Getting Disclosures Right: An FTC Focus and Evolving Challenge for Advertisers

People joke that consumers ignore the same advertising disclosures that take so much of a lawyer’s time to develop. This joke reveals a problem. 

Too often, consumers ignore or miss a disclosure because it is difficult to notice, read, or understand and is displayed in a way that is inconsistent with Federal Trade Commission (FTC) guidance for effective disclosures. 

While disclosures in all advertising media can be hard to read or understand, in digital advertising the problems often are more acute. Before the FTC or other regulators crack down on the misleading use of disclosures, whether in influencer marketing or interfaces that have devolved into dark patterns, brands should focus attention on making disclosures that are easy to see and understand to build a trusted relationship with consumers.  

The FTC’s current guidance on disclosures in digital marketing provides a roadmap for brands to use better practices, but new guidance may be forthcoming.  

In response to the FTC’s request for comments to its .com Disclosures business guidance, most recently updated in 2013, BBB National Programs recently submitted comments highlighting many of the disclosure issues we regularly see in cases at the National Advertising Division (NAD), the Children’s Advertising Review Unit (CARU), and the Direct Selling Self-Regulatory Council (DSSRC).  

BBB National Programs asks that any updated guidance: 

1. Provide examples of prominent disclosures in social media.
2. Provide guidance on when, where, and whether the sponsor of the post should be disclosed.
3. Update guidance on disclosure issues that lead to “dark patterns” and add examples of dark pattern disclosures that are misleading.
4. Address platform restrictions that make adding adequate disclosures more difficult.
5. Update current guidance as it relates to mobile devices.
6. Directly address affiliate marketers and require disclosure of their relationship with a brand.     
7. Provide guidance that disclosure of a material connection with a brand by affiliate marketers is required but disclosure alone may be insufficient to prevent consumers from being misled if the affiliate marketer ranks products.   
8. Provide additional guidance and examples of when a hyperlink can be used to make a disclosure and how it can be labeled to indicate the nature of the disclosure available in the link.
9. Clarify that disclosure of material terms several webpages into a purchase, even if unavoidable, is not sufficiently conspicuous to avoid misleading consumers.     
10. Provide clear guidance to advertisers that clear and conspicuous disclosures are required in virtual reality and the metaverse even when technological constraints make disclosures difficult.

In advertising challenges brought before BBB National Programs, we regularly see disclosures that are difficult to read due to their size, prominence, or placement. Problematic disclosures can be located far from the triggering claim, forcing a user to scroll to review them, or found only when clicking a hyperlink that is not labeled to indicate the nature of the information disclosed. In addition, the source of advertising is often obscure, unclear, or buried somewhere, making it unlikely that consumers will notice. 

Sponsored posts by affiliates or influencers, for example, are often not identified as such or are identified in a way that does not reveal the nature of the connection with the brand promoted. 

It is also important to consider that these issues that make disclosures difficult to notice, read, and understand, can worsen when viewed on a mobile device.  

The misleading use of disclosures, which some characterize as dark patterns, has been a focus of the FTC. Specifically, the FTC has scrutinized purchase screens that hide material terms of a purchase and designs that undermine consumer choice, including the use of text colors and placement that highlight or obscure choices. Brands can avoid unwelcome FTC attention by ensuring consumers understand the material terms of a purchase through the use of appropriate disclosures. 

If competitors are misleading consumers and gaining market share by obscuring the material terms of a purchase or working with influencers or affiliate marketers to build an audience without disclosing their connection to a brand, challenging such practices in national advertising through NAD, or in the children’s space with CARU, or in direct selling advertising with DSSRC brings value both to the brand and to consumers.  

Using targeted challenges to address the misleading use or absence of disclosures can build better practices across an industry. A challenge to a competitor’s disclosures can make it easier internally for marketers to adopt better practices while ameliorating the fear of losing sales or market share to competitors who do not play by the same rules. Further, it will build consumer trust and potentially give regulators fewer reasons to scrutinize practices within a particular industry.  

NAD recently created a path for more efficient and effective challenges related to disclosures that resolves matters in 20 business days with a reduced filing fee.  

While our self-regulatory processes are voluntary, consistent and timely FTC follow-up on referrals from BBB National Programs clearly demonstrates that it supports our review of advertising issues. That is because our work applies and reinforces FTC guidance. Additionally, in recent years, NAD has partnered with platforms to provide a reporting relationship that allows the platform to receive referrals of advertising that violates platform truth-in-advertising policies.  

The issues we see in social media will become more pervasive unless action is taken now to adopt best practices in using disclosures. Brands interacting with consumers in the metaverse will need to use clear and conspicuous disclosures of material connections and material terms of purchases. If we are not yet seeing advertisers coalescing around best practices for digital marketing, we can be sure that problems will abound in the next frontier in the metaverse.