Digital Marketing Under Attack

The Doritos complaint charges that PepsiCo's branded digital entertainment offerings and marketing campaigns for Doritos corn chips are “unfair digital marketing practices” and violate '5. The complaint urges the FTC to stop “advertising campaigns centered on things teens love: video games, music, horror, sports, contests and social media.” It goes on to charge that PepsiCo “chooses to disguise its marketing as a more appealing format by employing minimal branding, immersive techniques and viral marketing. '”

Entertainment Industry Concerns

What the complaint seeks goes far beyond the regulation of food marketing to children (which the FTC is already addressing through self-regulatory proposals by an interagency working group convened at the behest of Congress). It uses the real problem of poor nutritional practices in this country to try to justify paternalistic restrictions on marketing, particularly branded entertainment, advergaming and interactive digital promotions. As such, the complaint should be of concern to marketers in the entertainment industry, as it calls into question many current practices, including: integrating products and brands into content and associating brands with music and sports; engaging consumers with brands via social networking sites; providing consumers benefits and incentives in exchange for consent to send them direct marketing; and creating and using behavioral profiles of digital media users to serve them targeted, relevant advertising. Despite the assertions in the Doritos complaint, these techniques can all be employed by advertisers in ways that should avoid regulatory enforcement or consumer class-action liability.

Product Placement

Product placement is the practice of arranging for a product to appear in entertainment content. Brand integration goes a step further and weaves the product or brand into the story line. The practice has been around for decades in television and films, and the FTC declined to find it deceptive or unfair per se in a 2005 response to a complaint by the group Consumer Alert, which, like the Doritos complaint, attempted to use concerns about childhood obesity and children's access to general audience programming to support its call to action.

The FTC opined that failure to disclose that advertisers paid for products to appear in entertainment or informational content did not violate the FTC Act so long as product performance or attribute representations were not made. It did warn, however, that if product claims could be reasonably construed by the viewer, it would treat it as advertising and the claims must be accurate and substantiated. The FTC also stated that, for celebrity spokespersons, the issue of what disclosures are required and when would be addressed in its planned upcoming review of Endorsement and Testimonial Guides, discussed below. While specific federal law requires certain end-credit disclosures for paid placements in television programming, this does not apply to new media.

Thus, the FTC's 2005 approach should be the basis of the FTC's response to the Doritos complaint and, unless the FTC changes course, should be the guide for digital marketers.

Infomercials and Flogs

The FTC has brought cases involving infomercials, advertorials and fake blogs (“flogs”) that failed to disclose the advertiser's sponsorship or other material involvement. The Doritos complaint argues that these disclosure standards should apply to branded entertainment, especially so-called augmented or alternative reality content that at first blush appears to be nonfiction, but is actually fictional content designed to entertain (typically through science fiction or horror). However, the potential need for disclosures depends upon the context of the references to the product or brand, not the fictional nature of the content itself.

If any claims or endorsements are made, or if the brand is seeking consumers to provide information or engage in activities that benefit the brand, then clear disclosure is required. For instance, if personal information is being collected, the sponsor should make effective privacy practices disclosures so consumers understand that the information they are submitting is for the brand's marketing purposes. Furthermore, it would also not be appropriate to post a privacy policy of a fictional company to keep the users immersed in the story line. The site publisher is still the real life operator collecting data, notwithstanding the fact the site may be a game based on fantasy.

Social Media

Social media has proven an excellent platform for viral, word-of-mouth or recommendation marketing that gets consumers to talk about a product or brand. In late 2009, the FTC updated its 1980 Guidelines Concerning the Use of Endorsements and Testimonials in Advertising to make it clear that even where the brand is not the speaker or the publisher in new media ' such as when its employees post on Facebook ' or it gives compensation or products to bloggers or celebrities to blog or tweet about their products, the brand will be responsible for requiring the speaker to disclose connection to the brand and not make misleading or unsubstantiated claims, and reasonably monitoring and taking corrective action against those who fail to comply. The FTC's commentary to these guidelines, a set of frequently asked questions it has published about their application and its subsequent enforcement actions provide a road map to marketers as to how to engage in social media outreach programs in keeping with '5 obligations. See, Friel, “Evolving Online Advertising Techniques: Federal Scrutiny Increasing,” in the April 2011 issue of our sibling newsletter, e-Commerce Law & Strategy, http://bit.ly/s4BiUr.

