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A WORD FROM OUR SPONSORS: The FTC’s Guidelines on “Native Advertising” and

their Affect on Athlete and Celebrity Endorsers

Thomas J. Geddes*

I. INTRODUCTION ……………………………………………………………………1

II. BACKGROUND FACTS AND LEGAL DOCTRINE ……………………………....5

a. Native Advertising Defined

i. Native Advertising Examples

ii. Paid Social Posts by Athletes and Celebrities

b. Regulation and Guidance Thus Far

i. Administrative Interpretation for Endorsements and Testimonials

ii. The IAB “Playbook”

iii. ASME Weighs In

c. The Federal Trade Commission

i. The FTC’s First Attempt to Formulate Guidance

ii. The FTC‘s 2015 Policy Statement

iii. The Lord & Taylor Settlement

III. DISCUSSION……………………………………………………………………….19

a. Industry Response to the FTC’s 2015 Policy Statement

b. Constantly Evolving Issues that the Policy Statement Fails to Capture

i. The Brand Ambassador Dilemma

ii. The “Stock Market” for Professional Athletes

iii. Other Issues Concerning Paid Social Posts

c. Proposed Solutions to the Paid Social Post Problem

IV. CONCLUSION………………………………………………………………………27

1

“The greatest deception men suffer is from their own opinions.” - Leonardo da Vinci

I. INTRODUCTION

Shortly after his team won Super Bowl 50, Denver Broncos Quarterback Peyton Manning

exclaimed in celebration, "I'm going to drink a lot of Budweiser tonight."1

This postgame plug for Anheuser-Busch generated a mountain of media buzz as critics

contemplated whether Manning had been compensated by the beer brand for making the

statement.2 For one, National Football League (NFL) players are prohibited from endorsing

alcoholic beverages, and any such product promotion would likely conflict with rights granted to

the league’s official sponsor.3 While the Budweiser brand has denied involvement in the affair,

4

1 Darren Rovell, Budweiser ‘delighted’ but says Peyton Manning not paid to shill for brand after

SB, ESPN (Feb. 8, 2016), http://espn.go.com/nfl/story/_/id/14737625/budweiser-delighted-says-

peyton-manning-not-paid-shill-brand-sb.

2 Patrick Kulp, Peyton Manning flouted NFL rules for his infamous Budweiser marketing,

MASHABLE (Feb. 10, 2016), http://mashable.com/2016/02/10/did-peyton-manning-s-budweiser-

plug-break-the-ftc-s-advertising-rules/#.3SUiljitkqs.

3 E.J. Schultz, How Bud Light’s New NFL Deal Could Change Beer Ads, ADVERTISING AGE

(Nov. 4, 2015), http://adage.com/article/cmo-strategy/bud-light-s-nfl-deal-change-beer-

ads/301214/; Matt Sussman, NFL To Charles Woodson; Only We Can Endorse Alcohol,

DEADSPIN (July 19, 2008), http://deadspin.com/5026974/nfl-to-charles-woodson-only-we-can-

endorse-alcohol.

2

it has derived substantial value from the statement5 and even offered to send a few cases to the

team as a sentiment.6 Manning actually owns two beer distributors in Louisiana, meaning the

move may have been for purposes that were more self-serving.7

But what if the company had paid for Manning’s endorsement? After all, corporations

shell out millions of dollars per year to athletes to promote their products, and the Super Bowl is

a prime time to advertise because so much of the American populace is watching. In 2016 alone,

companies doled out $5M, on average, to CBS for a thirty-second spot during football’s biggest

4 Lisa Weser (@LisaWeser), “Hi Internet. For the record, Budweiser did not pay Peyton

Manning to mention Budweiser tonight. We were surprised and delighted that he did.”, TWITTER

(11:03 PM, Feb. 7, 2016), https://twitter.com/LisaWeser/status/696544870068912128. Weser is

the Chief Marketing Officer for Anheuser-Busch’s Budweiser brand.

5 The statement gave the beer brand nearly $5M in television exposure and $8.8M in subsequent

media coverage (including mentions on social media). See Eben Novy-Williams, Peyton

Manning Just Gave Budweiser $14 Million in Free Ads, BLOOMBERG (Feb 8, 2016),

http://www.bloomberg.com/news/articles/2016-02-08/peyton-manning-just-gave-budweiser-3-2-

million-in-free-ad-time.

6 See Budweiser (@Budweiser), “Congrats to Peyton and the whole @Broncos team. Where

would one ship 50 cases of Bud? Just curious. #ThisBudsForYou #SB50”, TWITTER (10:30 PM,

Feb. 7, 2016), https://twitter.com/Budweiser/status/696536448187527168.

7 Thomas Barrabi, Peyton Manning’s Budweiser Plugs, Explained, FOX BUSINESS (Feb. 8,

2016), http://www.foxbusiness.com/features/2016/02/08/peyton-mannings-budweiser-plugs-

explained.html.

3

game.8 After-game interviews such as this are a normal part of the post-game process, and the

association between beer and sports has become deeply engrained in the consciousness of our

culture.9 If anything, the controversy surrounding Manning’s mention shows us that it is

sometimes difficult, as viewers and consumers, to distinguish the paid endorsement of a product

and material that appears more organically.

