Mobile Tech, Social Media Force FTC to Revisit Advertising Guidelines

The Federal Trade Commission is reexamining its 12-year-old guidelines for disclosures and privacy in the online advertising space as the agency tries to keep pace with the rapid emergence of mobile computing and social networking technologies.

The FTC on Wednesday held a day-long workshop to solicit input from a variety of industry members, consumer advocates and other stakeholders as staffers work to update the Dot Com Disclosures the agency enacted in 2000 (available for download here.

“What a difference a decade makes. When Dot Com Disclosures was issued, who could have imagined the world we live in now?” said FTC Commissioner Maureen Ohlhausen.

The FTC’s efforts to update its disclosure guidance come amid the agency’s ongoing work on the broader issue of consumer privacy in the digital age. In March, the FTC released a set of guidelines for online marketers and data brokers, appealing to the industry to develop a framework for implementing a do-not-track mechanism that would allow Web users to opt out of behavioral targeting and other online data-collection across a broad network of advertising firms.

In the areas of mobile and social media advertising, Ohlhausen signaled that the agency is likely to continue to prod the industry to adopt best practices on its own, rather than, say, appealing to Congress for stronger regulatory authority. That approach would leave the agency to pursue individual enforcement actions against firms alleged to have engaged in unfair or deceptive trade practices, areas where the FTC has explicit statutory authority.

“[W]e are strong advocates of industry self-regulation. However, we also believe that self-regulation usually works best when it’s backed up by a law enforcement presence. At the same time, we are cognizant of how fast technology is evolving. And we understand the need for and benefits of innovation,” Ohlhausen said. “The collective goal of today’s discussion is … to explore and develop best practices for advertising and privacy disclosures in social media and on mobile devices. Clear and conspicuous disclosures have an obvious consumer benefit.”

She noted that the FTC Act, the agency’s charter statute, mandates that advertisers offer a disclosure if they are making a claim that would likely mislead consumers without significant qualifying information. So while it is common to see a disclosure along the lines of “results not typical” at the bottom of the screen during a TV spot advertising a weight-loss product, implementing meaningful disclosures gets murkier when the advertising creative is condensed to fit a three-inch mobile screen, or in the realm of social media, where advertisers are looking to tap into users’ networks of friends to generate trusted referrals.

“How do advertisers effectively communicate this information on social media platforms that have their own space or content limitations? How should someone who can only use 140 characters tell readers that they got the product they’re endorsing for free?” Ohlhausen said.

“It is hard to underestimate the importance of advertising and privacy disclosures,” she said. “With respect to privacy, transparency is a baseline principle outlined in the commission’s March 2012 privacy report. And one of the chief ways that businesses achieve transparency is through meaningful and clear disclosures to consumers.”

In practice, much of the FTC’s work on the disclosure and privacy in mobile computing and social media segments will hinge on mundane issues like formatting disclosures for the small screen in such a way that they provide meaningful notice without overshadowing the creative content.

Does a hyperlink that leads to a detailed explanation of terms, conditions or safety warnings constitute sufficient disclosure? Should health and safety information be treated differently than a disclosure about restrictions on an offer for a free cup of coffee? And how much can marketers be expected to disclose when they are putting out promotional messages on mobile devices or Twitter, where space is at a premium?

“It’s simply impossible in many instances to condense this information,” said Svetlana Walker, corporate counsel at the Clorox Company, who argued that by necessity, marketers should be able to rely on links that direct consumers to longer-form disclosure pages.

Consumer advocates counter that, at least in some cases, the concerns that marketers express over fitting meaningful disclosures into small-format ads are merely a smoke screen.

“I don’t think it’s that hard in a mobile device to say, ‘purchase required,'” said Sally Greenberg, executive director of the National Consumers League.

Added Texas Assistant Attorney General Paul Singer: “Limited real estate is not sort of a good excuse when that information can be clearly conveyed.”

In some respects, the challenges of providing meaningful disclosures and privacy protections in the mobile and social sectors mirror the broader privacy debate that has followed the rise of the commercial Internet. Acknowledging that dense and lengthy privacy policies and usage agreements are an ineffective tool for educating consumers about how their data will be used, prominent Web and advertising companies have been developing tools such as online dashboards in an effort to make privacy issues more transparent for consumers.

According to Jennifer King, a doctoral candidate in the field of human-computer interaction at the University of California, Berkeley, companies cannot achieve meaningful disclosure about the terms and conditions of a promotional offer or health and safety cautions of a product simply by including that language in their terms of service or usage agreement.

“People don’t read them,” said King. “Fundamentally, if there’s anything someone needs to see — they absolutely need to see that information before they make a decision — it needs to be called out and it needs to be somewhere in their task flow versus burying it in a document where most people are trained to simply acknowledge that ‘I accept’ and not read them.”

Kristin Burnham covers consumer technology, social networking and Web 2.0 for CIO.com. Follow Kristin on Twitter @kmburnham. Follow everything from CIO.com on Twitter @CIOonline and on Facebook. Email Kristin at kburnham@cio.com