Amy Mudge and Daniel Kaufman
Yesterday, the Federal Trade Commission (FTC) hosted an event to look at kids’ digital marketing. Here is a rough transcript; and if you have a spare five hours, you can watch the videos, which will soon be posted on the event page. The big question is whether the FTC will update its updated Testimonial & Endorsement Guides (or issue other mandates) with kid-specific requirements based on this event. (As an aside, these things used to be called “workshops.” For reasons that escape us, that term appears to be passe at the current FTC. Wouldn’t it be more festive to call them soirees, galas, thought raves or to dos if you wanted to rebrand?)
The event came out of the proposed changes to the Testimonial & Endorsement Guides. When issuing the updates for comment, the FTC basically punted on additional guidelines just for testimonials focused on kids. For many years, the FTC explained that all of its guidance applies to all consumers regardless of their age, but the sophistication of the target audience should be taken into account when determining what disclosures will be effective. In the proposed revision, the FTC put in a place marker for Kid Endorsements, saying, “Endorsements in advertisements addressed to children may be of special concern because of the character of the audience. Practices which would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” Simultaneously, the FTC scheduled this event to gather more information.
The day was divided into three panels – looking at kids’ cognitive abilities to understand advertising and advertising disclosures, potential harms from kids seeing blurred ads, and potential fixes for the same. Mamie Kresses, the director of the Children’s Advertising Review Unit (CARU), set the table by reviewing the self-regulatory landscape and summarizing their recent cases in the digital space.
There was a fair amount of discussion about the bar on the FTC to adopt rules directed to kids’ advertising under the FTC’s unfairness jurisdiction. Congress put this ban in place after the KidVid days when the FTC was mocked for its overreach and called the National Nanny for trying to bar certain ads directed to kids. This may not, however, prohibit the FTC from engaging in rulemaking over conduct it considered misleading or deceptive as directed at kids online. There was less discussion about West Virginia v. EPA, in which the Supreme Court ruled that regulatory agencies must have “clear congressional authorization” to make rules pertaining to “major questions” that are of great political or economic significance. But this FTC shows no lack of temerity in its enthusiasm for kicking off rulemakings (as we will discuss in tomorrow’s blog reviewing today’s Open Commission meeting).
As far as the event itself, setting aside the outlier views (advocates who said parents can police effectively on the one hand and many of the children’s advocates who said all digital ads to kids should be banned), our sense is that the FTC will likely add some more specific guidelines for online disclosures for ads directed to children, including perhaps adopting the CARU requirements of repeated audio and video disclosures. We would not be surprised if the FTC recommended using very simple words for disclosures like “ad” and “paid.”
YouTube discussed its current program with icons and other specific disclosures for kids and an accompanying education program, including research it has done showing that kids do understand these disclosures. Doing quantitative research on kids’ understanding of any ad disclosures is clearly a best practice.
It is not clear if the FTC will use the Children’s Online Privacy Protection Act definition of “kids” and focus on recommendations for under 13 and 13+, because there was a lot of discussion about the cognitive abilities and harms to people online from under 5 up to 17, as well as harms to older kids who are not neurotypical and disproportionate harms to children from socially disadvantaged backgrounds.
The day was very muddled as far as what is an ad versus what is content created by brands. Some presenters focused on an ad, appropriately in our view, as something that promoted the sale of a product or service. Some presenters did not seem to recognize such a distinction and seemed to imply that content created by brands was inherently commercial. We don’t think the FTC will wade into a detailed determination of where the ad/content line is drawn, but it is most definitely an area brands that create content (and who doesn’t these days?) should be mindful of and continue to consider carefully, as far as where to draw those lines.
There was a fair amount of discussion of advergaming. In the first panel focused on kids’ cognitive abilities, the panel talked about virtual influencers, noting that many avatars appear to be very friendly. They surmised that young kids may be more likely to see these influencers as friends and trustworthy.
The FTC is open to additional views and is particularly welcoming of quantitative research in this area. It will hold the comment period open another month.