate for the advertiser to disclose itself as the series sponsor when its advertisements ran in conjunc(ion with the series. but determined ii “as hOt necessary for Qualcornrn to conlinue lo identify itself as the sponsor after the sponsorship period ended and its advertisements ceased. NADUARU Case Reports. Case 5633 (September 2013). Shape Ma2azine. As part of its routine rmnhitoring proam. \AD reviewed an article Shape Magazine. which promoted the benefits Shape Water Boosters, a Shape-branded product. The anicle “Water \Vorks. was preceded by the headline News,” included information about the importance of hydration and recommended SI APE Water Boosters — flavored supplements that are added to water — as a healthful way to slay hydrated. NADs concern was ,ot the disclosure of a financial coimection between ihe magazine and the products. Rather. SAD noied in its decision, whiLereaders of the magazine may have been awa’e that the product was reLated to the magazine, the same readers could reasonabLy attach different weight to recommendations made in an editorial context than recommendations made in an advertising context. Thus, NAD recommended that the advertiser clearly and conspicuously designate content as advertising when it promotes Shape-branded products. NAD/CARU Case Reports, Case #5665 (December 2013). Taboola. NAD reviewed a competitive challenge by Congoo, LLC against Taboola, a content recommendation platform. NAD recommended that Taboola modify its native advertising “recommendation widget” to assure that consumers understand that clicking on certain links provided by Thhoola would link them to “sponsored content.’ Specifically, NAD asked Taboola to increase the visibility of the Sponsored Content’ or Promoted Content” disclosure in terms of font size, font color and bo!dness. as well as its placement on the page. SAD CARL Case Reports. Case 5708 (May 2014). American Express OPEN Forum. As part of its routine monitoring program. SAl) reviewed links in the Tahoola “recommendation widget” that directed readers to artices on the American Express OPEN Forum website. SAD as concerned that readers may not understand that the thumbnail image-plus-text ad units labeled OPEN Forum’ in the recommendaiion

FKKS: 581830.v4 14 99911.120 widget linked to arlicles on a site owned and operaled by American Express. SAD noted that during the course of the challenge. American Express changed the ahels in the 1dgei to say either “American Express OPEN or m\merican Express OPF\ Forum.” a change which SAD deemed appropriate. NADUARL Case Reporis. Case 5760 (September 2014).

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TAilsotuline does not provide an exhaustive treatment of the subject mauer. This outline is also nw intended to he legal advice and may not he applicable in all situations. Consult your attornttJov legal advice.

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