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FTC Report Examining Issues of Consumer Recognition of Native Advertising

On December 15, 2017, the FTC released a staff report that summarizes agency-commissioned research from 2014-2015.  The research explores consumer recognition of paid search advertising and “native advertising” that resemble news, feature articles, product reviews, entertainment or other non-advertising online content.

An advertisement is deceptive under Section 5 of the FTC Act if it materially misleads consumers as to its commercial nature or source.  In other words, consumers should be able to recognize an ad as an ad.  If a separate disclosure is necessary to make that happen, the disclosure should be made in a way that ensures consumers can read, process, and understand it.

The Commission believes that ad recognition is particularly challenging for consumers in the areas of search advertising and “native advertising.”  The FTC staff has expressed concern that consumers sometimes have difficulty distinguishing regular search results from advertised search results and has previously provided specific guidance to search engines on this issue.

Only a small number of studies have investigated how consumers perceive these non-traditional forms of advertising.  Some of these studies are online surveys that explicitly ask about respondents’ understanding of an ad’s source or commercial nature.  Other studies measure changes in participants’ behavior, such as their clicking or purchasing behavior or visual attention, but not their understanding of the ads.

See here for additional information.

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Richard B. Newman

Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

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