The Natives Are Restless: Legal Perspectives On Native Advertising
John P. Feldman, Partner, Reed Smith LLP: ads have been considered deceptive for not disclosing they are ads/source. Native ads = sponsored content formatted to fit seamlessly into modern media. Extension of tradition of placing ads in most advantageous ways. Implications for line between editorial content, noncommercial speech and commercial speech. Does payment for content make otherwise noncommercial content into commercial speech? Also right of publicity implications.
What does FTC look at for native ads?
Laura M. Sullivan, Staff Attorney, Division of Advertising Practices, Federal Trade Commission: Concerned about ads designed to look independent/editorial/independently sourced information. Native ads don’t change that. At our recent native advertising workshop, we heard agreement around the need for transparency even apart from §5 concerns. Publishers want to protect the integrity of the brand. Different thoughts around implementation: we wanted to learn what was occurring in the marketplace. Will likely issue guidance this year.
Feldman: Testimonial/endorsement gudies: is native advertising the same issue with respect to disclosing material connection? Is there a distinction?
Sullivan: Different cotnexts. Native ads take various forms. We looked at a subset, where there’s a risk of misleading consumers into believing that it’s editorial/independently sourced. It’s the relationship between the advertiser and the content: are there traditional markers or signals of advertising? If not, consumers should still be able to identify it.
Feldman: but note that deceptive format isn’t necessarily the same thing as “failure to disclose material connection.”
Rebecca Tushnet, Professor of Law, Georgetown University Law Center: In First Amendment terms, I like Justice Stewart’s idea about regulating transactions versus regulating in service of some other social goal. If the government is regulating to protect the consumer in the transaction, then it has broad freedom to act. If it’s regulating for some other goal—decreased energy consumption, say—then it should face a high burden of justification. This approach makes the abstract question “is it commercial speech” much less significant. Money matters: if I can’t benefit from saying I love Diet Coke (which I do) then my speech isn’t commercial, but it’s less important how the monetary connection works.
Sullivan: we use the RJR factors: from a case about ads that discussed a study on the relative safety of RJR’s cigarettes. Is the content promoting a brand or product? Does the speaker have a commercial motivation? How did the content come to be published?
Feldman: example of do it yourself craft ideas, such as recycling crayons, sponsored by a craft store on Buzzfeed. Commercial?
Sullivan: payment alone isn’t determinative. We’d look at content. Is there a specific product or attributes being promoted?
Feldman: assume it’s written by an organization dedicated to getting kids away from TV screens.
Sullivan: FTC lacks jurisdiction over nonprofits. We’d look at the content, again. What would the commercial motivation be?
Feldman: written and paid for by manufacturer of crayons?
Sullivan: again, the connection/motivation matters. Does the speech advance their commercial interests and are they talking about specific attributes?
RT: Again, the Stewart approach makes this easy. Why are you trying to regulate?
Feldman: right of publicity: there may be reasons to disclose sponsorship in every instance regardless of legal mandate because doing so is cheaper, simpler, safer and also produces brand enhancement. Assume you say it’s sponsored: what happens from a right of publicity perspective?
Stewart v. Rolling Stone (weird reasoning for why Camel wasn’t liable for editorial in insert surrounded by Camel ads); Jewel v. Jordan. RT: some risk that sponsorship might be interpreted as right of publicity violation—though in that case disclosure might not matter.
Feldman: example of Chicago Tribune section “sponsored by Menards,” a home improvement store. There’s a disclosure that it’s not written by CT editorial staff and a “learn more” link. The link says the content is paid for by a third party and the newsroom isn’t involved. Articles are about crafts, gardening—informative.
RT: note the incentive to disclose regardless because the goal is branding. Potential issues: §230—CT is no longer responsible but advertiser is. Tort law: “DIY cool hot plates” are the example: what could possibly go wrong?
Sullivan: we’d ask whether knowing the source changes the credibility/weight. In terms of labeling, the question is whether consumers notice and whether it conveys an accurate relationship.
Feldman: another native CT ad: “something fresh sponsored by Jewel Osco.” Curated articles from the Village Voice, HuffPo, Food & Wine—all food related, but don’t mention Osco.
RT: §43(a) problem if no licensing relationship? There shouldn’t be, but courts have applied §43(a) widely. What if a celebrity chef is mentioned: right of publicity claim?
Feldman: suppose one of the articles makes factual claims about iron pans?
Sullivan: if Jewel Osco is distributing the article for commercial purposes (other than to improve its brand), we’d look at whether a consumer would take away a product claim. If it is deceptive, §5 liability coulud attach.
Feldman: implications of curated content? If advertiser specifically curated article about something they sell in the store, and that’s not substantiated, greater risk.
Sullivan: yes. Very context specific—is it gaining credibility for economic benefit. Even content that is protected by the First Amendment in one context can be changed into an ad in another context.
Feldman: Tom Brady’s best friend: Funny or Die video sponsored by Under Armour. Branding is all over the video. What would require the label “sponsored”?
Sullivan: what ordinarily a consumer would expect. But again, we’d ask whether there was any information/statements in this context that would cause consumers to give it more weight.
RT: The only claim the ad seems to me to make is that Tom Brady is hot. That doesn’t seem falsifiable to me. (NB: This joke killed in a room full of advertising lawyers.)
Feldman: Slate’s homepage says “sponsored content” but you don’t know who sponsored it until you click through—is that a problem? Especially if people are paid for clicks.
Sullivan: Sponsorship serves a purpose, but we’re assuming it’s an ad. In some contexts, sponsored may be enough. If there’s deception in the first interaction with the consumer, though, that can violate §5. In fake news context, banners led to a fake news site—the initial deception was enough to be a deceptive practice even with later corrections/qualifications.
Standard disclaimer: her statements are not official statements or views of the FTC.
Q: a lot of precedent for limiting regulation to that which is likely to influence purchasing decisions. Disclosing material information before purchasing decisions. Readers aren’t consumers. Disclosing that people are directing your attention is a material change in the standard. Probably insurmountable challenge to disclose all the people benefiting from your attention: there are 95 cookies on that webpage and no disclosure can cover all that.
Sullivan: we approach it traditionally—is information within that message deceptive? Not different.
RT: Agree—we don’t want different format to change things—if a celebrity goes on Oprah and talks about a great new drug that helped her health, we want to know if she’s been paid to say that. Q: So do you need a disclosure in the teaser for the show? RT: Depends: if the teaser is “Kim Kardashian explains how she cured her acne,” I’d say yes.
Sullivan: what statements are being made? Tantalizing pictures aren’t necessarily claims that benefit the advertiser. We also need to consider mechanisms of disclosure: people may encounter the content in many different contexts, including Facebook—if you need disclosure, you need it to travel and be mindful of contexts in which your content is encountered.
RT: final thoughts on §230. Suppose the advertiser does adopt claims in another article. Will courts let them off the hook? Possible theories: agency law could extend to grab the advertiser, depending on the relationship—courts have not been willing to say that §230 immunizes an employer for acts of an employee w/in the scope of employment, and agency law may go further. Or, §230 doesn’t bar liability if the defendant contributed to the illegality of the content. One could argue that, if it’s the advertiser’s involvement that makes the content an ad, and it’s the fact that it’s an ad and not noncommercial speech that makes it illegal, then §230 wouldn’t bar liability. But we don’t really know how courts will deal with this.