Reed Smith Client Alerts

Authors: Kathyleen A. O'Brien

The staff of the Federal Trade Commission recently sent warning letters to more than 60 companies, including 20 of the 100 largest advertisers in the country, that failed to make adequate disclosures in their English- and Spanish-language television and print ads, as part of its “Operation Full Disclosure” initiative.

Who Was Targeted?

Though the FTC staff is not identifying the recipients of the letters at this time, its stated intention was to target a representative sample of advertisers across a wide range of industries that have made inadequate disclosures. The staff focused its efforts on those disclosures that contained important information required to avoid misleading consumers, yet were in fine print or were otherwise easy to miss or hard to read. Advertisers who did not receive a warning letter should not assume that their advertisements meet the “clear and conspicuous” disclosure standard. A non-exclusive list of inadequate disclosures that the FTC staff identified, and which advertisers should seek to remedy, includes:

  • Ads that quoted the price of a product or service without adequately disclosing the conditions for obtaining that price
  • Ads that failed to disclose an automatic billing feature
  • Ads that did not adequately disclose the need to own or purchase an additional product or service to use the advertised product
  • Ads that claimed a product was unique or superior in a product category without adequately disclosing the basis of comparison
  • Ads that advertised a free trial period without disclosing that consumers would have to pay for shipping
  • Ads that advertised results as typical

Although Operation Full Disclosure focused on television and print advertisements, it followed close on the heels of the FTC’s 2013 rollout of “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,” and gave advertisers a possible glimpse into how the FTC’s online guidelines might play out in traditional media.

What Is the Takeaway?

Although the FTC hasn't filed any lawsuits, Operation Full Disclosure sent a clear message to advertisers that it’s time to shape up. Advertisers would be well advised to make sure that their advertising disclosures meet the “clear and conspicuous” standard, and soon. As a starting point, the FTC provided the following basic, non-exhaustive tips to advertisers:

  • Disclosures in advertisements should be proximate to the claims to which they relate, and should not be hidden or buried in unrelated details
  • Disclosures should be easy to read, i.e., the font must be sufficiently large and must stand out against the background
  • Disclosures for television ads should be on the screen long enough to be noticed, read, and understood
  • Disclosures for television ads should not be obscured by other elements in the ad
  • Disclosures should be stated in clear and unambiguous language
  • Disclosures should stand out in the advertising, i.e., consumers should not have to search for them

What Can My Company Do?

Operation Full Disclosure was the FTC’s warning shot. Now is the time to take a closer look at your company’s advertising review process and to make sure that everyone in the chain – from in-house counsel to marketing employees to outside agencies – understands what is required. We suggest the following steps to this end:

  • If you haven’t done so already, create reader-friendly guidelines that clearly explain the “clear and conspicuous” standard, give examples of compliant and non-compliant disclosures, and are easily understood by non-lawyers
  • Provide training on the “clear and conspicuous” requirements to everyone who is involved in creating and reviewing your company’s advertising or, at the very least, to those who review and/or approve advertising copy
  • Make sure you have an effective review and approval process in place. A review that takes place too early in the creative process might not identify important disclosure issues that arise as the advertising copy evolves.
  • Make sure your contracts with agencies incentivize compliance and not just sales

Operation Full Disclosure presents an opportunity to remedy any deficiencies in your company’s advertising disclosures before more aggressive steps are taken by the FTC and the plaintiffs’ class action bar. Taking appropriate action now can save your company time, money and legal complications in the future.

 

Client Alert 2014-256