Known as “native advertising,” prior scholarship has explored this concepts’ affect on

journalism and free speech,10

focused on Federal Trade Commission (FTC) compliance for

businesses,11

and expressed the need for federal regulation and stricter governmental oversight.12

8 Nick Schwartz, Stunning infographic charts the skyrocketing cost of a Super Bowl ad, USA

TODAY (Feb. 6, 2016), http://ftw.usatoday.com/2016/02/how-much-does-super-bowl-ad-cost.

9 “There is a natural, accepted, and universal link between American beer and sports.”

See Richard Brodsky, Sports’ Culture of Intoxication, SB NATION (Jan. 22, 2013),

http://www.sbnation.com/longform/2013/1/22/3883626/beer-and-sports.

10 See Lili Levi, A "Faustian Pact"? Native Advertising and the Future of the Press, 57 ARIZ. L.

REV. 647 (2015).

11 See Shannon Byrne, The Age of the Human Billboard: Endorsement Disclosures in New

Millennia Media Marketing, 10 J. BUS. & TECH. L. 393 (2015).

12 See A.J. Casale, Going Native: The Rise of Online Native Advertising and A Recommended

Regulatory Approach, 65 CATH. U. L. REV. 129 (2015); Robert A. Gottfried, Six Ways This

Article Is Most Definitely Not an Ad: Deceptive Marketing and the Need for Clearly-Defined

Disclosure Rules in Online Native Advertisement, 27 LOY. CONSUMER L. REV. 399 (2015);

Anthony B. Ponikvar, Ever-Blurred Lines: Why Native Advertising Should Not Be Subject to

Federal Regulation, 93 N.C. L. REV. 1187 (2015).

4

The ascent of this issue has even served as a basis for some to conclude 2016 to be the year that

the FTC begins to bring a bevy of “native advertising” cases.13

Little inquiry, however, has

reflected on how more formalized instruction is set to affect advertisers and those they pay to

endorse their products.

This Comment takes a closer look at the concept of “native advertising,” particularly in

the context of paid social posts by athletes and celebrity endorsers. The Background Facts and

Legal Doctrine section below will examine the brief history behind this budding trend and

outline what regulatory bodies have done to monitor the matter thus far.14

The Background Facts

and Legal Doctrine section will also expound upon the FTC’s role as it pertains to protecting

consumers from deceptive forms of advertising, especially those that appear “native” in nature.15

The Discussion section will then assess the effect that certain statements and decisions have had

on the entertainment industry as a whole, analyze the aftermath of the newly-stated rules, and

argue that the FTC’s guidance to date really only aims to address online content, which — as

evidenced by Manning’s Super Bowl saga — may not be sufficient as the lines between what is

written and what is spoken is becoming increasingly blurred. 16

More, increased enforcement,

although restrictive in nature, stands to provide more opportunities for these types of individuals

13

Jeremy Barr, FTC Spells Out Its Guidelines for Native Ads, ADVERTISING AGE (Dec. 22,

2015), http://adage.com/article/media/federal-trade-commission-releases-native-ad-

guidelines/301921/.

14 See infra Part II.

15 Id.

16 See infra Part III.

5

because advertisers and promoters are more certain of what is and isn’t acceptable in terms of

targeting and engaging consumers.17

The aim of this essay is to add to the existing subset of scholarly work surrounding this

fleeting subject and contribute to a functional framework for this type of “native advertising”

moving forward.

II. BACKGROUND FACTS AND LEGAL DOCTRINE

Before analyzing what still needs to be done, it is imperative to first understand what

“native advertising” is and why it is known to pose a problem for advertisers and consumers.

a. Native Advertising Defined

“Native advertising” is relatively new to the marketing foray. The term first made an

appearance in 201018

and can most simply be described as content that bears a similarity to the

news, feature articles, product reviews, entertainment, and other material that surrounds it

17

Id.

18 According to Google Trends, the first few Google searches for this term occurred in March

2010, and the term first appeared in a newspaper headline in May 2013. Amar C. Bakshi, Why

and How to Regulate Native Advertising in Online News Publications, 4 U. BALT. J. MEDIA L. &

ETHICS 4 (2015),

http://law.ubalt.edu/academics/publications/medialaw/pdfs_only/Vol.%204%20No.%203-4.pdf.

6

online.19

Most advertisers and publishers aspire to deliver paid ads that are cohesive with the

page content, assimilated into the design, and consistent with a platform’s behavior such that the

viewer simply feels that they belong.20

These ads are seamlessly integrated into editorial content,

and thus appear “native” to their digital context.21

“Native advertising” presents an entirely new model to the marketing industry, and

advertisers, publishers, and personalities alike have thrived off of its unclear and nebulous “gray

area[s].”22

Advocates for its use argue that these ads can be interesting, informative, and are

intended to engage others in a fashion that isn’t overbearing,23

while its greatest critics contend

that “native advertisements” are a form of subliminal messaging that “intentionally cause[s]

19

Native Advertising: A Guide for Businesses, FTC (Dec. 2015), https://www.ftc.gov/tips-

advice/business-center/guidance/native-advertising-guide-businesses.

20 IAB, THE NATIVE ADVERTISING PLAYBOOK 3 (2013), http://www.iab.com/wp-

content/uploads/2015/06/IAB-Native-Advertising-Playbook2.pdf (hereinafter “NATIVE

ADVERTISING PLAYBOOK”).

