FTC Settles Charges with Misleading Websites: Another Native Advertising Enforcement Action
Following on the heels of the FTC’s March 2016 settlement with Lord & Taylor concerning a deceptive native advertising campaign, the FTC just announced that it has reached a settlement with SmartClick Media LLC over its phony doctor certification program and three deceptively formatted websites. While the FTC did not impose a monetary judgment on Lord & Taylor, SmartClick wasn’t so lucky. . .
In addition to operating a not-so-certified certification program for third-party health-related websites, SmartClick hosted a lifestyle “blog” at <betterlivingjournal.org>. The website featured just what you might expect from a blog called Better Living Journal –apparently unbiased advice and information about various products, programs, health issues, scientific breakthroughs and other services.
The only problem was that the blog was neither unbiased nor independent. According to the FTC’s complaint, Better Living Journal was composed of paid promotions, and SmartClick Media received commissions and other payments each time a consumer clicked on links or purchased the products featured in the blog posts. The only disclosures of these arrangements were located in the “About Us” and “Disclosures” links at the bottom of the page.
SmartClick also operated two other websites at <prematurecures.com> and <pheromonemen.info> which, according to the FTC, purported to objectively evaluate men’s sexual performance enhancement products, allow consumers to rate the effectiveness of these products and display the results of such ratings. But once again, SmartClick was paid to promote certain products on these websites and failed to make clear and conspicuous disclosures of these material connections.
All three of these websites were forms of native or disguised advertising because the content was sponsored, but they were made to look like independent or editorial websites. As a result, the FTC filed a complaint against SmartClick for violation of Section 5 of the FTC Act. SmartClick entered into a settlement with the FTC consisting of a permanent injunction and a monetary judgment for about $600K – a figure that exceeded SmartClick’s gross revenues from the challenged activities, but most of the payment was suspended based on upon the Defendants’ financial disclosures. The FTC also imposed many years of compliance monitoring, which can be quite costly itself. Interestingly, the FTC did not name any of the advertisers who paid SmartClick to promote their products in the complaint.
The lessons from the SmartClick case are essentially the same as they were from Lord & Taylor’s case, but they are worth repeating:
- Material connections between advertisers and third-party publishers, whether they be website operators, bloggers, social media influences or even consumers, must be disclosed. Advertisers or other publishers are free to operate blogs that feature (or consist entirely of) paid content, but not without a disclosure of that material connection.
- Disclosures must be clear and conspicuous. SmartClick’s disclosures, buried on the About Us and Disclaimer pages that could only be reached though clicking on small font at the bottom of the websites in question, were neither clear nor conspicuous.