FTC Hosts Event to Examine Children’s Advertising in Digital Media

Our broadcast clients are already well aware of their obligations to air children’s programming in accordance with the FCC’s rules, including the rule prohibiting “host selling.” The FCC’s rules do not, however, extend to digital media. Into that void steps the FTC. On October 19, the FTC held a virtual event focused on Protecting Kids from Stealth Advertising in Digital Media. The webinar dovetails with the FTC’s request for public comment on how children are affected by digital advertising and marketing messages that blur the line between ads and entertainment. The comment period runs through November 18, 2022.

The Protecting Kids webinar featured discussions from researchers, child development and legal experts, consumer advocates, and industry professionals on the techniques used to advertise to children in digital spaces. The agenda for the webinar, including a list of speakers, can be found here. For those unable to attend the hours-long event, we have provided a summary below. TL;DR – advertising directed at children in the metaverse is an area of focus for the FTC and regulations may be coming soon. Stay tuned.  

SUMMARY

The webinar began with a “show and tell” from the Better Business Bureau’s Children’s Advertising Review Unit (CARU), featuring examples of digital advertising that young people encounter in their day-to-day lives. Unlike in the past when television and radio dominated the landscape, today the digital space is the predominant advertising medium for children and adolescents. According to CARU, in the era of social media influencers, in-game advertising, and algorithms for targeted advertising, it is becoming increasingly difficult for children to differentiate between digital content and advertisements. CARU has taken note and recently issued a compliance warning putting “advertisers, brands, influencers and endorsers, developers, and others on notice that CARU’s Advertising Guidelines apply to advertising in the metaverse and that … CARU will strictly enforce its Guidelines against metaverse advertising.”

Panel 1: Children’s Cognitive Abilities – What do they know and when?

In the first panel, titled “Children’s Cognitive Abilities – What do they know and when?” childhood development experts discussed the latest research on how children perceive and understand digital advertising used by content providers. Most importantly, the panelists discussed recent research suggesting that children are not fully equipped to understand advertising even if they are able to generally recognize ads. The panelists explained that research shows that to fully understand advertising and its implications, consumers must: (1) be able to recognize that content is a paid advertisement, and (2) be able to understand the “persuasive intent” behind the advertising – i.e., that the advertisement is trying to persuade a consumer to do something. Children are likely to be unable to understand the persuasive intent behind the content they are viewing.

The panelists repeatedly mentioned that children are very susceptible to “blurred” digital advertising – i.e., advertising that looks like content – because they tend to be more trusting than adults. This susceptibility is especially apparent where “influencers” incorporate paid product placement into their digital content offerings.  

Panels 2 and 3: “The Current Advertising Landscape and its Impact on Kids” & “Looking Forward and Considering Solutions”

The two afternoon panels – “The Current Advertising Landscape and its Impact on Kids” and “Looking forward and Considering Solutions” – discussed the current legal landscape of children’s advertising and strategies to protect children from blurred or manipulative advertising, including:

• Paid Advertising Disclosures: Panelists agreed that one of the best ways to mitigate the harms of blurred advertising was to create disclosures that use child-friendly language and concepts – such as “this channel got money or free things to make this video.”
• Media Literacy Education: Panelists also emphasized that media literacy and a more complete understanding of advertising makes children better equipped to identify and respond to blurred or deceptive advertising.
• Ad-blocking Technologies and Parental Controls/AI for Identifying Ads: Some panelists supported ad-blocking technologies and the use of artificial intelligence to flag hard-to-identify advertisements. Others cautioned against using these technologies without further research because of the possible unintended economic consequences that might accompany widespread ad-blocking.

In addition to the strategies mentioned above, panelists discussed ways in which the FTC and industry may want to regulate digital content advertising in the future. FTC moderators asked both panels about whether regulating blurred advertising directed at children was within the scope of the FTC’s legal authority. The panelists were also asked to highlight potential First Amendment or Administrative Procedure Act challenges that might arise if the FTC began regulating the space.

It remains to be seen how the FTC will address blurred advertising and other children’s advertising issues in digital media moving forward. The FTC has the power to police false or misleading advertisements under its Section 5 authority, and we may see an increase in enforcement activity related to false or misleading children’s advertising as the agency continues its investigation into the space. Meanwhile, CARU has made clear that blurred advertising directed at children in the metaverse is an enforcement priority.