21 Levi, supra note 10, at 649. “Native advertising” has also been described as advertisements

done in a form that mirrors the host platform. See Gottfried, supra note 12, at 401.

22 See Kara Brown, Here’s How Much Celebrities Make in the Instagram Product Placement

Machine, JEZEBEL (Jan. 19, 2016), http://jezebel.com/heres-how-much-celebrities-make-in-the-

instagram-produc-1740632946.

23 Joline Buscemi, The Good and Evil of Native Advertising, HUBSPOT (Mar. 1, 2016),

http://blog.hubspot.com/marketing/good-and-evil-native-advertising.

7

confusion, blurring the line between editorial and [commercial content] with the hopes that the

advertisement becomes a credible source of information rather than, simply, an advertisement.”24

i. Native Advertising Examples

“Native advertising” is not necessarily confined to the digital space, though that is where

it is most prevalent.25

Many online publishers have turned to this method in response to

stagnating display ad revenue in recent years.26

A 2013 survey revealed that 73 percent of online

publishers offer “native advertising” opportunities on their sites and that an additional 17 percent

24

Gottfried, supra note 12, at 401.

25 “Native advertising” also exists in the form of advertorials, sponsored radio shows, and even

infomercials. See Buscemi, supra note 23.

26 Taylor Berman, The Atlantic Is Now Publishing Bizarre, Blatant Scientology Propaganda as

‘Sponsored Content’, Gawker (Jan. 14, 2013), http://gawker.com/5975981/the-atlantic-is-now-

publishing-bizarre-blatant-scientology-propaganda-as-sponsored-content. Atlantic publisher Jay

Lauf has also said, "A lot of people worry about crossing editorial and advertising lines, but I

think it respects readers more ... It’s saying, ‘You know what you’re interested in.’ It’s more

respectful of the reader that way.” Julie Moos, The Atlantic publishes then pulls sponsored

content from Church of Scientology, POYNTER (Jan. 15, 2013), http://www.poynter.org/2013/the-

atlantic-pulls-sponsored-content-from-church-of-scientology/200593/.

8

are considering offering them.27

Similarly, 41 percent of brands and 34 percent of ad agencies

currently use “native advertising,” with many others hoping to do so in the coming years.28

Online-only websites like Buzzfeed and Gawker have thrived in providing “native ad” offerings,

while traditional news publications such as USA Today and the New York Times have struggled

to tow the line between amassing profit and abiding by their rich institutional history and ethical

and journalistic norms.29

“Native ads” range is size and prominence and can be classified into six unique types,

including in-feed ads and promoted listings.30

One of the most notorious examples of “native advertising” appeared on The Atlantic’s

website on January 14, 2013: a “sponsored content” article written by the Church of Scientology

entitled “David Miscavige Leads Scientology to Milestone Year.”31

The piece was stylized as a

news article that chronicled the exponential growth of the religion and characterized its leader as

a humanitarian and visionary.32

The sponsored article also included pictures of churches and a

27

Blurred Lines: Advertising or Content? – An FTC Workshop on Native Advertising, FTC (Dec.

4, 2013), at 7, available at

https://www.ftc.gov/system/files/documents/public_events/171321/final_transcript_1.pdf.

28 Id.

29 Bakshi, supra note 18, at 6–7.

30 NATIVE ADVERTISING PLAYBOOK, supra note 20, at 5.

31 Jim Edwards, Here’s The Scientology ‘Sponsored Content’ Story That The Atlantic Doesn’t

Want You To See, BUSINESS INSIDER (Jan. 15, 2013), http://www.businessinsider.com/heres-the-

scientology-sponsored-content-story-that-the-atlantic-doesnt-want-you-to-see-2013-1.

32 See id. for archived copy.

9

“comments” section that contained primarily pro-Scientology posts. Amidst outcry, the

newspaper took down the sponsored content and temporarily suspended the ad campaign

“pending a review of our policies that govern sponsor content and subsequent comment

threads.”33

The mishap received widespread media attention, and also highlighted the power of

“native advertising” in influencing others and the supposed dangers that come along with it.

Other notable examples of “native ads” include Dunkin’ Donuts’ interactive “Which

Donut Are You?,” Spotify’s “15 Bands That Probably Wouldn’t Exist Without Led Zeppelin,”34

and an article about millennials sponsored by computer company Dell appearing in the New York

Times.35

ii. Paid Social Posts by Athletes and Celebrities

In addition to targeting consumers via artificial articles and sponsored content, companies

pay people with large followings to help promote their brand. And Manning isn’t the only well-

known personality involved with this novel form of “native advertising”: basketball player

LeBron James is the highest-earning athlete in terms of endorsements, while soccer star Cristiano

33

Id.

34 Anders Vinderslev, The top 10 examples of Buzzfeed doing native advertising, NATIVE

ADVERTISING INSTITUTE (Sep. 30, 2015), http://nativeadvertisinginstitute.com/blog/the-top-10-

examples-of-buzzfeed-doing-native-advertising/.

35 Demian Farnworth, 12 Examples of Native Ads (And Why They Work), COPYBLOGGER (Apr.

14, 2014), http://www.copyblogger.com/examples-of-native-ads/.

