FTC Disclosure in 2015 – an Important Update

During the last quarter of 2014, the Federal Trade Commission sent warning letters to more than 60 companies that allegedly failed to make adequate disclosures in their television and print ads.  Referred to as “Operation Full Disclosure,” the announcement is geared toward ensuring that advertisers comply with federal law and do not mislead consumers.

The initiative focuses upon both traditional modes of advertising, such as television and print, as well as online disclosures in new media.

The warning letters addressed fine print disclosures and those that the agency deemed “otherwise easy to miss or hard to read, yet contained important information needed to avoid misleading consumers.”  In addition to identifying problematic ads, the FTC staff recommended that advertisers review all their advertising “to ensure that any necessary disclosures are truly ‘clear and conspicuous.’ ”

The FTC has had “long-standing guidance” about disclosures in advertisements.  They should be close to the claims to which they relate.  They should not be hidden or buried in unrelated details.  They should appear in a font that is easy to read and in a shade that stands out against the background.  Other elements in the advertisements should not obscure or distract from the disclosures.  Disclosures in television ads should be on the screen long enough to be noticed, read and understood. 

The initiative should be considered in light of the FTC’s 2013 update to advertising disclosure guidelines, entitled “Dot Com Disclosures,” which accounts for new developments in the digital marketplace, including advertising on social media, blogging, the use of voiceovers and video, as well as disclosures presented through hardware with smaller screens such as tablets and mobile phones. 

The PMA Compliance Council recently published guidance for disclosures in new media with a particular focus on blogging and social media.  The Blogging and New Media Disclosure guidance is free to PMA members and can be found, here. 

• The same consumer protection laws that apply to commercial activities in other media also apply online, including in mobile marketplaces;
• Where practical, advertisers should incorporate relevant limitations and qualifying information into the underlying claim;
• Disclosures required by law must be presented in a clear and conspicuous manner;
• If an advertisement requires a specific disclosure, and it is not possible to present that disclosure in a clear and conspicuous manner online or through a mobile phone or tablet, then the advertisement should not be disseminated to the public;
• Clearly and conspicuously display the full cost of a product’s, including any additional fees, before a consumer incurs a financial obligation and before the consumer has made the decision to buy (e.g., before the consumer clicks on an “order now” or similar purchase or application button);
• Optimize advertisements to be clearly and conspicuously displayed across multiple types of hardware devices;
• With respect to displaying complicated or lengthy advertisement disclosures, use text such as “see below for important information on . . .” to prompt potential customers to scroll for all of a product’s key terms and conditions;
• Hyperlinks that explain details about additional fees that may be too complex to describe adjacent to a price claim should be clearly labeled to communicate the specific nature of the information it contains, and appear adjacent to the advertised price;
• Institute best practices to ensure key disclosures are reproduced if an advertiser’s ad is republished by a third party; and
• Require consumers to affirmatively acknowledge negative options, such as by clicking on an authorization box which has not been preselected, to confirm the purchase of products or services that are different from the main product or service being sold.

Negative options are regulated by the Restore Online Shoppers’ Confidence Act (“ROSCA”) which prohibits unfair and deceptive Internet-based sales practices, including certain third-party billing practices and enrolling consumers in negative option programs without adequate disclosures.  The FTC has recently brought its first slew of enforcement action under the ROSCA against marketers of “free” trials,” dietary supplements and health care-related products.

Such actions clearly illustrate how the FTC is willing to use the statute to ensure that business involved in automatic shipment programs review online marketing practices.  Enrolling consumers in negative option features violate ROSCA if there is a failure to provide clear and conspicuous disclosures, to obtain the consumers’ express informed consent, and to establish a simple mechanism for consumers to stop the recurring charges. 

Critical are the placement of disclosures and their proximity to the advertising claims they explain or elaborate upon.  Always keep in mind that the need for a disclosure may oftentimes be an indication that the underlying representation may possess a deceptive element. 

Consumer protection laws apply equally to marketers across all media, whether delivered on a desktop computer, a mobile device or more traditional media like television or print.  A failure to adhere to clearly defined advertising guidelines can result in allegations of, without limitation, a violation of ROSCA, Section 5 of the FTC Act, the Electronic Funds Transfer Act, and the Telemarketing Sales Rule.

Information conveyed in this article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.