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Advertising, Marketing & Promotions Alert >> Regulators and Watchdogs Continue to Focus on Disclosure Obligations

October 18, 2016

As native advertising and influencer campaigns become more integral to marketers' promotional efforts, advertising agencies, technology companies, advertisers, their publishing partners and, likely, even the social media influencers being hired by such marketers are being closely scrutinized and will continue to be monitored by regulators, self-regulatory groups and watchdogs alike.

This summer alone, we saw a number of significant developments on this front that, in the wake of the Federal Trade Commission's (FTC) recent actions against Lord & Taylor and Warner Brothers, serve as an important reminder that regulators are going to continue to drill down on disclosure obligations with respect to both native advertising and influencer posts online to ensure that consumers are made aware that such content is paid advertising prior to interacting with it (to see a previous D&G Alert discussing the FTC's action against Lord & Taylor, click here).

NAD Decision Involving Joyus
In May, the National Advertising Division (NAD), a self-regulatory organization, issued a decision relating to native advertising content developed by Joyus Inc. appearing on the PEOPLE Magazine website, People.com. Joyus, an e-commerce platform for lifestyle companies, sponsors a variety of online videos featuring various lifestyle brands with commentary by PEOPLE staff, all appearing under a section of the People.com Style section (www.people.com/style) titled "Stuff We Love." In reviewing the video content on that page, the NAD found that, upon playing the videos, it was evident that they were sponsored shopping advertisements. However, there was no disclaimer on any of the lead-in pages prior to the actual page on which the videos lived – and thus a consumer would not be aware that the destination page consisted of sponsored advertising prior to making the decision to interact with the link.

The NAD determined that in a link to a sponsored ad, or in the text surrounding the link, a disclosure of the sponsored advertising relationship must be made contemporaneously with the link (rather than only on the destination page). Joyus has stated that it is working with PEOPLE to implement changes on the website to comply with this disclosure obligation, but as of yet, no new disclosures have been introduced. Commentators at the watchdog website Truth in Advertising (www.truthinadvertising.org) have suggested that a simple alteration to the "Stuff We Love" link to "Ad: Stuff We Love" would be sufficient.

This recommendation and the NAD’s position both echo the FTC's recent guidance in "Native Advertising: A Guide for Businesses," which counsels that clear and prominent disclosures must be made in or around links to external, sponsored content so consumers are aware that the linked content is an advertisement before they click on it.

Celebrities as the Newest Frontier
In a separate and highly publicized instance later this summer, Truth in Advertising published an exposé on the systemic failure of the Kardashian and Jenner families to make appropriate disclosures in their paid social media posts, and while regulators have so far focused on advertisers, talent may be the newest frontier for regulators. In August, the site presented its "Kardashian/Jenner Database," which catalogues over 100 instances between June and August 2016 in which various Kardashians and Jenners have posted sponsored Instagram photos without making any advertising disclosures. For example, both Kim Kardashian and Kylie Jenner failed to disclose their paid sponsorship relationships with phone accessory company LuMee and sports retailer Puma respectively, in multiple posts promoting the brands and featuring photos of the sisters wearing and using brand products.

The media attention resulting from this exposé drove several of the Kardashian and Jenner family members to edit the captions on many of their previous posts to add in the disclosure "#ad," which the FTC has previously deemed an appropriate disclosure in influencer content.

Bottom Line

As of yet, the FTC has taken no specific action against any of the Kardashians or Jenner types, but it is surely keeping a close eye on this development. Typically, as noted, when a paid influencer fails to make appropriate advertising disclosures, the FTC directs its enforcement actions toward the sponsoring advertiser, rather than the influencer individually – but this may herald a shift in that approach. Regardless, these developments show that regulators continue to be highly focused on disclosure obligations in all forms of paid advertising online and in new media – and advertising agencies, advertisers, publishers, media companies, and now perhaps even their influencers will need to stay on top of these obligations to ensure they are not the next target.