10

Rinaldo — who boasts over 100 million fans on Facebook36

— can bring in over $300,000 per

tweet, according to Elite Daily.37

Famous figures like Kim Kardashian routinely fetch five

figures for a single tweet,38

and AdWeek reports that celebrities Taylor Swift, Selena Gomez and

Kendall Jenner are worth $230,000 per social media post when the message appears across

Facebook, Instagram and Twitter.39

Lady Gaga “engages … and retweets stuff [fans] say as if

she was one of them,” creating a loyal bond between the two, and this relatableness is attractive

to advertisers.40

A market even exists to measure value and match advertisers with endorsers.41

36

Kurt Badenhausen, Cristiano Ronaldo Heads The Most Popular Athletes on Social Media,

FORBES (Jun. 10, 2015), http://www.forbes.com/sites/kurtbadenhausen/2015/06/10/cristiano-

ronaldo-heads-the-most-popular-athletes-on-social-media/#349b452154cb; see also

https://www.facebook.com/Cristiano.

37 Joseph Milord, These Are The Absurd Amounts Of Money Athletes Get Paid Per Tweet, ELITE

DAILY (Mar. 10, 2015), http://elitedaily.com/sports/athletes-get-paid-to-tweet/961383/.

38 Liat Kornowski, Celebrity Sponsored Tweets: What The Stars Get Paid For Advertising In 140

Characters, HUFFINGTON POST (May 30, 2013),

http://www.huffingtonpost.com/2013/05/30/celebrity-sponsored-tweets_n_3360562.html.

39 Christopher Heine, These 4 Celebrity Influencers Can Charge $230,000 for a Single Brand

Post, ADWEEK (Dec. 4, 2015), http://www.adweek.com/news/technology/these-5-celebrity-

influencers-can-charge-230000-every-time-they-post-brand-168466.

40 Quentin Fottrell, Elon Musk’s $1 billion tweet – and 5 other profitable tweets,

MARKETWATCH (Mar. 31, 2015), http://www.marketwatch.com/story/5-of-the-most-profitable-

tweets-ever-2013-03-25.

11

But celebrities aren’t the only ones cashing in via this medium: ordinary users on

Instagram are commonly paid hundreds to thousands of dollars to promote a product as well.

Danielle Bernstein, a fashion blogger with over 1.1 million followers, charges anywhere between

$5,000 and $15,000 for a single branded Instagram post.42

Advertisers are turning to this method

more and more every day because of its effectiveness, so instruction on how to navigate these

waters is needed.

b. Regulation and Guidance Thus Far

Some guidance already exists in navigating this area despite the concept’s relative

infancy. Publications put out by the FTC and various trade associations have attempted to

develop the law surrounding this issue, with mixed results.

i. Administrative Interpretation for Endorsements and Testimonials

41

Ad.ly and IZEA match advertisers with celebrities based on content, desired audience, and

number of followers. Kornowski, supra note 38. Opendorse is a company that specializes in

athlete social media campaigns. See http://opendorse.com/.

42 Alexandra Ma, How To Make Money On Instagram, HUFFINGTON POST (July 31, 2015),

http://www.huffingtonpost.com/entry/make-money-on-

instagram_us_55ad3ad6e4b0caf721b3624c.

12

In 2009, the FTC issued an administrative interpretation regarding the use of

endorsements and testimonials in advertising.43

Though “native advertising” isn’t explicitly

referenced in the text, the guidance served as a stepping stone in establishing more concrete rules

concerning the matter. The move was meant to deter deceptive practices in advertising and

explained that paid endorsements must reflect the honest opinions, findings, beliefs, or

experience of the endorser and may not convey any express or implied representation that would

be deceptive if made directly by the advertiser.44

While it was noted that the interpretation did

not purport to cover every possible use of endorsements in advertising,45

it provided examples as

to what did and did not constitute deceptive practices: a celebrity endorser claiming a kitchen

product would cook a chicken in 30 minutes when it actually took an hour could be held liable

for a false statement, whereas a film star endorsing a particular food product in a commercial

predicated on points of taste and individual preference did not have to disclose a relationship

because “such payments likely are ordinarily expected by viewers.”46

Even with this minute

guidance, problems with disclosure still ensued, and the advent of later technologies further

obfuscated the issue.

i. The IAB “Playbook”

43

Guides Concerning Use of Endorsements and Testimonials in Advertising, 16 C.F.R. § 255

(2009), available at http://www.ecfr.gov/cgi-bin/text-

idx?SID=701066299822530421fece37367c91d3&mc=true&node=pt16.1.255&rgn=div5.

44 Id. at §255.1.

45 Id.

46 Id. §255.5.

13

In late 2013, the Interactive Advertising Bureau (IAB) — a non-profit trade association

tasked with developing industry standards for the online advertising industry — released a

“Native Advertising Playbook” (Playbook) intended to offer a framework for thinking about and

developing ads that convey a message and avoid confusion, helping “sellers sell and buyers

buy.”47

The Playbook provided industry guidance for advertising disclosure, thus bringing

greater clarity to the market.48

The Playbook also categorized “native ads” into six types: (1) in-feed units, (2) paid

search units, (3) recommendation widgets, (4) promoted listings, (5) in-ad with native element

units, and (6) custom, “can’t be contained” content.49

Further, it listed common language for

companies to use in delineating their ads.50

Clarity and prominence of this disclosure is

paramount such that a reasonable consumer should be able to distinguish between what is paid

advertising vs. what is pure editorial content.51

While the IAB’s guidance was helpful in

corralling the collective input of companies throughout the advertising industry, it failed to set

forth legally enforceable measures for compliance. Even after the IAB’s insightful guidance,

Buzzfeed’s vice president of agency strategy and industry development said more discussion on

47

NATIVE ADVERTISING PLAYBOOK, supra note 20.

