FTC Internet Advertising Rules

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Because of the continuous growth of social and digital media, the Federal Trade Commission has updated the guidelines section of their website to address matters concerning internet advertising and marketing. It’s the first update since 2010. John Norling, an attorney from Jennings, Strouss & Salmon, will tell us more about the updated guidelines.

TED SIMONS: Advertisers and marketers are increasingly using social media to get their messages out. But the growth of sites like FaceBook and Twitter are leading the Federal Trade Commission to issue new guidelines for social and digital media. Here now is John Norling, an attorney from Jennings, Strouss & Salmon. Good to have you here thanks for joining us.

JOHN NORLING: Good to be here.

TED SIMONS: Okay so FTC is updating guidelines. Is this just for online, just for social media? What's going on here?

JOHN NORLING: The FTC has recently issued the guidelines specifically directed to online media and our online advertising and social media, you know, the digital marketing industry in the United States is quickly approaching $50 billion. And it's expected that by 2016 the money spent on digital advertising will surpass the money spent on TV advertising now.

TED SIMONS: My goodness.

JOHN NORLING: So right now businesses are operating in a vacuum. They don't have the guidance until recently.

TED SIMONS: And this is the first time, the first update on ads and marketing in how many years?

JOHN NORLING: Well depends on what you look at. The most recent update was on the endorsements side of things. That was I think the first since 2010. The guidelines for online advertising, though, what the FTC calls dot-com advertising, was updated for the first time since the year 2000.

TED SIMONS: Wow, time for an update.

JOHN NORLING: In the technology world, you're right.

TED SIMONS: Okay so the new guidelines, the emphasis I think would be rather obvious: Tell the truth, don't be misleading or don't lie correct?

JOHN NORLING: Absolutely, truth in advertising is a theme that prevails everything. The new guidelines aren't the law. I want to make that clear. The guidelines that the FTC has offered are just the FTC's interpretation of what it takes to comply with the law. The actual law the FTC enforces is called the FTC Act, and that has a very broad statute that the FTC uses. And it declares anything that is deceptive or unfair as an unlawful practice. That's a pretty broad statement. So the FTC needs to issue some guidelines to tell businesses how you advertise or what constitutes deception or what constitutes unfairness.

TED SIMONS: So in the online world, what constitutes as being fair or deceptive, any different than radio, television?

JOHN NORLING: No. The difference is how it's conveyed. Let's say Twitter, advertisement, we only have 140 characters. How do you make the proper disclosures in that? You don't have somebody issue a tweet that says, I've lost 40 pounds on this diet pill, I've taken it one day a week for two (inaudible). Well, that's an endorsement. It needs to be specified as such as you need to have hashtag ad or something to show it's an advertisement.

TED SIMONS: How about substantiating claims. Let's say I've taken this pill and I am now Superman or something like that. How much substantiation has to occur?

JOHN NORLING: Well, the advertising needs the empirical data to the back up its claims. But in the ad itself, if let's take the weight loss scenario -- if you have a claim that says, I lost 60 pounds in four weeks by taking this pill, if those results are not typical, then that ad needs to say typical results would be one pound a week. Or it needs to disclaim that this person exercised six hours a day, drank the protein shakes and only ate raw vegetables, something to show the consumer that those advertisements results aren't typical.

TED SIMONS: How are these violations found or reported and how are they endorsed? Anyone can go online and say, this weight loss plan works. Who enforces? Who investigates? Who watches over this kind of thing?

JOHN NORLING: A number of different areas. One is because it's online now, it's low-hanging fruit for the regulators. They can sit in their office and they can surf the net and look at these advertisements and basically from the comfort of their desk find a host full of violations. Not like the old days when everybody depended on direct mail marketing. They had to get their hands on a piece of mail collateral. Another way the advertising violations get found is by competitors. Competitors turn each other in; it's a cutthroat business out there.

TED SIMONS: I'll bet they do. What are the consequences here? First offense, second offense, any difference?

JOHN NORLING: Yes and no. It depends on the gravity of the issue. Under the Federal Trade Commission Act the FTC can issue what's called a Civil Investigative Demand where they will send out basically a subpoena for every ad you've run in the last five years. It's very extensive and very exhaustive. Then they will do their investigation. Sometimes it takes two or three years for the investigation. It typically ends up with some type of settlement through a consent judgment where the parties agree the advertiser will not take certain actions, won't violate the law, will comply with the law. And that's typically it. Sometimes they include reporting requirements, sometimes in the automotive sector have required reporting requirements where the advertiser has to submit quarterly reports for 20 years to the FTC. If they run afoul of the consent order it could lead to $16,000 per day per violation.

TED SIMONS: My goodness. How often do businesses get hit for this?

JOHN NORLING: Well just a short glance this morning, I saw Anheuser Busch, Gerber, (inaudible) and GNC all embroiled on some type of enforcement action, whether instituted by the Federal Trade Commission or the State Attorney General's Office or a private consumer class action.

TED SIMONS: Interesting. All right so with that in mind, whether you're a big business like the ones you just mentioned or a small business, and saying you're out there watching right now and you're going well, I want to use Twitter and I want to use Facebook and digital media to get my message out. What kind of advice do you have?

JOHN NORLING: Truth in advertising. Make sure that you convey your advertisements as truthful, not misleading, and that they can be substantiated - if you make a claim, you better have the backup to support it - and that it is clear and understandable. If there is a material fact that would be relevant to the consumer's buying decision, make sure it's in the ad and make sure it's disclosed properly. You know, they talk about the disclosures being clearly and conspicuously made. You don't bury it in the fine print at the bottom. If it's an audio ad, you don't put it in the rapid-fire disclosures where nobody can understand it. Make sure that it's included in the text of the ad if possible and make sure it's as clear and as easily understandable as possible.

TED SIMONS: That all makes sense. That all seems like common sense. So why did it need - I mean, what happened between 2002 and now? What needed updating? Or 2000, I should say.

JOHN NORLING: Well, in 2000 Twitter wasn't around, YouTube wasn't utilized. I mean, the shift to digital marketing has been a recent phenomenon. People live on their cell phones and people live on their mobile devices. Advertisers know that that's where they need to get the ads out. People aren't reading the newspapers anymore; you can see by the thickness of the newspapers. With digital marketing going to exceed what's spent on television advertising by as early as next year, you know, they're estimating that the spend will be 30-40% of the advertising dollar. By 2019, we'll be digital.

TED SIMONS: So regardless of the platform, just tell the truth?

JOHN NORLING: Absolutely.

TED SIMONS: Alright. Good to have you here. Thanks for joining us.

JOHN NORLING: My pleasure. Thank you.

John Norling:Attorney - Jennings, Strouss & Salmon

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