Native Advertising: The Old Is New Again

"Native advertising" is generally defined as advertiser-sponsored content that is designed for compatibility with the editorial content in which it is placed. There is a diverse array of native advertising formats and techniques, including: (1) custom content (which may be written by the publisher or written by the brand in partnership with the publisher); (2) content that appears in-feed (such as a promoted tweet on Twitter or content in a publisher's "top news" feed); and (3) content that appears in a recommendation "widget" placed on a publisher's site. Numerous other forms of native advertising also exist, and additional forms are certain to be developed in the coming years.

Although there has been a growing focus on native advertising by regulatory and self-regulatory bodies, native advertising is anything but new. Moreover, during the past decades, regulators and self-regulators have brought enforcement actions challenging ads that, in the regulators' and self-regulators' view, were deceptively posing as editorial content (including "advertorials" in magazines and infomercials on television). However, the legal and ethical issues around native advertising have become more complex in recent years because of the many (and varied) ways that advertising can be integrated seamlessly into traditionally editorial spaces in an online and mobile environment—and in light of the wide adoption of native advertising by online publishers.

The implications for determining that any content sponsored by an advertiser may constitute "advertising" are profound. Not only may regulators mandate the format and content of disclosures to ensure that the relationship between sponsored content and an advertiser is transparent, but deeming such content "advertising," even if it does not promote the advertiser's products, services or brand, could require a sponsor to clear all claims and third-party rights in the content.

This article explores the precedent for the current regulatory and self-regulatory focus on native advertising and the most recent actions taken by regulators and self-regulators. It reflects developments in the native advertising arena through April 1, 2015.

WHAT IS ADVERTISING?

Historically, commercial speech has been accorded less protection under the First Amendment than non-commercial speech, and some regulation of commercial speech—including the prohibition of commercial speech that is false or misleading—has been tolerated.1

The implications for determining that any content sponsored by an advertiser may constitute "advertising" are profound.

Drawing the line between commercial and non-commercial speech is not always easy, especially when the speech in question serves multiple purposes, some of them commercial, and others non-commercial. At its core, commercial speech is "speech proposing a commercial transaction."2 Beyond this core, however, "the precise bounds of the category of ... commercial speech" are "subject to doubt, perhaps."3

The California Supreme Court's decision in Nike v. Kasky4 gives insight into how the line may be drawn today between commercial and non-commercial speech. A divided court held that Nike's statements—press releases, letters to newspaper editors, and letters to university officers defending its labor practices—constituted commercial speech, explaining that "categorizing a particular statement as commercial or non-commercial speech requires consideration of three elements: the speaker, the intended audience, and the content of the message." Even if the speaker has a "secondary purpose to influence lenders, investors, or lawmakers," the speech is nevertheless commercial so long as it is "primarily intended to reach consumers and to influence them to buy the speaker's products."

A continuing issue that courts are going to have to face, then, is whether particular content that is generated by, or that is sponsored in some manner by, an advertiser is actually commercial speech, subject to all of the special rules that govern advertising.5

Self-regulatory organizations have weighed in as well. Some recent cases brought by the National Advertising Division of the Better Business Bureau (NAD) have examined this very question. In April 2012, NAD reviewed Chipotle's "Back to the Start" commercial, which appeared on YouTube, online at Chipotle.com, on Chipotle's Facebook page, in movie theaters in advance of feature films, and on television. NAD found that the film, with its closing shots displaying the Chipotle logo and Web site address, clearly constituted "national advertising" as defined by NAD Rule 1.1(A). The film used stop-motion animation to depict a farmer's journey to sustainable farming. NAD requested that the advertiser address concerns that the film communicated the message that all the animals that provide the meat (pork, chicken, and beef) for Chipotle products are raised naturally and humanely. NAD ultimately found that Chipotle could support such claims, but noted that, at the time the commercial aired in August 2011, while 100 percent of the pork served in Chipotle restaurants was "naturally-raised," only about 80 percent of Chipotle restaurants served "naturally-raised" chicken and 86 percent served "naturally-raised" beef. NAD recommended that Chipotle obtain substantiation for all express and implied claims before disseminating its advertising messages in the future.6

NAD found that video clips placed by advertisers on video-sharing Web sites such as YouTube, when controlled or disseminated by the advertiser, may be considered national advertising.

In 2011, Acushnet, Inc., the maker of Titleist golf balls, challenged competitor, Bridgestone Golf, Inc., on its print, Internet, Twitter, and television advertising. Acushnet alleged that Bridgestone's Twitter feed name, "#1BallFitter," constituted a claim that it was the leading golf ball fitter. Bridgestone argued that its name on a social media site did not constitute "advertising." NAD found that claims made by an advertiser in a Twitter feed are clearly "national advertising" as defined by NAD Procedure § 1.1(A) and noted that, because advertisers are responsible for all the reasonable messages conveyed by their claims, it was reasonable to assume that when Twitter users use the "#1BallFitter" to Tweet about or find Tweets about the advertiser's golf ball fittings, they understood the meaning of the "#" symbol to be a "Number 1" claim.7

In another case, based on a challenge by Nestle USA, Inc., marketer of Coffee-Mate creamer, the NAD recommended that LALA-USA, Inc. modify or discontinue certain ad claims for the company's La Crème Real Dairy Creamer made in broadcast, in YouTube videos, on Facebook and Twitter, and in other viral marketing media. Part of the challenge dealt with certain online "vignettes" claiming that non-dairy creamers contain ingredients that also are found in paint, glue, shampoo and shaving cream, and that some non-dairy creamers are flammable and contain trans fat. The vignettes also were linked to YouTube videos in which non-dairy creamers were shown as a replacement for glue or paint.8

In 2008, NAD reviewed a video clip disseminated by Cardo Systems, the manufacturer of wireless Bluetooth technology, as part of a viral marketing campaign on YouTube. The video depicted individuals using their cell phones to pop popcorn kernels in close proximity. NAD requested that the advertiser address concerns that the video clip communicated that cell phones emit heat and/or radiation at a level that allows popcorn kernels to pop. Cardo argued that the video was created to create a "buzz" and to depict something absurd. Cardo also questioned whether the popcorn video was "national advertising" as the term is defined and used in NAD's Policies and Procedures. NAD found that video clips placed by advertisers on video-sharing Web sites such as YouTube, when controlled or disseminated by the advertiser, may be considered national advertising, and that the absence of any mention of a company or product name does not remove a marketing or advertising message from NAD's jurisdiction or absolve an advertiser from the obligation to possess adequate substantiation for any objectively provable claims that are communicated to consumers.9

PRECEDENTS DEALING WITH POTENTIALLY DECEPTIVE FORMATS

Regulators have long decreed that when consumers do not realize they are viewing advertising content—in other words, when the format itself is deceptive—the advertiser has an obligation to clearly and conspicuously disclose to consumers that the content is, in fact, advertising.

Editorial Content

The Federal Trade Commission (FTC) has said that disclosure is required if consumers would be led to believe that an advertising feature in a newspaper is really part of a newspaper's editorial content.10

Infomercials

The FTC has taken action against marketers that have produced program-length infomercials that appear to be independent programming rather than...