digital native advertising, influencers and reviews...media (e.g., advertorials) • has long...

Digital Native Advertising, Influencers and Reviews

Bill Hearn, Partner, Fogler Rubinoff LLP

LSUC’s Six Minute Business Lawyer Seminar

Toronto, June 13, 2017

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Introduction

Note: This presentation uses “digital” and “online” interchangeably

• Canadian consumers and suppliers have embraced the digital

marketplace

• Digital advertising, marketing and selling occupies an

increasingly significant percentage of suppliers’ interaction

with consumers

• The digital marketplace is constantly evolving … becoming

more sophisticated, innovative and global

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Introduction

• Innovation in the digital marketplace must respect the rights

of consumers not to be deceived

• Since the digital marketplace is borderless, there is a

continuing trend towards international and domestic

cooperation amongst consumer protection regulators - e.g.,

the International Consumer Protection and Enforcement

Network (ICPEN)

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• This presentation focuses on two types of digital advertising

Native advertising

Influencers and reviews

Introduction

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• Basic truth-in-advertising principles

• Anchored in no-deceptive-advertising provisions of

the federal Competition Act

provincial consumer protection statutes

industry self-regulatory codes such as Advertising

Standards Canada (ASC)’s Canadian Code of Advertising

Standards (the ASC Code)

Introduction

WHAT ARE DIGITAL NATIVE ADS?

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• Native advertising is advertising designed to look like non-

advertising editorial content that is original or native to the

media (e.g., advertorials)

• Has long existed in traditional media (such as newspapers and

magazines)

• Has become prevalent in digital publications and social media

• In part is a response to consumers learning to “skip ads”

Native Advertising Generally

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• A type of ad designed to match the natural form and

function of the digital platform

• Looks and feels like natural editorial content

• Behaves consistently with native user experience

Digital Native Advertising

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• As described in the Canadian Marketing Association’s Native

Advertising Mini-Guide

Digital native advertising is any form of advertising that

fits naturally onto a digital page, blending into both look

and feel

It provides advertisers with the opportunity to speak

naturally with their target audience

Unlike other forms of advertising that may be somewhat

disruptive, digital native advertising gives consumers

information or leads them to a place on the Internet

(typically to shop)

Digital Native Advertising

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• Main regulatory concern is when advertising is disguised as

objective editorial content that misleads and influences

consumers to purchase a product based upon what appears to

be unbiased arms-length information (when it’s not)

• In an article entitled “Online Advertising in Canada” in its

Deceptive Marketing Practices Digest, June 2015, the Bureau

expresses concerns about “online information that is actually

advertising” – i.e., deceptive digital native advertising

• The online world offers consumers gateways to new sources

of information where they can educate themselves about

products and services by referring to articles and studies

Deceptive Digital Native Ads

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• This “intensely pro-consumer development” can be

completely undermined by advertisers who design online ads

to look like something other than promotional material

e.g., ads disguised to look like unbiased news articles or

independent sources of information

• Advertisements that deceptively pose as arms-length

information can be seriously misleading and erode confidence

in the digital marketplace


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• Clause 2 of ASC Code (re: Disguised Advertising Techniques)

provides that no advertisement shall be presented in a format

or style that conceals the fact that it is an advertisement

• Best practice is to separate editorial content from advertising

messages in a manner transparent to the reader

• May soon see Bureau and/or ASC enforcement action in this

area

Bureau will likely rely on deceptive electronic messages

provisions of the Competition Act


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• See also the Word of Mouth Marketing Association

(WOMMA)’s white paper Don’t Be Naïve About Native –

How Marketers Should Approach Disclosure in Native

Advertising, November 2014

• See also FTC’s Enforcement Policy Statement on Deceptively

Formatted Advertisements, December 2015

The link itself or text surrounding the link should advise

consumers that the content to which consumers are

linking is an advertisement


Warner Bros. FTC Consent Order – July 2016

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• FTC alleged that Warner Bros. deceived consumers during a

marketing campaign for the video game Middle Earth:

Shadow of Mordor by failing to adequately disclose that it

gave online “influencers” free advance-release versions of

the game and

paid each influencer from hundreds to tens of thousands

of dollars to post positive gameplay videos on YouTube

and social media

• Over the course of the campaign, the sponsored videos were

viewed more than 5.5 million times


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SHOW MORE


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This video is sponsored by Warner Bros.


