Frankfurt Kurnit Klein+ Selz DC Native Advertising: The Old Is New Again Background and Recent Developments (as of September 2016) Tern S. Seliginan Frankfurt Kurnit Klein & Selz Introduction “Native advertising” is generally defined as advertiser-sponsored content that is designed for compatibility with the editorial content in which it is placed. While there has been a growing focus on native advertising by regulatory and self-regulatory bodies, native advertising is anything but new. Moreover, over the past decades, regulators and self-regulators have brought enforcemeni actions challenging ads that, in the regulators and self-regulators’ view, were decepiiveiy posing as editorial content (including “adveriorials” in magazines and infomercials on television). However, the legal and ethical issues around native advertising have become more complex in recent years because of the many (and varied) ways that advertising can be integrated seamlesslv into traditionally editorial spaces in an online and mobiie environment and in light of the wide adoption of native advertising by online pub]ishers. The implicaiions for determining that any content sponsored by an advertiser may constitute ‘advertising are profound. Not only may regulators mandate the format and content of disclosures to ensure that the rebtionship hetveen sponsored content and an advertiser is transparent. hut by treating such content as adveriising.” c’cen if it does not promote the advertisers products. services or brani could require a sponsor to vet all claims and clear all third patty rights implicated in the content. This outline will explore the precedent for the curreill regulator-v and self-regulatory focus on native advertising and the most recent actions taken by regulators and self-regulators. This outline reflects developments in the native advertising arena only through September 2016. Background: What is Advertising? Firsi Amendment. Historically, commercial speech has been accorded less proteclion under the First Amendment than non-commercial speech. arid some regulation of commercial speech — including the prohibition of commercial speech that is false or misleading — has been tolerated. See Central Hud5on Gas & Elec. Co. v. Public Sen. Comm ti, 447 U.S. 557, 566 (1980) (for commercial speech to come within First Amendment protection “it must ... not be misleading’).ee a/so Bolger v. Youngs Drug Products Cop., 463 U.S. 60(1983). FKKS 58830 V4 99911.120 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 Es core. 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 A7ke v. 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-an v .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 information 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 & 994 of photograph of surfer in a bitch. 265 F.3d (9th Cir. 2001) (unauthorized use 7th rnagalog’’ actionable): Jonian v Jewel Food Stores, Inc., [cite], 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 marketing 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.