One issue with native advertising is it is unclear on what is original content on a website or TV show and what is an ad. To give guidance to clients – mostly national brand advertisers – who ask about native ads “on a daily basis,” Mudge refers to her “toolbox”: the FTC’s dot-com disclosure and search engine ad guidelines; a 2005 FTC letter on sponsored product placement and the commission’s endorsement; and testimonial guidelines. She explained that the guidelines map out “sound” basic advertising disclosure principles that tie well to native ads. In particular, the 2005 letter has “a lot of good information about their thinking” on ad disclosure. “The FTC said 'we’re not going to ban a practice ... we're going to look at it on a case-by-case basis and make the call then.'” For example, the letter said that music competition show American Idol did not need to disclose to the audience its sponsorship deal with Coca-Cola just because all three judges drank from large Coca-Cola cups during the show.
Mudge also weighed in on the contentious issue of sponsored content not wholly relating to the sponsor’s actual product. For instance, when the Better Business Bureau’s National Advertising Division (NAD) said Qualcomm was obligated to disclose their sponsorship of a technology series – unrelated to Qualcomm – on Mashable.com, Mudge disagreed. Qualcomm was entitled to “call out” its sponsorship if it wanted to, but there should not be a requirement to do so, she said. In a recent All About Advertising Law blog post, she explained that the NAD’s opinion on the Qualcomm example suggests that it aims to protect consumers not only from undisclosed bias in purchasing decisions but also in journalism. She added, “it is unlikely the FTC will take such an expansive view of Section 5 if and when they follow the workshop [December 4 FTC seminar on native advertising] with a staff report.”
Commenting on the NAD generally, Mudge said the group’s opinions are important because it has “a Batphone” to the FTC. “Historically, they have a good relationship.” The NAD is trying to get ahead of this issue, and has several similar native advertising cases in the pipeline, she said.