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Disclosures in Online Advertising

Advertising is the lifeblood of small businesses. When the internet was developed, it promised to level the playing field for small-business owners. This new frontier could help them compete locally with companies with large advertising budgets.

Unfortunately, few consumer protection laws existed on the early "Information Superhighway." Anyone with an online presence and a product could blast spam into potential customers' emails without any regulation. Existing case law meant the Federal Trade Commission Act (FTC Act) regulated the internet and other forms of advertising media.

The first efforts at regulating online advertising involved opt-out mechanisms and anti-tracking devices. More recent efforts include required disclosures on sponsored social media posts that make it clear the viewer is seeing an ad. Search engine optimization (SEO) algorithms have changed to prevent keyword stuffing.

FTC Rules for Internet Advertising

The Federal Trade Commission (FTC) regulates marketing and advertising. The same general principles apply to all advertising, from print to telemarketing. Advertising for new products must meet certain criteria. Advertising may not be deceptive or intentionally mislead consumers.

Online advertising disclosures must meet FTC requirements. The agency is the best resource for relevant information about internet advertising. The FTC even created a handbook on this topic for businesses.

Some states' e-commerce regulations now require an opt-out provision if a website collects and retains customer data. This has become a requirement for businesses that do business in Europe as well. If your business website attracts overseas customers, you may need to comply with European regulations such as the General Data Protection Regulation (GDPR).

What Is a Disclosure?

disclosure is an acknowledgment that the reviewer or influencer has a relationship with the advertiser. For instance, if you are selling shampoo, and you pay an influencer to talk about your shampoo while discussing hair care products in a webinar, you must disclose that relationship during the webinar. Otherwise, it is "deceptive advertising." Both you and the influencer may be subject to enforcement actions for your digital marketing efforts.

Disclosures must be "clear and conspicuous" in language a reasonable consumer would understand. There is no hard-and-fast definition of clear and conspicuous in business marketing, but you need to consider:

  • Placement of the disclosure: It must be easy to see and not require the viewer to click or scroll to another page.
  • Prominence of the disclosure: Do not block it with pop-ups, flashing icons, or contrasting colors.
  • Audio ad disclosures must have a volume and cadence audible over any background music or sound: Repeat during a livestream so all viewers hear them.
  • Video ad disclosures must be of sufficient duration and quality for viewers to notice them: As with audio disclosures, repeat visual disclosures throughout a livestreamed video so late viewers can see them.
  • Space-constrained ads: Many people view podcasts, social media, and other multimedia on smartphones and mobile devices. This means that an entire webpage is not visible on their screen. The FTC guidance states that a disclosure in another column or part of the screen is not "clear and conspicuous" as required.
  • Text size and style: Avoid tiny fonts or unusual styles. Remember that many smartphone apps cannot read all font styles.

Use of Hyperlinks

The FTC spends some time explaining the use of hyperlinks in dot-com disclosures. Links can be useful if a disclosure or disclaimer is too complicated to include in the main advertisement. The hyperlink text must contain enough information for the user to click on it. You must place the link close enough to the relevant claim to be clear that the link relates to the claim.

For instance, suppose you offer a "money-back guarantee!" with your online product. Yet the buyer must pay shipping and handling for the return. Labeling the link "Disclaimer" is not enough. The link should say "Conditions apply" and appear next to or under the "money-back guarantee!" text.

In pay-per-click (PPC) advertising, the advertiser pays only when customers click on the ad. Be sure to use caution with this type of advertising. Still, PPC ads can be effective with proper placement. If they're used on the right sites, with an eye to your target markets, you can drive up your conversion ratio quickly. But unless you optimize placement, you could pay for dozens of clicks that get you nothing in return. Your PPC ad should have a prominent hyperlink that tells users where it redirects them.

Disclosures in Content Marketing

"Content marketing" involves selling a brand by increasing product line awareness. Having an influencer discuss the product in context with other products in the brand during a podcast is cost-effective and raises the business profile. However, influencer and endorsement marketing require conspicuous disclosures and good business practices.

The FTC's endorsement guidelines make it clear that in any content marketing campaign, "a connection between the endorser and the seller" that could affect the way consumers evaluate the endorsement "must be disclosed clearly and conspicuously." The same rules apply to influencers and endorsers as to disclosures. Your intended audience must know whether the review or endorsement is genuine. If the endorser was compensated, inform the audience.

The FTC endorsement guides explain what influencers need to do to stay compliant and provide good sponsorship on their social media platforms. Owners and advertisers should consider their target demographic when developing advertising ideas for content marketing. The FTC has indicated it is cracking down hard on child-directed advertising and fake ads in coming enforcement efforts.

Social Media Marketing

Social media advertising on platforms like Facebook, TikTok, and Snapchat has become the newest marketing strategy for businesses to create brand awareness. Social media influencers can reach a target audience with a quick Instagram reel and present a product or service at no extra cost.

Influencer advertising is subject to the same business advertising laws as other marketing. The FTC has created guidelines for social media influencers explaining how and why they must follow FTC regulations.

Online marketing can be a moneymaking strategy for local businesses. It can also be a money-loser if you're not careful. The FTC's Consumer Review Fairness Act provides business guidance on what companies can and cannot do about negative or hostile reviews. For instance, you may not have a blanket policy statement penalizing negative reviewers. You may not remove negative or hostile reviews except under certain circumstances. The FTC staff works with the Small Business Administration to review and revise these regulations yearly.

Facebook ads and Google ads have their own policies for negative or hostile reviews and comments. Facebook will preemptively remove any comment or posting that violates the site owner's terms of service (TOS).

Email Marketing

The original online marketing and the first targeted for regulation — email advertising, or "spam" — has its own federal law, the CAN-SPAM Act. The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 was a belated response to decades of junk email flooding everyone's computers. It contains all the regulations that control spam today.

An email advertising strategy is still used for low-cost marketing for businesses without a web presence. Thanks to the strict requirements of the CAN-SPAM Act, there are a few limits on what advertisers can dump into your inbox and more ways to stop it.

  • Header information must be accurate. The "From/To" and routing information must be correct.
  • The subject line must not be deceptive. Since spam is often used to download viruses, fraudulent subject lines may open the sender to criminal charges.
  • The email must clearly state that it is an advertisement. The FTC does not require a display ad headline saying, "This is an advertisement," but it must state that somewhere in the message.
  • You must provide a valid physical postal address. It can be your actual business address or a mail-receiving service, but it must be a physical address.
  • You must provide an opt-out function and honor such requests immediately. The FTC requires businesses to process all opt-out requests within 10 business days.

Email used for correspondence and conversions from ad campaigns into lead generation may be exempt from the CAN-SPAM Act. The act only applies to commercial content. Commercial content is anything that promotes a product or service. If new customers have filled out a form indicating they want further contact, the email is not commercial. The qualifying statement is "agreed." The customer must know that they can expect an email response by giving the company their address.

Email marketing templates can be used to create regulation-compliant email marketing ads. Businesses should be aware that their dispatches may have a low read rate. Microsoft Outlook and other email servers have filters that intercept most unsolicited emails. That means the servers are likely to dump them straight into the spam folder.

Need Professional Legal Help?

Knowing the FTC's rules may be enough, but every business is different, and legal gray areas may arise. If you have doubts about whether your online ads comply with the law, call a business and commercial law attorney for guidance.

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