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No one reads this far into the description. What are you doing snooping around?


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• Under the consent order (which does not expire for 20 years),

Warner Bros. is barred from failing to make such disclosures

in the future and cannot misrepresent that sponsored content,

including gameplay videos, are the objective, independent

opinions of influencers

• Can’t mask paid sales pitches as opinions of video game

enthusiasts

• Warner Bros. must clearly and conspicuously disclose any

material connection between Warner Bros. and any influencer

promoting its products


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• Warner Bros. must also take steps to educate influencers

regarding sponsorship disclosures, monitor sponsored

influencer videos for compliance, and terminate or withhold

payment from influencers for non-compliance

• No penalty in July 2016 order but each violation of the 20-

year order may result in a civil penalty

Digital Native Advertising -

Key Takeaways

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• Can take many forms with various levels of editorial control

• Consumer must always be made aware that the advertisement

is, in fact, not native to the media

• Native ads will likely be considered “deceptive” if they

convey that they are independent and impartial

• If the nature and source of the advertising content is clear,

consumers can make informed decisions and give appropriate

weight to the information conveyed in a native ad


Key Takeaways

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• Advertisers should be clear and conspicuous when making

material disclosures

• Best to place disclosures at beginning of ad – i.e., before the

consumer engages with the ad

In front or above the headline of a native ad, ideally top

left

Also on the main page of a publisher site if there is a

content teaser

• If a video, image or graphic is the focal point of a native ad,

include disclosure at the focal point


Key Takeaways

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• Include a disclosure in any links or other teasers driving

viewers to the content

• Need to make the relationship between the advertiser and the

media clear

• Use visual cues (like shading or framing) to differentiate

native from editorial content


Key Takeaways

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• “Ad”, “Advertisement”, “Paid”, “Sponsored Advertising

Content” all likely to be understood and therefore are not

deceptive

• Best to avoid (as ambiguous or unclear):

“Promoted” or “Promoted Stories”

shorthand like “#spons”

company logos alone

• “Presented by X”, “Sponsored by X”, “Brought to you by X”

is also likely not sufficient where the sponsor both pays for

the ad and influences its content


Key Takeaways

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• Disclosure of a sponsorship is required anytime an advertiser

compensates or incentivizes a third party media provider to

create content about the advertiser’s products/services, a

competitor’s products/services, or about the product/service

category generally

• Disclosure is not necessary when the content only includes

product placement or otherwise does not touch on the

sponsor’s business

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Deceptive Digital Native Ad?

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No, here’s why …

Digital Influencers and Reviews

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Digital Influencers

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• Advertisers paying for endorsements by people with large

Internet followings

In part a response to the rise of ad-blocking technology

• Some people already in the public eye

• Others less widely known but popular with heavy social

media users

Especially in the 18-34 year old demographic, that has

been increasingly difficult to reach through traditional

media channels

• Examples in terms of followers on Instagram

Kim Kardashian (100 million), Lilly Singh (2.5 million),

Lisa Tant (15,200)

Deceptive Digital Influencers and Reviews

What is “astroturfing”

• “Fake online grassroots support” – that is, reviews of

products/services posted online that appear to come from

independent ordinary consumers experienced with the

product/service but, in fact, are posted by people who have an

undisclosed “material connection” with the product/service

being advertised – e.g., they are an employee of the advertiser

or a paid spokesperson and, again, this important fact is not

disclosed in the post

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Why does “astroturfing” concern the Competition Bureau?

• To protect consumers from deception and to protect the

integrity of online commerce and competition amongst

suppliers

Impartial consumer reviews on digital platforms benefit

both consumers and businesses. If unbiased, reviews help

consumers make informed decisions

Authentic experiences of ordinary consumers are highly

valued to other consumers and to businesses

This is threatened by an undisclosed material connection

between the reviewer and the advertiser

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How’s “astroturfing” being addressed by the Bureau’s

counterparts elsewhere?

