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FTC Rejects Heightened Disclosure Requirements
for Product Placements
By Robert
J. Driscoll
[February 2005]
On February 10, 2005, the Federal Trade Commission
(FTC) rejected a call for heightened disclosure requirements
in connection with product placements in television programming.
The FTC’s action was in response to a petition
filed in September 2003 by Commercial Alert, an advocacy organization,
asking the FTC to require that product placements on television
be disclosed “in a conspicuous and unmistakable manner.”
Specifically, Commercial Alert argued that the FTC should require
a prominent superscript disclosure both at the outset of the
programming (such as “This program contains paid advertising
for…”) and at the time the placement occurs. (Although
Federal Communications Commission regulations require disclosure
when broadcasters, or cable operators engaged in originating
cablecasting, transmit programming for which valuable consideration
has been received or promised, such disclosures typically appear
in the credits at the conclusion of the programming.) Without
such prominent disclosure, Commercial Alert contended, product
placements constitute “stealth” advertisements that
are inherently misleading.
The FTC’s response was based on the premise
that “[t]he principal reason for [requiring disclosures]
identifying an advertisement as such is that consumers may give
more credence to objective representations about a product’s
performance or other attributes if made by an independent third
party than if made by the advertiser itself.” Because
the appearance of a product in television programming generally
does not involve the communication to viewers of any particular
objective claim about the product, the FTC argued, the rationale
for disclosure in most cases is absent. The FTC noted that in
the event a particular placement were to convey false or misleading
claims about a product, it could then take action pursuant to
its enforcement powers under Section 5 of the FTC Act, which
generally prohibits unfair and deceptive trade practices. In
this regard, Commercial Alert and the FTC were like ships passing
in the night: Underlying Commercial Alert’s petition was
a fundamental objection to the steady blurring of boundaries
between marketing and entertainment, whereas the FTC took a
relatively narrow view of the issue, focusing only on whether
product placements cause the type of deception traditionally
remedied under Section 5 of the FTC Act. In its focus on Section
5, the FTC also did not address arguments made by advertising
industry members that the burdens imposed by Commercial Alert’s
proposed disclosure requirements would amount to a ban on certain
forms of commercial speech, in violation of the First Amendment.
The FTC also responded to Commercial Alert’s
concern that product placements present a particular threat
to children, whom the petitioner described as “suffering
from an epidemic of marketing-related diseases.” While
acknowledging the particular vulnerabilities of children, the
FTC reiterated its view that because product placements, whether
in adult-directed programming or child-directed programming,
tend not to result in objective claims about the product, evaluating
advertising methods on a case-by-case basis is sufficient to
protect young viewers from deception.
In its response, the FTC left open the possibility
of further action with respect to the use of paid celebrity
endorsers in television programming. This issue is already addressed
with respect to traditional advertising in the FTC’s Guides
Concerning Use of Endorsements and Testimonials in Advertisements,
16 C.F.R. Part 255, which require disclosure in situations where
there is a connection between the endorser and seller that “might
materially affect the weight or credibility of the endorsement
(i.e. the connection is not reasonably expected by the audience).”
In its response to Commercial Alert’s petition, the FTC
said in its upcoming review of the Guides it would consider
whether advertisers should disclose if a celebrity has been
paid to endorse a product in news or entertainment programming.
This is an area of great interest in light of recent controversies
concerning the appearance of paid spokespersons in news programming,
including two cases in which it was reported that purportedly
independent journalists were paid to promote Bush administration
policies.
Commercial Alert filed a similar petition with
the FCC on September 30, 2003, seeking an FCC rule-making to
require prominent disclosure of product placements, arguing
that the FCC’s current sponsorship identification regulations
are not adequate in light of the recent explosion of product
placements. The FCC has not yet responded to the petition.
Commercial Alert’s FTC petition may be viewed
at www.commercialalert.org/ftc.pdf.
The FTC’s response may be viewed at www.ftc.gov/os/closings/staff/050210productplacemen.pdf.
For more information, please contact:
This Advisory is a publication
of the Advertising & Marketing Law Department of Davis Wright
Tremaine LLP. Our purpose in publishing this Advisory is to
inform our clients and friends of recent developments in advertising
& marketing law. It is not intended, nor should it be used,
as a substitute for specific legal advice as legal counsel may
only be given in response to inquiries regarding particular
situations.
Copyright © 2005, Davis Wright
Tremaine LLP.
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