Online Behavioral Advertising

The Doritos complainant also objected to use of online behavioral advertising (OBA), the practice of using tracking devices such as cookies, beacons, e-tags and other technology to develop profiles of consumers based on their online activities and use the data to serve them more relevant, targeted ads. OBA has been under scrutiny by the FTC, Congress and consumer data privacy advocates, notwithstanding efforts of the Digital Advertising Alliance (www.AboutAds.info), a confederacy of business trade organizations to self-regulate and require notice of OBA to consumers and give them the ability to opt out. Some 50-plus OBA class actions were filed last year, and an analysis of these cases suggests ways publishers and advertisers can help prevent successful claims arising out of their OBA activities through effective disclosures and consents. See, Austin and Shelton, “Defending Behavioral Ad Class Actions,” Law 360 (Oct. 20, 2011) (http://bit.ly/rrezXc).

Aside from OBA privacy issues, marketers need to ensure that even their privacy and data security practices generally are accurately reflected by effectively communicated disclosures, and that they actually deliver on those representations. Recent settlements between the FTC and Twitter, Google and Facebook demonstrate the need for companies to have robust privacy and data protection programs that regularly check for compliance and anticipate and take reasonable efforts to prevent, consumer data privacy and security breaches.

Conclusion

Digital marketing presents unique tools to engage with consumers like no medium ever before. However, no new or heightened standards are necessary to protect consumers, including teenagers and young adults, from digital marketing. The same standards that have always applied continue to work well: Advertising cannot be deceptive or unfair based on time-tested FTC standards and guidance. If marketers and their agencies apply the same culture of compliance to new media promotions as has been established in traditional advertising, including with regard to consumer data privacy and security, continued calls to treat new media as in need of increased regulation to protect consumers should be quelled. However, because the digital marketing profession has evolved rapidly and largely from the Web developer and public relations fields that do not have the same historical familiarity with the regulatory requirement traditional ad agencies have, companies must not take for granted that their agencies will follow applicable laws and self-regulatory schemes and need to have legal counsel closely oversee digital marketing campaigns.

The convergence of media and technology continues to change the way we communicate, consume media and engage in commercial transactions. Marketers have been among the greatest digital media innovators and the medium has evolved as largely advertiser supported. That business model is under attack by consumer groups that argue that marketers are unfairly invading consumers' privacy and confusing consumers as to the nature and origin of commercial messages. In Fall 2011, for example, consumer advocates filed a complaint with the Federal Trade Commission (FTC) over PepsiCo's online promotion of Doritos. The complainants want greater restraints and obligations on marketers, particularly those that target teens and young adults with interactive and new media. In the Matter of Complaint and Request for Investigation of PepsiCo's and Frito-Lay's Deceptive Practices in Marketing Doritos to Adolescents. (A PDF of the complaint is available online from Food Politics.com at http://bit.ly/s5u6Hj.)

FTC Act

Marketers should certainly ensure that their campaigns are compliant with '5 of the FTC Act, 15 U.S.C. 45 (http://bit.ly/v9arKc), on which most state consumer-protection schemes are based. Under '5, commercial messages must not be explicitly or implicitly misleading. If additional information is required to prevent deception: it must be clearly, proximately and conspicuously disclosed; any claims made must be substantiated by objective evidence; and statements and practices likely to cause substantial injury to consumers with no countervailing benefit to consumers or competition are deemed “unfair” and prohibited. These rules apply regardless of the advertising medium used.

The Doritos complaint charges that PepsiCo's branded digital entertainment offerings and marketing campaigns for Doritos corn chips are “unfair digital marketing practices” and violate '5. The complaint urges the FTC to stop “advertising campaigns centered on things teens love: video games, music, horror, sports, contests and social media.” It goes on to charge that PepsiCo “chooses to disguise its marketing as a more appealing format by employing minimal branding, immersive techniques and viral marketing. '”

Entertainment Industry Concerns

What the complaint seeks goes far beyond the regulation of food marketing to children (which the FTC is already addressing through self-regulatory proposals by an interagency working group convened at the behest of Congress). It uses the real problem of poor nutritional practices in this country to try to justify paternalistic restrictions on marketing, particularly branded entertainment, advergaming and interactive digital promotions. As such, the complaint should be of concern to marketers in the entertainment industry, as it calls into question many current practices, including: integrating products and brands into content and associating brands with music and sports; engaging consumers with brands via social networking sites; providing consumers benefits and incentives in exchange for consent to send them direct marketing; and creating and using behavioral profiles of digital media users to serve them targeted, relevant advertising. Despite the assertions in the Doritos complaint, these techniques can all be employed by advertisers in ways that should avoid regulatory enforcement or consumer class-action liability.

Product Placement

Product placement is the practice of arranging for a product to appear in entertainment content. Brand integration goes a step further and weaves the product or brand into the story line. The practice has been around for decades in television and films, and the FTC declined to find it deceptive or unfair per se in a 2005 response to a complaint by the group Consumer Alert, which, like the Doritos complaint, attempted to use concerns about childhood obesity and children's access to general audience programming to support its call to action.

