On Feb. 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 Sept. 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.
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 Sept. 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.