48 Id.

49 Id. at 5.

50 “Advertisement,” “ad,” “promoted” and “sponsored” are among the suggestions on how to

delineate paid-for content. Id. at 9.

51 Id. at 15.

14

how to label “native ads” was needed.52

Chris Cunningham, CEO and cofounder of a mobile ad

company, described the guidelines as a “good first step” but again questioned whether the rules

would be adaptable to new technologies.53

ii. ASME Weighs In

The American Society of Magazine Editors (ASME) weighed in on “native advertising”

as well in saying promotion on websites and social media posts should be “clearly labeled” and

advertising should be visually distinguished from editorial content.54

The group’s April 2015

guidelines further advised that advertisements that mimic the “look and feel” of the print or

digital publication in which they appear may deceive readers and should be avoided.55

ASME’s

instruction mostly focused on clear and conspicuous labeling for print publications and mailings

and offered little help in terms of content originating online.

c. The Federal Trade Commission

52

Katy Bachman, Native Ad Workshop Leaves FTC Perplexed, ADWEEK (Dec. 4, 2013),

http://www.adweek.com/news/advertising-branding/native-ad-workshop-leaves-ftc-perplexed-

154303.

53 Id.

54 Editorial Guidelines, ASME (Apr. 15, 2015), http://www.magazine.org/asme/editorial-

guidelines.

55 Id.

15

The FTC was established in 1914 by passage of the Federal Trade Commission Act56

to

investigate and regulate “unfair methods of competition … and … unfair or deceptive acts or

practices in or affecting commerce ...”57

Since then, the FTC’s role has expanded to encompass

examining pre-merger notification filings, addressing consumer complaints, and investigating

fraudulent and misleading reports in the media.58

Perhaps the FTC’s most important role, though,

concerns enforcement for purposes of consumer protection. Notable cases initiated under the

FTC’s enforcement power include a settlement with Google for unlawful placement of tracking

“cookies” and a $108 million settlement with Bank of America for cheating hundreds of

thousands of customers facing foreclosure on their homes.59

The FTC has a long history of

56

Our History, FTC, available at https://www.ftc.gov/about-ftc/our-history.

57 15 U.S.C. § 45 (2012), available at https://www.law.cornell.edu/uscode/text/15/45.

58 See A Brief Overview of the Federal Trade Commission’s Investigative and Law Enforcement

Authority, FTC, available at https://www.ftc.gov/about-ftc/what-we-do/enforcement-authority;

Cases and Proceedings, FTC, available at https://www.ftc.gov/enforcement/cases-proceedings.

59Google Will Pay $22.5 Million to Settle FTC Charges it Misrepresented Privacy Assurances to

Users of Apple’s Safari Internet Browser, FTC (Aug. 9, 2012), https://www.ftc.gov/news-

events/press-releases/2012/08/google-will-pay-225-million-settle-ftc-charges-it-misrepresented;

FTC Returns Nearly $108 Million to 450,000 Homeowners Overcharged by Countrywide for

Loan Servicing Fees, FTC (July 20, 2011), https://www.ftc.gov/news-events/press-

releases/2012/08/google-will-pay-225-million-settle-ftc-charges-it-misrepresented.

16

enforcing deceptive advertising cases as well.60

“Native advertising,” though new, has

additionally caught the eye of the administrative agency.

i. The FTC’s First Attempt to Formulate Guidance

The same year the IAB released its Playbook, the FTC hosted a one-day workshop to

educate attendees on the dangers of blending advertisements with news, entertainment, and other

editorial content across digital media.61

The event, entitled “Blurred Lines: Advertising or

Content?,” brought together publishing and advertising industry representatives, consumer

advocates, academics, and self-regulatory groups to explore the ways in which sponsored content

is presented to consumers online and the contexts in which it should be made identifiable.62

FTC Chairwoman Edith Ramirez, who spoke at the event, agreed that “native ads” can bring

great benefit, though she warns it still “has to be done lawfully.”63

Others, including FTC Staff

Attorney Lesley Fair, explained the Commission’s history of adjudicating the matter.

Though the workshop hoped to clarify the many misunderstandings of “native

advertising,” in actuality it “raised more questions than it answered.”64

Representatives from

60

See Patricia P. Bailey & Michael Pertschuk, The Law of Deception: the Past as Prologue, 33

AM. U.L. REV. 849 (1984).

61 Blurred Lines: Advertising or Content? – An FTC Workshop on Native Advertising, FTC (Dec.

4, 2013), https://www.ftc.gov/news-events/events-calendar/2013/12/blurred-lines-advertising-or-

content-ftc-workshop-native.