• US Federal Trade Commission (FTC)

Published guidelines on the use of endorsements and

testimonials in 2009 and updated its FAQ guidance on the

subject in May 2015

In 2011, the FTC took enforcement action against Legacy

Learning Systems. Company paid $250K to settle FTC

charges that it deceptively advertised its products through

online affiliate marketers who falsely posed as ordinary

consumers or independent reviewers

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How’s “astroturfing” being addressed by the Bureau’s

counterparts elsewhere?

• Australian Competition & Consumer Commission (ACCC)

In 2013, the ACCC published practical and informative

guidelines in its Online reviews – a guide for business and

review platforms

• United Kingdom’s Competition & Markets Authority (UK

CMA)

In March 2016, the UK CMA published Online Reviews:

letting your customers see the true picture setting out

guidelines for acceptable online reviews and confirming it

had taken enforcement action against an online marketing

company Total SEO & Marketing

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• International Consumer Protection and Enforcement Network

(ICPEN)

Good example of international cooperative enforcement is the annual

ICPEN Internet Sweep – i.e., an intensive, coordinated search of the

Internet to uncover potentially deceptive online conduct

Competition Bureau is a member

In September 2016, the sweep aimed to identify deceptive digital

reviews and endorsements

In June 2016, ICPEN published Online Reviews and Endorsement

Guidelines to help businesses worldwide avoid deceiving consumers

when using digital reviews and endorsements as a marketing tool

ICPEN Sweep & Guidelines

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• ICPEN’s Online Reviews and Endorsement Guidelines

provide tailored advice for the main participants in digital

reviews and endorsements - namely

Traders and marketers (i.e., those promoting their own or their client’s

products or services)

Digital influencers (e.g., bloggers, tweeters and online publications)

Review administrators (i.e., those who process online reviews)

ICPEN Sweep & Guidelines


What has the Bureau done to address its concerns?

• In July 2014, the Bureau published the article “Don’t Buy into

Fake Online Endorsements” encouraging consumers to be

wary of phony online endorsements

• In June 2015, the Bureau published the article “Online

Reviews” expressing its concern over an increase in

“astroturfing” – especially by so-called “reputation

enhancement firms” who pay third parties to post fake online

reviews

• In October 2015, the Bureau announced its settlement with

Bell Canada

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Bell Canada Settlement October 2015

• Online reviews for Bell apps written by Bell employees

without disclosing their material connection to Bell

Specifically, in November 2014, certain Bell employees

were encouraged to post positive reviews and ratings of

the free MyBell Mobile app and Virgin My Account app

on the iTunes App Store and the Google Play Store,

without disclosing that they work for Bell

The apps allowed Bell customers to manage their

mobility accounts directly from their mobile devices

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• Bell’s senior management acted quickly to have the reviews

and ratings removed as soon as they became aware of the

matter

• Still, the Bureau concluded that these reviews and ratings

created the general impression that they were made by

independent and impartial consumers and temporarily

affected the overall star rating for the apps

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• Following inquiry by the Competition Bureau, Bell agreed to:

− pay an administrative monetary penalty (AMP) of

$1.25 million

− enhance and maintain its corporate compliance

program, with a specific focus on prohibiting the

rating, ranking or reviewing of apps in app stores by

its employees or contractors

− sponsor and host a workshop to promote, discuss and

enhance Canadians’ trust in the digital economy,

including the integrity of online reviews

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Is this astroturfing?

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Yes, here’s why

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As set forth in Advertising Standards Canada (ASC)’s

Canadian Code of Advertising Standards (the ASC

Code) , testimonials must

− reflect genuine current opinions of endorser

− be based on adequate information or experience

− not be deceptive

− disclose any material connection between endorser

and manufacturer of product

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• Clause 7 of the ASC Code

“Testimonials, endorsements or other representations of opinion or

preference must reflect the genuine, reasonably current opinion of the

individual(s), group or organization making such representations, must be

based upon adequate information about or experience with the identified

product or service and must not otherwise be deceptive.”

