Clearing Your Digital Advertising To Avoid Liability

Earlier this year, the Federal Trade Commission (FTC) sent more than 90 letters to advertisers and influencers using Instagram reminding them of their obligations to disclose brand relationships in social media posts, in particular on Instagram. See a discussion on this FTC action here. This FTC action serves as a reminder that digital advertising raises unique legal issues that can result in liability from third-party lawsuits, claims made by government agencies such as the FTC, or actions taken by industry groups.

This issue becomes more critical as advertising dollars continue to shift to digital advertising and away from traditional advertising. In fact, it was predicted by eMarketer that by the end of 2016, for the first time, online advertising spend would exceed the spend on TV advertising. This trend will continue and in all likelihood speed up. While many of the same legal considerations that apply to traditional advertising apply to digital advertising, there are significant differences as well.

What makes legal clearance for digital advertising much more challenging is both the speed and quantity of digital advertising implementation combined with potential viral sharing. Therefore, businesses that are using or producing digital advertising need to have a good level of awareness of the legal issues and a process implemented that monitors compliance as digital advertising is created and rolled out.

What are compliance issues for digital advertising?

Digital advertising takes many forms and each can raise different compliance issues.

(1)        Display Ads are what you see on the news and other websites that include third-party advertising as you surf around the Internet. Display ads can be static images, text, popups, or video.  The primary legal issues that require clearance for display ads are verifying authorized use of copyright material (images and background music), trademarks that may be used or appear on products or otherwise in the ad, and right of publicity for any individuals who may appear in the ads. Also, ad tracking disclosure requirements should be examined when cookies are placed on a visitor’s device in order to follow the visitor to other sites to be able to continue to present advertising from the past sites visited. If any performance claims are made about products or services, FTC and FDA substantiation requirements must also be complied with.
(2)        Social Media Ads face all the issues for display ads, but since these ads appear in social media context (e.g., Facebook, LinkedIn, Twitter, Pinterest, Instagram, etc.), other issues are raised as well. When display ads appear in social media the ads often allow for interaction with users through “Likes,” comments, or participation in some type of program or contest. In addition to legal compliance, use of Likes and other user interactions in social media must comply with the advertising rules of the social media site. If a contest is being run, then it must comply with the site rules for contests, but also must comply with applicable national and international contest rules. Social media ads can be organic (e.g., posts on LinkedIn) or paid-for ads. For either type of ad, the same legal rules will apply.
Social media also easily lends itself to celebrity promotions, which on the face, just seem like celebrity self-promotion, but in actuality are a promotion for a specific product. When a celebrity is compensated for posting a selfie on Twitter wearing a recognizable brand, then this celebrity influencer must disclose that the celebrity is being compensated. This rule applies to the obvious endorsements and testimonials and also to the subtle ones. See the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising.
(3)        Native Advertising is paid advertising that blends in with the user experience and may not appear to the user as an advertisement. Applicable law and self-regulatory rules require that consumers be made aware that the content is an ad and is not objective editorial or consumer-generated content. In this regard, you will see words such as “promoted” or “sponsored” proximate to such ads. These disclosures need to be conspicuous. See the FTC guidance for conspicuous disclosure requirements for digital advertising.
(4)        Blogs and other information sources often cover developments relating to products and services. If the writer receives compensation in any form or is connected to the vendor of the products or services, then this must be disclosed conspicuously. See the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising and the FTC guidance for conspicuous disclosure requirements for digital advertising.
(5)        SMS and Email marketing is subject to federal laws, such as Telephone Consumer Protection Act (TCPA), the CAN-SPAM Act of 2003, and similar laws enacted by the states. Detailing the requirements of these laws is beyond the scope of this article, but know that you should not undertake email or SMS marketing until you clearly understand the requirements. In addition, most reputable email service providers will shut down your service if you violate best practices by knowingly sending unsolicited email, even though you are doing it in a manner that 100% complies with the CAN-SPAM Act. Having an email domain blacklisted can cause all of your email to be blocked – which can cause you major operating difficulties.

The above is not an exhaustive description of the legal issues raised by digital marketing but hopefully, serves as a useful introduction for some of the major issues to look out for.

Implement compliance procedures

Advertisers should implement practical procedures to monitor that all advertising is in compliance with laws, regulations, social media policies and self-regulating industry standards. Additionally, for social media, rules, and procedures should be developed into a policy to inform all employees, vendors, and agents on their use of social media to ensure compliance with these requirements. Such policies should be developed in coordination with legal, business, and technical advisors. However, developing policies is only the first step. Your company will also need to implement procedures to monitor compliance with these policies, otherwise, your company will not be protected from the legal and commercial consequences of non-compliance.


William S. Galkin
William S. Galkin
Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions including corporate formation and transitions, intellectual property, technology licensing and transfer, regulatory compliance, and agreements for online businesses. His broad experience gained during more than 20 years in practice allows him to provide cutting-edge, creative and efficient solutions to complex problems. Mr. Galkin has been an Adjunct Professor of Computer Law at the University of Maryland School of Law and Adjunct Professor of Business Law at the Merrick School of Business at the University of Baltimore, as well as the Chairperson of a panel on Crimes in Cyberspace for the 19th National Information Systems Security Conference (Sponsored by the National Security Agency). Mr. Galkin also authored the Maryland Intellectual Property and Technology Transactions Forms and Practice Manual, published by Data Trace Publishing. Mr. Galkin is also a member of Schwell Wimpfheimer & Associates LLP, with responsibility for technology transactions, which affiliation allows Mr. Galkin to provide a broad array of legal services to his clients. Additionally, he serves as Of Counsel to the Information Technology Group of one of the largest Israeli law firms, managing many U.S. transactions for the firm’s clients.

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