Originally published in the American Advertising Federation Phoenix Chapter Newsletter (June 2013)

Summary of March 12, 2013 FTC Guide, “Dot Com Disclosures” By Susan D. Brienza, Attorney at Ryley Carlock & Applewhite

“Although online commerce (including mobile and social media marketing) is booming, deception can dampen consumer confidence in the online marketplace.” Conclusion of new FTC Guide on Disclosures

The Federal Trade Commission (“FTC”) has broad powers to regulate and monitor all advertisements for goods and services (with the exception of a few industries such as banking and aviation)— advertisements in any medium whatsoever, including Internet and social media promotions. Under long-standing FTC statutes, regulations and policy, all marketing claims must be true, accurate, not misleading or deceptive, and supported by sound scientific or factual research. Often, in order to “cure” a potentially deceptive claim, a disclaimer or a disclosure is required, e.g., “The following blogs are paid reviews.”

Recently, on March 12, 2013, the Federal Trade Commission published a revised version of its 2000 guide known as Dot Com Disclosures, after a two-year process. The new FTC staff guidance, .com Disclosures: How to Make Effective Disclosures in Digital Advertising, “takes into account the expanding use of smartphones with small screens and the rise of social media marketing. It also contains mock ads that illustrate the updated principles.” See the FTC’s press release regarding its Dot Com Disclosures guidance: http://www.ftc.gov/opa/2013/03/dotcom.shtm and the 53-page guide itself at http://ftc.gov/os/2013/03/130312dotcomdisclosures.pdf . I noted with some amusement that the FTC ends this press release and others with: “Like the FTC on Facebook, follow us on Twitter. . .”

The FTC released the original guide 13 years ago, when mobile phones were just for calls and not linked to the Internet, and when social media was an infant. In the new version of the guide, updated recommendations and specific examples focus on how to design disclosures given the small screen sizes of smartphones as compared to PC screens, and the space constraints of most social media (e.g., Twitter’s 140-character limit for tweets). To prepare for this updated guide, the FTC held three public comment periods, and hosted a public workshop in May 2012. The technical nuances are different, but the general principles remain the same. Indeed, in an early April conversation I had with an FTC attorney, he referenced the Commission’s Policy on Deception in Advertising (published in 1983) as if it were still quite current. As the guide’s Conclusion states: “To ensure that products and services are described truthfully online and that consumers get what they pay for, the FTC will continue to enforce its consumer protection laws. Most of the general principles of advertising law apply to online ads, but new issues arise almost as fast as technology develops.” (Emphasis added.)

Clear & Conspicuous Requirement. Under the FTC Act, if a disclosure is necessary to prevent a claim from being deceptive, then that disclosure must always be “clear and conspicuous.” Often, the FTC requires that the disclaimer or disclosure necessary to qualify a claim be in the same type size as that of the claim itself, and certainly not be in what the Commission calls “mouseprint.” Regarding placement, including disclosures in the “Terms of Use” section of a website would not be effective, reasons the FTC, because most consumers don’t bother to read such sections. The revised guide, like the 2000 version, continues to emphasize that advertisers should consider the following factors in determining whether an online disclosure is indeed clear and conspicuous:

. Whether the language of the disclosure is understandable (and the test is: understandable for the average consumer or reader);

. Whether the disclosure needs to be repeated in order to be comprehended; . Placement of the disclosure, specifically, how close it is to the claim being qualified; . Prominence of the disclosure (e.g., the size of the disclosure in a visual ad; the volume of the disclosure in an audio ad); . Whether the disclosure is unavoidable, or can be skipped by the consumer or user; . Whether other elements and graphics in the ad distract from the disclosure; and . Whether disclosures are displayed in a location such that they will be considered before the consumer decides on a purchase.

Hyperlinking. Hyperlinks are present in most websites and online advertisements, sometimes to “hide the pea” or minimize a disclosure. Generally, hyperlinks are disfavored by the FTC, and are recommended only when there is no other solution. Regardless of where a hyperlink might appear – for instance, on an advertiser’s website or in an endorser’s social media post – the revised guide recommends considering the following factors:

. The placement and prominence of the hyperlink; . Whether the label of the hyperlink is appropriately descriptive, ideally a preview, and “give[s] consumers a reason to click on it” (as opposed to just “Disclosure”); . Whether the actual disclosure provided via hyperlink is understandable, as to exactly how it qualifies the claim; and . Whether hyperlinks throughout a website (or other piece of online advertising) are consistent with each other in style and presentation.

The FTC cautions marketers that some disclosures, such as “cost information” and “certain health information” (and of course safety cautions or risk warnings of a product), are generally too important to be provided merely through a hyperlink. However, the recent guide allows for some flexibility, and states that if details are “too complex” to describe on the same page as the claim, a hyperlink may be appropriate if it clearly conveys the nature and subject of the disclosure.

