Caught by the Fine Print: The FTC’s New .com Disclosures Will Transform Online Advertising

Maintaining transparency between businesses and consumers is no small task. With the growth of online shopping, social media marketing, and influencers, regulations need to keep pace to ensure fairness and protect consumers.

One key player in this space is the Federal Trade Commission (www.FTC.gov) and their dedication to consumer protection laws and eliminating deceptive business practices.

In 2013, the FTC.gov published its ‘.com Disclosures’—guidelines aimed at making online advertising more transparent. These rules required businesses to provide ‘clear and conspicuous’ disclosures in their online ads to prevent consumers from being misled. But as digital marketing practices continue to evolve (and businesses try to find loopholes), these guidelines are due for an update—or at least an amendment.

A key issue prompting the revamp is the problematic use of hyperlinks in disclosures. Some companies have been using these to hide important information—essentially creating barriers between consumers and the full picture. A recent example involving Hopper, a travel site, sheds light on this practice, highlighting the potential for consumers to be misled even when disclosures are technically provided.

In this blog post, we’ll delve into the history of the .com Disclosures, the FTC’s plans for a revamp, and what these changes mean for businesses, particularly online merchants. The FTC’s updated dot com Disclosures aren’t just a regulatory issue—they’re also an opportunity for businesses to build trust and engage more authentically with their customers.

Background and Historical Context

The Federal Trade Commission (FTC) in the United States published the “Dot Com Disclosures” as guidelines for businesses working online to ensure they were complying with FTC regulations regarding advertising and marketing practices.

The .com Disclosures were initially published in 2000 but were updated in 2013 to address changes in the digital marketplace, including the rise of social media and mobile devices. They provide business guidance on how to make clear and conspicuous online disclosures in digital advertising to avoid deception.

You can read the current version of the guidance document, titled “.com Disclosures: How to Make Effective Disclosures”, here.

Here are some key points of the .com Disclosures:

1. Clear and Conspicuous: The most important principle of the .com Disclosures is that disclosures must be “clear and conspicuous.” In other words, disclosures must be noticeable and understandable to consumers.
2. Proximity and Placement: Disclosures should be placed as close as possible to the relevant information they are clarifying. If the disclosure relates to a claim in a headline, it should be placed near the headline. The idea is that consumers should not have to search for the information.
3. Prominence: Disclosures should be displayed in a manner that ensures they will be noticed and read. This could involve using a font size and color that is easy to read and stands out from the background.
4. For Space-Constrained Ads: In space-constrained ads (such as tweets or other social media posts), the disclosure should be incorporated into the ad itself whenever possible. For example, if an ad on Twitter is sponsored, the tweet might include “Ad,” “#ad,” or “#sponsored” to make it clear.
5. For Multimedia Ads: In video ads, the disclosure should be in the video itself, preferably accompanied by audio if the platform allows it. In audio ads, the disclosure should be read at a cadence that’s easy to follow and in a volume that’s easy to hear.

The .com Disclosures don’t just apply to businesses that operate online, but also to any business that uses online advertising, which includes nearly all businesses today.

Now, we’re in 2023, a full decade later, and the digital marketplace has seen even more changes. Social media and influencers play a huge role in marketing strategies, online shopping has skyrocketed due to global events, and consumers are getting more and more of their information from mobile devices.

As such, there’s a pressing need for a revision to the dot com Disclosures.

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The Problem with Hyperlinked Disclosures

In theory, hyperlinks should serve to provide consumers with more comprehensive information about a product or service. They should elucidate, not confuse. Unfortunately, in practice, the use of hyperlinks in disclosures has sometimes had the opposite effect.

The core issue is that businesses can ‘hide’ crucial information behind these links. Consumers might be unaware of the vital details unless they actively click on and read the content hidden behind these hyperlinks. Moreover, it’s not always clear to consumers that these links contain significant information, especially when these links are visually downplayed or blend into the surrounding text.

Let’s consider the case of Hopper, a travel site, which offers an illustrative example of this problem. In April of 2023, Hopper allowed its customers to lock in airfare prices in advance, promising to cover the difference if the prices went up. However, what wasn’t immediately obvious to customers was that Hopper would only cover up to $100 per traveler if the price did increase. This vital piece of information was tucked away behind a disclosure hyperlink, not immediately visible or required reading before confirming a purchase.

The consequence? Consumers, thinking they had a full price guarantee, could have ended up paying significantly more than they initially thought. While the information was technically disclosed, it wasn’t a conspicuous disclosure as the FTC’s .com Disclosures require.

The Hopper example illustrates the crux of the problem: hyperlinked disclosures can be misused, and this can lead to consumers making decisions based on incomplete or misunderstood information. It’s clear that a new approach is needed to ensure that disclosures continue to serve their purpose of protecting consumers in the online marketplace.