62 Id.

63 See supra note 27, at 8.

17

Buzzfeed, the Wall Street Journal, the IAB, and the American Society of Magazine Editors gave

mixed opinions when queried about whether a set of hypothetical “native ads” were deceptive.65

The only consensus among the panelists and speakers was that transparency and disclosure are

important, though they could not agree on how it should be done.66

ii. The FTC‘s 2015 Policy Statement

In December of 2015, the FTC finally offered official guidance by spelling out its rules

for “native ads.”67

In explaining the evaluation criteria, the policy statement said that the

Commission will scrutinize the entire ad by examining its overall appearance, including the

similarity of its written, spoken, or visual style to non-advertising content offered on a

publisher's site, and the degree to which it is distinguishable from such other content."68

Moreover, when labels such as "advertisement" are found to be necessary, they need to be

prominent upon first contact with consumers. For example, disclosures that subsequently inform

consumers of a natively formatted ad's commercial nature after they have clicked on and arrived

at another page will not cure any misleading impression created when the ad is presented in the

64

Bachman, supra note 52.

65 Id.

66 Id.

67 Barr, supra note 13.

68 Id.

18

stream of a publisher site.69

"The more a “native ad” is similar in format and topic to content on

the publisher's site, the more likely that a disclosure will be necessary to prevent deception.”70

Regarding content shared across social media, the FTC mentioned that consumers would

be unlikely to ordinarily perceive much content as anything other than paid commercial content

and that disclosure before imbedded videos begin to play is not always necessary.71

However,

some denotation that there is sponsored content is imperative.72

Not much more was said in

terms of sponsored user-created content like celebrity posts on social sites like Facebook, Twitter

and Instagram. While more inclusive and instructive than its predecessors, the FTC’s 2015

guidance still leaves many questions unanswered on what is allowable in this regard.

iii. The Lord & Taylor Settlement

Acting under its authoritative power, the FTC put into effect its first-ever enforcement

action involving “native advertising” when it brought suit against clothing retailer Lord & Taylor

in March 2016. A year earlier, Lord & Taylor had partnered with a number of influential

Instagram users in an effort to help promote its brand. The planned advertising campaign

consisted of 50 fashionistas posting a picture on the social media site donning the same Design

69

Id.

70 Id.

71 Id.

72 Id.

19

Lab dress.73

The clothing item sold out quickly, in a move meant to interact with consumers in a

way they “consum[e] content every day.”74

However, none of the users disclosed the fact that the

company had paid them for the promotion. After ample investigation, the FTC brought forth

charges against the company with the aim to protect consumers by showing the company had

misrepresented the independent and objective nature of the source.

The two parties reached a settlement: though the exact terms of the settlement are

unknown, in settling the charges, Lord & Taylor is prohibited from misrepresenting that paid ads

are from an independent source, and is required to ensure that its influencers clearly disclose

when they have been compensated in exchange for their endorsements.75

III. DISCUSSION

As alluded to above, advertisers constantly quibble to create material that is compliant yet

compelling. Material marked with clunky hashtags can seem stale and disingenuous, and the

public today expects celebrities and influencers to partner with brands in a way that feels

73

David Griner, Lord & Taylor Got 50 Instagrammers to Wear the Same Dress, Which Promptly

Sold Out, ADWEEK (Mar. 31, 2015), http://www.adweek.com/news/advertising-branding/lord-

taylor-got-50-instagrammers-wear-same-dress-which-promptly-sold-out-163791.

74 Id.

75 Lord & Taylor Settles FTC Charges It Decieved Consumers Through Paid Article in an

Online Fashion Magazine and Paid Instagram Posts by 50 “Fashion Influencers”, FTC (Mar.

15, 2016), https://www.ftc.gov/news-events/press-releases/2016/03/lord-taylor-settles-ftc-

charges-it-deceived-consumers-through.

20

authentic, relevant and conversational.76

That said, there can be dire consequences when an

endorser doesn’t disclose this relationship. The FTC’s 2015 guidance and subsequent

enforcement against Lord & Taylor shows, if anything, that the agency is ready to enter the fray.

But there are those that feel the FTC hasn’t done enough in explaining what can and can’t be

done in the context of “native ads” and paid social posts.

a. Industry Response to the FTC’s 2015 Policy Statement

The IAB has stated that while it applauds the FTC for putting “native advertising”

guidance into the marketplace, it is weary that the regulations are “technically feasible, creatively

relevant, and [do] not stifle innovation.“77

Marketing professional David Rodnitzky explains that

the question remains on whether these new regulations will have any bite at all. He further

predicts that tough enforcement will shut down aggressive ad networks, lead to a decline in

overall effectiveness, and garner predictability which will allow big brands to join the fray

without fear of brand dilution.78

As Forbes contributor David Schwab points out, advertisers and

76

David Schwab, No, You Don’t Need To Write #Ad In Your Promoted Tweet, FORBES (Jan. 11,

2016), http://www.forbes.com/sites/davidschwab/2016/01/11/no-you-dont-need-to-write-ad-in-

your-promoted-tweet/#54611daf3195.

77 IAB Concerned About FTC Guidance on Native Advertising, IAB (Dec. 24, 2015),

http://www.iab.com/news/iab-concerned-about-ftc-guidance-on-native-advertising/.

78 David Rodnitzky, Now That The FTC Has Spoken On Native Advertising, What’s Next?,

MARKETING LAND (Jan. 12, 2016), http://marketingland.com/now-ftc-spoken-native-advertising-

whats-next-158262.

