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Takeaways From NAD 2022: The FTC’s Enforcement Priorities, New Technologies, Dark Patterns, And The Usual Suspects – Advertising, Marketing & Branding

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Last week, the National Advertising Division of the Better
Business Bureau National Programs (NAD) held its annual conference.
The wide array of speakers covered a broad range of topics, from
the metaverse to dark patterns, social justice, environmental
claims, and (as always) substantiation and disclosures. Multiple
speakers from the Federal Trade Commission also presented and gave
insight into the FTC’s current priorities.

The regulators. Samuel Levine, Director of the
FTC’s Bureau of Consumer Protection, made clear that the agency
is closely tracking practices it believes result in consumer
economic harm and consumer surveillance and privacy issues. He made
clear that the Commission is not shying away from seeking big
ticket monetary relief against national well-known advertisers, and
intends to hold individuals and executives responsible for their
companies’ advertising practices. In addition, Serena
Viswanathan, FTC’s Associate Director in the Division of
Advertising Practices, highlighted the Commission’s focus on
disclosure issues as well as endorsements and reviews, such as
review solicitation and aggregation, and product ranking
websites.

Effective disclosures. Second, presenters
across the industry, including advertisers, regulators, and
lawyers, discussed the importance of effective disclosures in
advertisements. Presenters reiterated the expectation that
disclosures be “unavoidable” and mirror the manner in
which the claim was made (visually, orally). NAD noted that the
number of influencer and customer review cases it hears is
expanding. Venable has covered this subject in prior blogs as well, including with respect to influencers.

The implications for the metaverse are complex, as within the
3-D world, consumers (players) can turn around, look up or down,
and so may not even see certain disclosures in the virtual world.
Thus, even with changing technologies, it remains clear that
competitors and regulators are scrutinizing disclosure issues, and
whether an advertisement or campaign is making those disclosures
unavoidable to consumers could affect the risk of a campaign.

Environmental claims. Next, sustainability
claims such as those regarding the environmental impact of a
product, or how a fish or other animal was caught or raised,
continue to be popular among advertisers, and thus regularly
attract the attention of regulators and competitors. Moreover, as
the Commission reiterated during presentations, the Green Guides
are soon to be updated as part of their 10-year review. Along with
the updated guides, the prospect of sustainability marketing in the
metaverse presents new challenges. For example, in a virtual world
where trees can grow instantly, and animals and fish can appear at
the touch of a button, implied claims may need to be carefully
considered by the advertiser so as not to overstate the
environmental benefits of its products.

The metaverse. The metaverse remained a hot
topic, as blockchain-enabled resources such as non-fungible tokens
and cryptocurrencies serve as both a platform for carrying
advertisers’ messages and products and a source of FTC
compliance and litigation risk. Presenters made clear that the same
rules apply for new technologies—advertising must not be
misleading, and any required disclosures must be made clearly and
conspicuously. In the metaverse in particular, though, attendees
learned that the line between sponsored and unsponsored content can
be unclear, especially to children, who make up a large portion of
the users on these new platforms. Moreover, NAD has made clear in
its recent cases that privacy claims are fair game for its
monitoring and challenger cases.

Dark patterns. Dark patterns were also a
recurring theme. For those unfamiliar with the term, “dark
patterns” are marketing methods that supposedly obscure or
subvert consumer decision-making or choice through user experience
design. Presenters discussed how FTC has monitored dark pattern
practices for some time, and Director Levine directed advertisers
to the report highlighting newer, more sophisticated
dark patterns, including difficult-to-cancel subscriptions, and
using urgency and scarcity to push consumers into a buying
decision. As companies engage in more metaverse activations, the
use of dark patterns is likely to become only more complex and
sophisticated.

What’s next? NAD made clear that it is
willing to take on new questions and industries, including social
issues, privacy, customer reviews, and dark patterns. For example,
NAD announced it has updated its procedures to
assist in resolving complaints or questions concerning national
advertising, including national advertising that is misleading or
inaccurate because of its portrayal or encouragement of negative
harmful social stereotyping, prejudice, or discrimination.
Furthermore, in conjunction with the expansion of the metaverse,
those selling access to online environments (telecom companies)
that make claims regarding wireless coverage and pricing and fees,
for example, are also becoming targets. Overall, the rise of the
metaverse and blockchain resources seems to simply raise the stakes
for advertisers willing to enter this new and largely uncharted
environment: the presence of children and minors as consumers on
the platform, the possibility of overstating implied claims, and
the possible complexities of dark patterns are all issues of
concern for the NAD, FTC, and competitors alike.

Time will tell what comes next, but one thing is clear: the FTC
and NAD are ready and willing to take on new industries and new
advertising practices. Companies would do well to take note.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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