FTC’s Proposed Rulemaking Revamp

In response to the increasingly problematic use of hyperlinked disclosures, the FTC has proposed a significant revamp of the .com Disclosures. While the exact details are yet to be fully unveiled, the crux of the update aims to enhance the transparency of online advertising and protect consumers from hidden conditions or terms.

The revamp is expected to specifically address how important information should be presented to consumers, curbing the misuse of hyperlinks that obscure vital details. The goal is not to eliminate hyperlinked disclosures altogether, but rather to regulate their usage more effectively.

1. Firstly, the FTC is likely to enforce stricter rules on the visibility and clarity of hyperlinks in disclosures. This could involve guidelines around hyperlink labeling, encouraging phrases that explicitly indicate the importance of the information behind the link. For example, instead of generic phrases like “more info” or “terms and conditions,” links could be required to have descriptive labels such as “important limitations” or “key conditions apply.”
2. Secondly, the FTC might address the proximity of these hyperlinks. Businesses may be required to place such links closer to the claim they qualify, making it less likely for consumers to overlook them.
3. Lastly, there could be stronger emphasis on the necessity for businesses to ensure that customers have accessed and understood critical information before proceeding with a transaction. In the case of important terms or limitations, this might mean the consumer must interact with the link, or a summary of the critical information could be required to appear directly on the page, not just behind a hyperlink.

This is isn’t the first crackdown on advertising laws. FTC acts are already in place to reduce dark pattern use by advertisers and detail qualifying ads. The government is becoming more adept at understanding the digital landscape and how consumers use it.

Take social media platforms scrolling as a potential culprit. Users are now so used to scrolling through content, it’s become too easy for advertising disclosures to be hidden away if a section on a webpage is slightly too long.

These changes are designed to ensure consumers can make fully informed decisions, knowing all the necessary details about a product or service before making a purchase.

Implications for Merchants

While the proposed changes to the FTC’s .com Disclosures may seem daunting for businesses initially, they represent an opportunity to foster trust and improve customer relations. Here’s what these changes could mean for merchants:

Need for Transparency

The most direct implication of the revamped .com Disclosure requirements is to be more transparent. Businesses will have to ensure that crucial information is not hidden behind hyperlinks but presented clearly to the consumer. This may require changes in how they format their advertising or communications.

Review of Current Practices

Businesses will need to review their current practices to ensure they comply with the new guidelines. This might involve scrutinizing the placement, labeling, and content of hyperlinked disclosures in current advertising and communication channels.

The problem is inherently a visual problem. Remember that disclaimers of any kind are, above anything else, visual in nature. Visual disclosures cannot be in 4pt font and greyed out. Audio disclosure are easy (though one day the FTC will likely stop allowing advertisers to make disclaimers at x4 speed).

One can only imagine what will happen with virtual reality…

Adaptation and Training

There may be a need to adapt current systems, especially for businesses that heavily use hyperlinked disclosures. This adaptation could include changes to website design, ad formats, or even updating scripts used in video or audio advertising. Additionally, training for marketing and communications teams will be crucial to ensure everyone understands the new guidelines and implements them correctly.

Potential Impact on Trust and Customer Relationships

While the above changes could pose short-term challenges, there’s a significant long-term benefit: improved customer trust. By making all important information readily accessible, businesses show they respect their customers’ right to make fully informed decisions. This can strengthen customer relationships and enhance the company’s reputation.

Many affiliate marketing arrangements, multi-party selling arrangements, and endorsements are hidden behind these links. But this information doesn’t have to be a secret nor harmful to your business. In fact, if you feel the need to hide this info behind a link, then maybe it isn’t a good business practice in the first place.

Innovation and Creativity

Finally, these changes could spark innovation and creativity in digital advertising. To make effective disclosures ‘clear and conspicuous’ within the boundaries of the new guidelines, businesses may come up with unique ways to present necessary information, leading to more effective and engaging communication strategies.

Why not try pop-ups displaying the terms that force the customer to click continue?

Is your business prepared for a regulatory update?

The FTC’s .com Disclosures represent an essential mechanism for protecting consumers in the ever-evolving digital marketplace. The proposed revamp, aimed at addressing the misuse of hyperlinked disclosures, reflects the need for regulations to keep pace with changing online practices.

As we navigate these changing regulations together, it’s important to remember that changes aren’t just about compliance. They’re about demonstrating respect for your customers, reinforcing trust, and building long-term customer loyalty. These are principles that we at DirectPayNet hold in high regard.

If you’re a high-risk merchant concerned about how these changes might affect your business, DirectPayNet is here to help. We specialize in providing high-risk merchant accounts and offer extensive support and guidance on maintaining compliance with evolving regulations like the .com Disclosures. We’re committed to helping you navigate these changes and ensuring your business is well-positioned for success in this new landscape.

Don’t navigate these waters alone. Contact us today and let’s create a plan that puts your business ahead of the curve.

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