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endorsers do not explicitly need to include #ad, #sp or #sponsor in a paid-social post: all they

need to do is reasonably disclose that there is a business relationship between the person writing

the post and the property, brand or product they are promoting.79

As is shown, balancing

advertisers’ innovations with the demands and desires of consumers still yields mixed opinions

and varied results.

b. Constantly Evolving Issues that the Policy Statement Fails to Capture

Problems still exist regarding regulation and enforcement in this area. As it relates to

athlete and celebrity endorsers, the FTC’s case against Lord & Taylor demonstrates the need to

clearly delineate a paid endorsement, though the settlement serves as a subtle slap on the wrist

instead of actual enforcement aimed at providing direction. No concrete ruling was given, and

advertisers are simply left with the overly-ambiguous premise that their targeted marketing must

be conspicuously labeled.80

i. The Brand Ambassador Dilemma

Consumer use of the internet is constantly evolving, and the continuous delay of clear

instruction only leaves these problems compounding. For one, what happens if an endorser

promotes a product on their own volition, then subsequently gets signed to be a brand

ambassador? At what point must this business relationship be disclosed? Former Seattle

79

Schwab, supra note 76.

80 See supra note 75.

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Seahawks running back Marshawn Lynch’s habit of eating Skittles after every touchdown

became a national media obsession and eventually parlayed into a monetary deal with the brand

in 2014.81

But even before he got paid, he would prop up the candy in interviews and his mother

would even post pictures of her in a football jersey with a bag of Skittles on social media.82

Under the FTC’s guidelines, Lynch would now have to disclose this beneficial relationship,

though he hasn’t always done so.83

Likewise, the confectionary affiliate of Mars, Inc. referenced

Lynch’s spectacular play by posting “Awesome touchdowns make Skittles taste better …” before

the business relationship had fully bloomed84

: this sends a cloudy message to consumers that the

endorser is impartial when true intent is no longer known. Lynch’s paid endorsement of Skittles

81

Darren Rovell, Marshawn Lynch gets sweet deal, ESPN (Jan. 28, 2014),

http://espn.go.com/nfl/playoffs/2013/story/_/id/10363225/super-bowl-marshawn-lynch-seattle-

seahawks-agrees-deal-skittles; see also Marshawn Lynch sells Skittles on home shopping

channel, SPORTS ILLUSTRATED (Sep. 1, 2015), http://www.si.com/extra-

mustard/2015/09/01/seattle-seahawks-marshawn-lynch-skittles-commercial.

82 Clare Farnsworth, The Truth Behind Marshawn and Those Skittles, SEAHAWKS.COM (Jun. 27,

2012), http://www.seahawks.com/news/2012/06/27/truth-behind-marshawn-and-those-skittles.

83 See Marshawn Lynch (@MoneyLynch), “24 for life. Thanks @Skittles for the custom

jersey!”, TWITTER (5:23 PM, Mar. 11, 2014),

https://twitter.com/MoneyLynch/status/443497434790916096. While Skittles is mentioned in the

post, there isn’t a denotation that this is a paid advertisement/endorsement.

84 Skittles (@Skittles), “Awesome touchdowns make Skittles taste better, and I didn’t think that

was even possible!”, TWITTER (8:40 PM, Jan. 19, 2014),

https://twitter.com/Skittles/status/425080416429539329.

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is not prominent85

and a reasonable person may not ordinarily know the extent of the

relationship.86

On the other hand, it could be argued that someone who follows Lynch on social media

might be familiar with his extracurricular activities and endorsements: as such, they would have

greater awareness of what brands he does and does not align with and would not be as prone to

being fooled when the distinction isn’t so clear. Viewing the paid social media post as a whole

would not be apt to cause confusion.87

While this argument may hold some merit, the terms of

Lynch’s deal were never made apparent to the public,88

and his expanding popularity and reach

across the entertainment spectrum makes the business relationship more vulnerable to scrutiny

and enforcement. The same could be said for other influencers who freely advetise a particular

product and are rewarded for the publicity, like Instagrammers who receive complimentary

clothing or in the case of the Denver Broncos, 50 cases of crisp cool beer.

ii. The “Stock Market” for Professional Athletes

The FTC’s guidance thus far also fails to account for existing and emerging technologies,

such as the market for buying and trading stock tied to the career of famous athletes. NFL Pro-

Bowl player Vernon Davis is as much concerned with his abilities on the field as his image off of

85

See supra Part II and corresponding footnotes.

86 Id.

87 Id.

88 Rovell, supra note 81.

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it. With an endorsement portfolio that already includes KRAVE Beef Jerky89

and a variety of

fitness products, Davis is oft considered a walking billboard for corporate companies. Davis is

also the test subject of Silicon Valley start-up Fantex, Inc.’s entrepreneurial idea to allow

professional athletes to sell stock in their own personal brands.90

The company paid Davis $4

million for 10 percent of his future income from playing contracts, corporate endorsements and

appearance fees in 2014.91

Because stockholder dividends are tied to the success of Davis’

personal brand, he is essentially operating as his own business on behalf of Fantex: must he

always disclose this business relationship in his tweets, media appearances, and other

interactions with the public? While the future of this stock-trading endeavor is all but certain,92

it

paints a picture that the market is still riddled with doubt as to what is and isn’t acceptable in the

context of paid social posts and “native advertising,” pointing toward the premise that the FTC’s

current level of insight and enforcement is unacceptable.