ASC Guidance

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• Interpretation Guideline #5 re: Clause 7 of ASC Code

(effective October 2016):

“A testimonial, endorsement, review or other representation must

disclose any “material connection” between the endorser, reviewer,

influencer, or person making the representation and the entity that

makes the product or service available to the endorser, reviewer,

influencer or person making the representation except when that

material connection is one that consumers would reasonably

expect to exist such as when a celebrity publicly endorses a

product or service.”

“If a material connection exists, that fact and the nature of the material

connection must be clearly and prominently disclosed in close

proximity to the representation about the product or service.”

ASC Guidance

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• Defines “material connection” as

“… any connection between an entity providing a product or service

and an endorser, reviewer, influencer, or person making a

representation that may affect the weight or credibility of the

representation and includes: benefits and incentives, such as

monetary or other compensation, free products with or without

conditions attached, discounts, gifts, contests, sweepstakes entries, and

any employment relationship, but excludes nominal consideration

for the legal right to identify publicly the person making the

representation.”

ASC Guidance

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• Interpretation Guideline #5 re: Clause 7 of ASC Code

(effective October 2016):

Examples of how to disclose material connections can be found in

− the US Federal Trade Commission (FTC)’s Guides Concerning

the Use of Endorsements and Testimonials in Advertising as well

as The FTC’s Endorsement Guides – What People Are Asking,

May 2015

− the Word of Mouth Marketing Association (WOMMA)’s White

Paper – Ethical Word of Mouth Marketing Disclosure Best

Practices in Today’s Regulatory Environment

ASC Guidance

FTC Guidance, May 2015

• A famous celebrity has millions of followers on Twitter.

Many people know that she regularly charges advertisers to

mention their products in her tweets. Does she have to

disclose when she’s being paid to tweet about products?

It depends on whether her followers understand that her tweets

about products are paid endorsements

If they know she is a paid endorser, no disclosure is needed

But if a significant portion of her followers don’t know that,

disclosures are needed

Determining whether followers are aware of a relationship

could be tricky in many cases, so we recommend disclosure

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Kim Kardashian and Carl’s Jr

“I want to clear this up because there has been a lot of talk about this.

Carl’s Jr. did not pay me to Tweet about their salads. Yes, obviously I was

paid to be in the commercial … we all have to work! But I was not paid to

talk about the salads on my blog, Facebook account, MySpace account or

any other online outlets. Am I not allowed to talk about something I

like without people assuming I must have been paid to do it?”

[OK to tweet but disclose the “material connection”]

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FTC Reminder Letters, April 2017

• If there’s a connection between influencer and brand that

might affect the weight or credibility that consumers give the

endorsement, that “material connection” should be clearly and

conspicuously disclosed

unless the connection is already clear from the context of

the communication containing the endorsement

• A material connection could be a business or family

relationship, monetary payment, or provision of free product

to the influencer

• To be “clear” and “conspicuous”, the influencer should use

unambiguous language and make the disclosure stand out

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FTC Reminder Letters, April 2017

• Consumer should be able to notice the disclosure easily and

not have to look for it – for instance

On Instagram, influencers should disclose the material

connection above the “more” button

− When a consumer views posts in their Instagram

streams on mobile devices, they usually only see the

first three lines of a longer post unless they click

“more” and many consumers may not click “more”

Where there are multiple tags, hashtags or links,

consumers may just skip over them especially where they

appear at the end of a long post

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Managing Digital Influencers and Reviews

- Key Takeaways

• Must disclose relationship between advertiser and influencer

including employment/contractual relationship, free

products/samples, incentives to post

• To be effective, disclosures must

be clear and conspicuous

be at beginning of post

be at beginning of online video and repeated multiple

times depending on length of video

use hashtags such as #Ad, #Paid, #Paid Ad, #Sponsored

• Consumers must be able to recognize disclosure of material

connection

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Disclaimer: This presentation contains general information only and does not constitute legal advice.

Qualified legal counsel should be consulted to assess the application of laws to specific facts.

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Questions?

Bill Hearn

[email protected]

416.941.8805

mailto:[email protected]

digital native advertising, influencers and reviews...media (e.g., advertorials) • has long...

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