On October 25, 2016, the Better Business Bureau (BBB) announced its release of a new section to its Code of Advertising to address The term “native advertising” describes ads where the “design style and functionality of commercial messages mimic related content.”
The New Guidance
The fundamental point of the new section 39 is that advertisers “must not mislead consumers as to the nature or source of native ads.” In other words, if it is not apparent that an ad is a paid commercial message, the advertiser “must ensure that such material promoting its products and services is clearly and conspicuously labeled as a ‘paid ad,’ ‘paid advertisement,’ ‘sponsored advertising content’ or other similar words that state expressly that the material is an advertisement.”
NAD & Native Advertising
Even prior to the release of this new section, the BBB’s National Advertising Division (“NAD”) had initiated proceedings involving native ads. For example, in May of 2016, the NAD found that e-commerce platform Joyus impermissibly crossed the line between editorial content and advertising, with a page labeled “Stuff We Love” that was included in a famous online magazine. The NAD found that the consumers may expect that the products included in “Stuff We Love” represented independent editorial selection by the magazine, rather than paid advertising from Joyus.
In its defense, Joyus pointed out that, once the consumer clicked on a particular product, the resulting video contained both audio and visual cues that the video was an ad. The NAD agreed, but took issue with what Joyus had consumers see prior to clicking on the product.
The “Stuff We Love” page did not disclose that it was an advertisement for Joyus products. The NAD found that merely including the Joyus logo at the beginning of each video that the consumer could click on as part of the “Stuff We Love” page was not sufficient disclosure. It was also not sufficient that the consumers who did click on the products were quickly informed that the content was advertising. In short, the “Stuff We Love” page was not clearly and conspicuously labeled as a “paid ad.”
FTC & Native Advertising
Readers familiar with the Federal Trade Commission’s enforcement actions on various types of native advertising will recognize the NAD’s reasoning as similar to the FTC’s “misleading door opener” case. (Encyc. Britannica, Inc., 87 F.T.C. 421, 495-97, 531 (1976), aff’d, 605 F.2d 964 (7th Cir. 1979), as modified, 100 F.T.C. 500 (1982).) That 1976 case related to door-to-door encyclopedia salesmen who would approach homes claiming to be delivering gifts or prizes without identifying themselves as salesmen. (On the trademark side, this reasoning is a form of “initial interest confusion.”)
Social Media & Native Advertising
The BBB advertising guidelines also state (in Section 39.3) that “Advertisers should maintain disclosures when native ads are republished by others in non-paid search results, social medial, e-mail, or other media.” In other words, in order to comply with the new guidelines, ads using “share this” or “forward to a friend” technology should have appropriate disclaimers included in the republished content, and not merely on the page where the original ad appears.
Private Right of Action
In the BBB’s announcement of the new guidelines, it stated that these guidelines closely followed the FTC’s native advertising guidelines. There is no private right of action under Section 5 of the FTC Act, but competitors frequently bring claims to the NAD for alleged violations of the NAD guidelines. And, as we recently wrote, at least one court has used the FTC’s Endorsement Guides as a standard in a private false advertising lawsuit.