89

Mark Antonation, Denver Broncos Product Endorsements Turn Toward Jerky, WESTWORD

(Feb. 3, 2016), http://www.westword.com/restaurants/denver-broncos-product-endorsements-

turn-toward-jerky-7572259.

90 See Daniel Roberts, NFL star Vernon Davis talks about being a stock, FORTUNE (Jun. 6,

2014), http://fortune.com/2014/06/06/fantex-vernon-davis-buck-french-nfl/.

91 William Alden, Vernon Davis Breaks His Silence Over Fantex I.P.O., N.Y. TIMES (Jun. 4,

2014), http://dealbook.nytimes.com/2014/06/04/vernon-davis-breaks-his-silence-over-fantex-i-p-

o/?_r=0.

92 Fantex’s first financial experiment with former Houston Texans running back Arian Foster

was rescinded due to injury. Myles Udland, Arian Foster isn’t going public anymore, BUSINESS

INSIDER (Nov. 18, 2015), http://www.businessinsider.com/fantex-pulls-ipo-2015-11.

25

iii. Other Issues Concerning Paid Social Posts

Beyond the “official” market illustrated above, some athletes and socialites are so closely

associated with a certain brand that nearly anything they do or say will reflect on their sponsor.

Michael Jordan and Tiger Woods are almost synonymous with the Nike brand93

– how can

consumers differentiate what is and is not a paid social post when an athlete is paid a reported

$100 million over a five year span to endorse a product? Moreover, the FTC cannot possibly

police the entire internet, so how will the agency choose what and what not to prosecute?

Sometimes it’s not so easy to signify “sponsored content” for verbal speech. What if Manning

had posted a video clip of his postgame interview on social media? Would he have to disclose

the fact that he had been paid for the statement? What if CBS had posted the clip of Manning

making the statement instead? The lines are being blurred more and more every day and it’s not

so easy to distinguish the difference between a person promoting a product from a personalized

Snapchat account versus a player like Manning saying something during a live TV broadcast and

the video content going viral. Sports agents often receive a commission on negotiated contracts,

and angel financiers and academies like IMG that invest in young tennis stars also have an

interest in the image of athletes94

– must these associations be disclosed as well? If so, how? The

93

Brian Rogers, Mother seeks justice from Nike and Michael Jordan in her son’s murder,

HOUSTON CHRONICLE (Feb. 2, 2016), http://www.houstonchronicle.com/news/houston-

texas/houston/article/Mother-seeks-justice-from-Nike-and-Michael-Jordan-6802244.php.

94 See Tennis Angels, IMAGINATION FOR PEOPLE,

http://imaginationforpeople.org/en/project/tennis-angels/; Danielle Rossingh, Next Sharapovas

26

FTC balked at the chance to establish more clear-cut guidelines when it settled with Lord &

Taylor and now there is no real binding precedent. As is, the guidelines serve little to no solace

in being able to clear up these important issues from an athlete and celebrity standpoint.

c. Proposed Solutions to the Paid Social Post Problem

While there may not be one clear-cut solution for reconciling the opinions of all of those

in the advertising industry, the endorsement of products online is a burgeoning market and is

thus important to address. Though ASME discourages the use of advertisements that mimic the

“look and feel” of the print or digital publication in which they appear, the widespread use of

“native ads” is inevitable and more concrete rules need to be crafted for everyone’s benefit.95

Perhaps another FTC workshop is in order to further educate in this field, with advertisers and

endorsers alike weighing in on what works for them and what doesn’t. Input from consumers is

imperative as their opinion is ultimately what determines what is misleading and deceptive. The

FTC also needs to be more about the bite instead of the balk: instead of settling with companies

that clearly violate the rules that are in place, the administrative agency needs to establish

binding precedent so that companies are clear on what types of practices and ad campaigns they

can engage in. Special attention needs to be given to the role of the FTC on paid media and

Cost $400,000 as Teen Champs Disappear, BLOOMBERG (Jan. 26, 2011),

http://www.bloomberg.com/news/articles/2011-01-26/budding-sharapovas-cost-parents-400-

000-as-teen-tennis-champs-disappear.

95 Supra note 55.

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social posts instead of a broad, blanket ban on everything not marked with a hashtag or a

“sponsored” sign. The collective input of all can help answer these questions than add to them.

IV. CONCLUSION

As access to athletes and celebrities’ lives expands due to technology and tools like social

media, so do the possibilities for problems associated with it. Popular people are paid by

advertisers to promote products across all platforms. The FTC, tasked with preventing unfair and

deceptive practices in or affecting commerce, has stepped into the ring and tried its hand in

providing uniform rules for all to follow. Though the FTC’s 2015 Policy Statement regarding

“native ads” addresses this form of advertisement to a greater extent than its predecessors, it is

by no means comprehensive, and problems still exist in deciphering what can and must be done

to denote paid-for content. The rules assume consumers are not competent enough to reconcile

the differences between material that is meant for marketing and material that is more

unobtrusive. Tougher enforcement by the FTC would provide more lucidity in this area, and

more marketing opportunities would likely be made available because more established

companies wouldn’t be afraid to enter the fray. While it’s unrealistic to think that a complete

rulebook regarding “native advertising” and paid social posts will be written come February of

next year, hopefully further rulings and guidance by the FTC will provide clarity and have

advertisers and endorsers clinking glasses of beer instead of wondering about the rules regarding

their endorsement.