Not Necessarily The News: FTC Crackdown on Fake News Ads

Ron BurgandyAs detailed in a previous post, marketers of weight loss products have been known to mask their online ads as legitimate news sites.  The product being advertised is featured in a “report” that appears to be an objective report on the benefits of the product.   The FTC has taken a dim view of this advertising method, and has taken action against several online marketing companies that undertook this approach.

On February 7, 2013, the The FTC recently announced proposed settlements with these fake news marketers, who used this advertising method to hawk acai-berry supplements, work-at-home opportunities, teeth whitening products and skin treatments.  The terms of the settlements require the marketers to shut down permanently and to pay more than $9 million to settle the charges.  

Online marketers would do well to take notice of a key element of the commission’s claims:  that the websites portrayed themselves as part of or affiliated with legitimate news organizations, such as CNN and Fox New, and falsely represented “that the reports they carried had been seen on major media outlets such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports.”  The FTC also focused on the fact that the websites featured logos of logos of real news outlets, which was clearly intended to mislead consumers into believing that the report was legitimate.

It’s easy to see why these marketers used fake news sites to sell their products; after all, one of the greatest marketing challenges has always been to heard above the noise.  Although clearly illegal in many respects (trademark infringement, deception, etc.) the fake news sites were certainly innovative and effective, at least until the FTC stepped in to curb what it views to be a “widespread problem.”  

So how could these marketers have employed this news-like approach without running afoul of FTC regulations?  First and foremost, they should have notified the public that the site was an advertisement, in a clear and conspicuous manner.  According to the FTC, inconspicuous disclaimers or a “well-hidden” and “vague” notation in “tiny, inconspicuous print” that the site was an advertisement or “advertorial” was “inadequate to cure the net impression of these websites.”  Second, they should have avoided any reference to actual news outlets, not to mention Oprah or any other program.  

The question then arises, would undertaking these steps render the web ad ineffective?   The answer is, probably, but maybe not as much as one might think.  Having worked with many marketers, both online and off, I have always been struck by a pervasive lack of creativity and innovation in the industry.  Too many marketers simply copy what others are doing, and often go so far as to put up websites that are identical to those of their competitors in every respect.  It’s easy to see how they can get away with this, as any marketer who employs deceptive advertising methods clearly resides in a glass house.  

So what would happen if these fake news marketers avoided the appearance of deception and instead focused their efforts on making their ads truly innovative and engaging?  They may not have made as much money, but at least they would have been able to keep it.


Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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