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Digital Native Advertising, Influencers and Reviews
Bill Hearn, Partner, Fogler Rubinoff LLP
LSUC’s Six Minute Business Lawyer Seminar
Toronto, June 13, 2017
1
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
2
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
5
• 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
10
• 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
Deceptive Digital Native Ads
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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
Deceptive Digital Native Ads
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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
Deceptive Digital Native Ads
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
Warner Bros. FTC Consent Order – July 2016
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SHOW MORE
Warner Bros. FTC Consent Order – July 2016
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This video is sponsored by Warner Bros.
Warner Bros. FTC Consent Order – July 2016
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No one reads this far into the description. What are you doing snooping around?
Warner Bros. FTC Consent Order – July 2016
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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
Warner Bros. FTC Consent Order – July 2016
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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
Digital Native Advertising -
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
Digital Native Advertising -
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
Digital Native Advertising -
Key Takeaways
23
• “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
Digital Native Advertising -
Key Takeaways
24
• 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
25
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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Deceptive Digital Influencers and Reviews
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
30
Deceptive Digital Influencers and Reviews
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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Deceptive Digital Influencers and Reviews
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
Deceptive Digital Influencers and Reviews
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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Deceptive Digital Influencers and Reviews
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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Deceptive Digital Influencers and Reviews
Bell Canada Settlement October 2015
• 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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Deceptive Digital Influencers and Reviews
Bell Canada Settlement October 2015
• 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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Deceptive Digital Influencers and Reviews
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
416.941.8805