The FTC opined that failure to disclose that advertisers paid for products to appear in entertainment or informational content did not violate the FTC Act so long as product performance or attribute representations were not made. It did warn, however, that if product claims could be reasonably construed by the viewer, it would treat it as advertising and the claims must be accurate and substantiated. The FTC also stated that, for celebrity spokespersons, the issue of what disclosures are required and when would be addressed in its planned upcoming review of Endorsement and Testimonial Guides, discussed below. While specific federal law requires certain end-credit disclosures for paid placements in television programming, this does not apply to new media.

Thus, the FTC's 2005 approach should be the basis of the FTC's response to the Doritos complaint and, unless the FTC changes course, should be the guide for digital marketers.

Infomercials and Flogs

The FTC has brought cases involving infomercials, advertorials and fake blogs (“flogs”) that failed to disclose the advertiser's sponsorship or other material involvement. The Doritos complaint argues that these disclosure standards should apply to branded entertainment, especially so-called augmented or alternative reality content that at first blush appears to be nonfiction, but is actually fictional content designed to entertain (typically through science fiction or horror). However, the potential need for disclosures depends upon the context of the references to the product or brand, not the fictional nature of the content itself.

If any claims or endorsements are made, or if the brand is seeking consumers to provide information or engage in activities that benefit the brand, then clear disclosure is required. For instance, if personal information is being collected, the sponsor should make effective privacy practices disclosures so consumers understand that the information they are submitting is for the brand's marketing purposes. Furthermore, it would also not be appropriate to post a privacy policy of a fictional company to keep the users immersed in the story line. The site publisher is still the real life operator collecting data, notwithstanding the fact the site may be a game based on fantasy.

Social Media

Social media has proven an excellent platform for viral, word-of-mouth or recommendation marketing that gets consumers to talk about a product or brand. In late 2009, the FTC updated its 1980 Guidelines Concerning the Use of Endorsements and Testimonials in Advertising to make it clear that even where the brand is not the speaker or the publisher in new media ' such as when its employees post on Facebook ' or it gives compensation or products to bloggers or celebrities to blog or tweet about their products, the brand will be responsible for requiring the speaker to disclose connection to the brand and not make misleading or unsubstantiated claims, and reasonably monitoring and taking corrective action against those who fail to comply. The FTC's commentary to these guidelines, a set of frequently asked questions it has published about their application and its subsequent enforcement actions provide a road map to marketers as to how to engage in social media outreach programs in keeping with '5 obligations. See, Friel, “Evolving Online Advertising Techniques: Federal Scrutiny Increasing,” in the April 2011 issue of our sibling newsletter, e-Commerce Law & Strategy, http://bit.ly/s4BiUr.

Online Behavioral Advertising

The Doritos complainant also objected to use of online behavioral advertising (OBA), the practice of using tracking devices such as cookies, beacons, e-tags and other technology to develop profiles of consumers based on their online activities and use the data to serve them more relevant, targeted ads. OBA has been under scrutiny by the FTC, Congress and consumer data privacy advocates, notwithstanding efforts of the Digital Advertising Alliance (www.AboutAds.info), a confederacy of business trade organizations to self-regulate and require notice of OBA to consumers and give them the ability to opt out. Some 50-plus OBA class actions were filed last year, and an analysis of these cases suggests ways publishers and advertisers can help prevent successful claims arising out of their OBA activities through effective disclosures and consents. See, Austin and Shelton, “Defending Behavioral Ad Class Actions,” Law 360 (Oct. 20, 2011) (http://bit.ly/rrezXc).

Aside from OBA privacy issues, marketers need to ensure that even their privacy and data security practices generally are accurately reflected by effectively communicated disclosures, and that they actually deliver on those representations. Recent settlements between the FTC and Twitter, Google and Facebook demonstrate the need for companies to have robust privacy and data protection programs that regularly check for compliance and anticipate and take reasonable efforts to prevent, consumer data privacy and security breaches.

Conclusion

Digital marketing presents unique tools to engage with consumers like no medium ever before. However, no new or heightened standards are necessary to protect consumers, including teenagers and young adults, from digital marketing. The same standards that have always applied continue to work well: Advertising cannot be deceptive or unfair based on time-tested FTC standards and guidance. If marketers and their agencies apply the same culture of compliance to new media promotions as has been established in traditional advertising, including with regard to consumer data privacy and security, continued calls to treat new media as in need of increased regulation to protect consumers should be quelled. However, because the digital marketing profession has evolved rapidly and largely from the Web developer and public relations fields that do not have the same historical familiarity with the regulatory requirement traditional ad agencies have, companies must not take for granted that their agencies will follow applicable laws and self-regulatory schemes and need to have legal counsel closely oversee digital marketing campaigns.