One new example demonstrates the details of an appropriate hyperlinked disclosure. A one-page online ad for the “Frost-A-Tron” electric cooler includes a “Satisfaction Guaranteed” claim. But directly below that claim, there is a hyperlink labeled, “Restocking fee applies to all returns.” The hyperlink then leads to a fee schedule providing what dollar amount will apply, depending on the time lapse between the consumer purchase and the return. By contrast, another example with an ineffective disclosure of restocking fees simply includes a hyperlink labeled only “Disclaimer.”

Scrolling. The revised guide includes a detailed discussion of situations where reading a disclosure on a computer, smartphone, or other device may require scrolling down by the consumer. The revised guide states: “When advertisers are putting disclosures in a place where consumers might have to scroll in order to view them, they should use text or visual cues to encourage consumers to scroll and avoid formats that discourage scrolling.” The guide provides a checklist of what the FTC considers to be inadequate cues to scroll. For instance, this guide disfavors and recommends against using “vague statements, such as ‘details below’”; indicating that scrolling is required only by using scroll bars on the edge of the screen; and leaving many lines of blank space above a disclosure (which could well discourage continued scrolling down by the tired consumer).

In general, the FTC recommends either “[o]ptimizing websites for mobile devices” or placing website disclosures in vertical proximity to the claim being qualified. The Commission’s reasoning is that consumers “who have to zoom in to read a claim on a small screen” may be unlikely to scroll right or left in order to view the disclosure at all. Other new recommendations are similarly logical.

Pop-Ups. Regarding pop-ups or other high tech, real time methods of delivering information, the revised guides recommend considering:

. Whether the various browsers or devices that a consumer might use will support the pop-up or other method of delivery; . Whether blocking software will prevent proper display of pop-up disclosures; and . Whether consumers would be likely to ignore the disclosure, given the particular communication method and its possible distractions.

The Commission suggests that advertisers might solve the problem of consumers likely ignoring a disclosure if the consumer is forced to actively and affirmatively choose and click a “yes” or “no” option in order to proceed further.

General Principles in Specific Channels. A running theme throughout the revised guide is that if limited space or technical constraints prevent a disclosure from being clear and conspicuous, then that particular claim, advertisement, or medium should not be used at all. The guide states definitively, “If a disclosure is necessary to prevent an advertisement from being deceptive, unfair, or otherwise violative of a Commission rule, and if it is not possible to make the disclosure clear and conspicuous, then either the claim [that is being qualified] should be modified so that the disclosure is not necessary or the ad should not be disseminated.” In other words, if a potentially deceptive claim cannot be cured by an effective, readable, and clear disclaimer in the online environment, then: Don’t use it.

Where space is especially constrained, such as in tweets or banner ads, the FTC recommends conscientiously considering factors such as whether a disclosure will be retained with republishing (e.g., re-tweeting), and whether abbreviated disclosures will be understood at all by consumers. A new example indicates that the FTC believes that “Ad” at the beginning of a tweet will usually be adequate to indicate that a message is sponsored, but in contrast that the abbreviation, “#spon,” will not be adequate.

Future Enforcement? Although not legally binding (like all federal agency guides), the recommendations in the guide must be seriously considered and executed as appropriate—for the particular medium and the message. The new version of .Com Disclosures represents a preview of how FTC Staff will likely apply the law and policy on fairness vs. deception in the future in reviewing online disclosures, making inquiries, starting investigations, and pursuing enforcement actions. In recent years, the FTC has actively and deliberately targeted several well-known, national brands. See, for example, the closing letter (written in February, 2012 and posted on www.ftc.gov on March 12) objecting to a “Tweet Up” campaign by Nordstrom Rack of April 2012, for which the fact that each “social media influencer” first received a gift card of $50 was not clearly and uniformly disclosed to consumers; and indeed the entire Tweeting event was not handled properly by Nordstrom.

All advertisers under FTC jurisdiction, using whatever medium, are now on notice to review their use of online disclosures in the near future, or risk an inquiry or investigation. The FTC ends press releases regarding settlements or Consent Orders with a toll-free number for consumer complaints, and then concludes: “The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal enforcement agencies in the U.S. and abroad.” Over the past year, and especially now that the guide has been issued, social media marketers have quite active oversight by a tech-savvy Commission.

About the Author: Susan Brienza counsels clients in advertising law including print ads, websites, TV and radio ads, social media, infomercials, telemarketing, branding, consumer testimonials, expert endorsements, and free offers. As a former college professor with a Ph.D. in Literature, she brings her background in linguistics and stylistics to crafting aggressive marketing claims for clients, while avoiding the misleading and deceptive claims that could elicit Federal Trade Commission scrutiny. She can be reached at [email protected].