Last week, the FTC issued its long-awaited Enforcement Policy Statement on Deceptively Formatted Advertisements, often referred to as “native advertising.”  For those unfamiliar with the term, the FTC helpfully explains that “native advertising” is advertising and promotional content designed to be integrated into — and often indistinguishable from — editorial and other non-commercial content published in print and digital media.

While the terminology may be unfamiliar to many consumers, native advertising has become increasingly common — Twitter, the New York Times website, National Geographic magazine and Buzz Feed all publish native advertisements. That’s why the FTC has become so concerned.

The Policy Statement does not constitute binding regulatory action, but rather lays out the governing principles that the FTC will apply in evaluating whether a particular presentation of native advertising is deceptive. And now that these guidelines have been established, it may not be long before the FTC starts applying them in enforcement actions against advertisers, publishers, content distributors and/or advertising agencies.  (The Commission specifically noted that “everyone who participates directly or indirectly in creating or presenting native ads should make sure that ads don’t mislead consumers about their commercial nature.”)

To help businesses avoid liability for deceptive advertising, the FTC also issued Native Advertising: A Guide for Businesses, providing 17 examples of real-world situations in which native advertising might be used. These examples offer valuable guidance as to whether the presentation of ad content is likely to be considered deceptive. Part 2 of this post will focus on these examples and what they reveal about the FTC’s anticipated enforcement strategy. For now, it is useful to consider the basic principles underlying the Commission’s approach to native advertising, as set out in the Enforcement Policy Statement:

• Advertising and promotional content should be identifiable as such. Notably, the FTC is not saying that all native ads necessarily need to be identified as advertising.
• An advertisement is deceptive if it misleads reasonable consumers into believing that the content originates with an independent, impartial source, rather than the sponsoring advertiser, even if the product claims communicated in the advertisement are truthful.
• The FTC will consider the overall net impression of the content, not statements in isolation, to determine if the content is distinguishable from other non-commercial content.
• A reasonable interpretation by consumers need not be the only one communicated or be shared by a majority of consumers.
• Interpretations that advertisers intend to convey about the source of an advertisement will be presumed reasonably understood by consumers.
• The Commission will consider consumers’ prior experience with the particular media in which the content appears.
• In determining the overall net impression of native advertising, the FTC will consider qualifying disclosures contained in the ad or other visual cues that distinguish the ad from other content into which it is integrated.
• To serve as an effective disclosure, the language must be simple, unequivocal and conspicuous.

These principles seem very straightforward and have been applied to non-native ads in the past. But to find out how they might play out in a variety of realistic native advertising scenarios, stay tuned for Part 2 of this blog post.