The Federal Trade Commission (“FTC”) announced earlier this month that it was seeking comments on plans to revise its online disclosure guidance focused on digital advertising, potentially through new guidelines that take the metaverse / virtual reality into consideration. First published in 2000 and updated in 2013, the “.com Disclosure Guideaims to enable mobile advertisers and other online advertisers “to make disclosures clear and visible to avoid deception.” The FTC recently revealed that it is seeking public comment on ways to modernize the guidelines to bring them into line with new advances in technology and how advertisers now interact with consumers.
While the FTC stresses its willingness to crack down on advertisers’ attempts to “avoid liability under FTC law by burying disclosures behind hyperlinks,” as well as the increasing use of “dark patterns” (that’s i.e. technology designed to trick users into taking certain actions online that they otherwise would not be able to use) and “other forms of digital deception”, the regulator is also specifically seeking comment on “integrated advertising in games and virtual reality, and micro-targeted ads”.
Among the 16 questions posed by the FTC, one focuses on “what issues are raised by current or emerging online technologies, activities, or features, such as…the use of in-game advertising content… should be addressed in a revised guidance document”. Another question posed by the regulator asks whether its revised guidelines should address “issues that have arisen with respect to advertising that appears in virtual reality or the metaverse, and, if so, how should these issues be addressed. ?” (To date, no public comments have addressed the FTC’s gaming/metaverse investigations, but the comment period remains open until August 2.)
It should be noted that whether or not the FTC chooses to issue metaverse-specific guidance if/when it makes changes to the existing .com disclosure guide, its existing rules regarding advertising disclosures actually apply to advertising and recommendations on the Web3. as they do for more traditional forms of advertising and sponsorship. Among other things, the FTC “has made it clear that its disclosure requirements will continue to apply to virtual influencers who appear to endorse a brand’s products or services, even if those endorsers are not real people,” the attorneys say. by Davis & Gilbert in a recent note.
The existing FTC rules no doubt also apply to the wave of celebrities who have been busy promoting non-fungible tokens (“NFTs”) over the past year – even though the technology involved is relatively new. . The rapid rise of NFTs since March 2021 and the accompanying marketing has raised questions about the nature of celebrity endorsements in the space, in particular. Wired’s Kate Knibbs asked earlier this year if Bored Ape owner Justin Bieber, for example, “had been paid to promote some of the NFTs he posted on [on social media], either with free NFTs or regular old US dollars? The answer, according to Knibbs, “We don’t know at this time.”
These are the types of (potentially problematic) questions and answers that the FTC – and federal law in the United States – aims to avoid by requiring individuals who have a material connection to the brand whose products/services they endorse to know these links. to consumers through clear and visible information if such a link would not otherwise be obvious to the average consumer.
As the FTC has stated, material relationships can consist of “a business or family relationship [between the endorser and the company]monetary payment [to the endorser]or the supply of free products to the endorser.
The NFT domain has been filled with reports that celebrities who have promoted NFTs from popular collections have done so after receiving the NFTs as gifts – either from the companies behind the NFT collections themselves, or from third parties, such as NFT “concierge services”. by Wired – in exchange for a promotion. This could explain the cries to Moon Pay, for example, that accompanied some celebrity promotions of their Bored Ape NFTs. If giving in exchange for endorsements were, in fact, at stake in these scenarios (and there is no guarantee that this is the case), the principles of the FTC law would apply, thus obliging the approving party ( the celebrity owner of NFT) to alert consumers to the nature of the connection and the donor to monitor these promotions to ensure appropriate disclosures are made.
At the same time, the drive to modernize its online advertising guides comes as the FTC has faced complaints about advertising in the virtual world. Truth in Advertising (“TINA”), for example, called on the FTC to take action regarding marketing on Roblox Corporation, the hugely popular metaverse/gaming platform. In a complaint in April, the Connecticut-based advertising watchdog alleged that Roblox, “a multibillion-dollar public company,” is accused of failing to “establish meaningful safeguards to ensure compliance truth in advertising laws, effectively empowering marketers including but not limited to Alo Yoga, DC Entertainment, Forever 21, Hasbro, Hyundai Motor America, Mattel, Netflix, NFL Enterprises LLC, Nike, Paramount and VF Corp., to manipulate millions of consumers into one of the largest and most captivating virtual platforms on the internet today.
TINA claimed in the 44 page complaint that in pursuit of its operation of a closed-platform metaverse, Roblox is “pushing [advertising] in front of millions of consumers, including more than 25 million children and teenagers, by a multitude of companies and their influencer avatars. The problem, he argues, is that in “jump[ing] in the Roblox metaverse “in order to connect with young consumers, Roblox and these big companies would be ‘exploiting children’s inability to distinguish organic content from marketing, and manipulating them and other Roblox users with undisclosed promotions which are almost identical to the virtual organic items and experiences on the platform.
A Roblox spokesperson told TFL at the time that “Roblox is committed to ensuring our users and developers have a positive and safe experience on our platform,” noting that the company has “strict guidelines for developers who want to promote or use ads in their experiences, including specific rules to protect users under 13, expectations that all developers adhere to community standards we strictly enforce, and no tolerance for fraud or scams.
While transparency may not necessarily prove to be the norm in the nascent virtual world as a whole, the FTC’s request for information about advertising in the metaverse and beyond “could ultimately lead to major changes in the how it views the requirements for businesses of all kinds to advertise their products online” – including in the metaverse – “to the public”, according to Troutman Pepper’s Christopher Capurso, Mark Furletti, Caleb Rosenberg, Chris Willis and Alan Wingfield. Beyond that, they note that in addition to influencing how the FTC has treated online advertising, its .com Disclosure Guide has also been “extremely influential in guiding online advertising ratings by d ‘other regulatory agencies’.