In a speech to the Promotion Marketing Association, Director of the FTC’s Bureau of Consumer Protection, David C. Vladeck, described several areas of consumer advertising that have seen significant new developments and enforcement activity. One of those areas is mobile marketing, which, with the proliferation of smart phones that can access the Internet and e-mail, has become an important medium for businesses to reach consumers. According to at least one estimate, US mobile advertising spending will reach 5 billion dollars by 2015. Thus, Vladeck believes that the burgeoning mobile advertising market is one the current challenges facing the FTC.
In discussing mobile advertising, Vladeck first discussed the FTC’s efforts in addressing potential privacy issues relating to mobile technology. In 2008, the FTC hosted a Town Hall meeting to explore various consumer protection issues in the mobile marketplace. As a result of the Town Hall meeting, the FTC has expedited its regulatory review of the Children’s Online Privacy Protection Rule from 2015 to this year due to the unique privacy issues surrounding mobile marketing practices towards children and teens. In addition, the FTC’s staff is drafting a report that will further address two significant issues raised at the meeting: the extent to which location-based services were proliferating in environment without any basic rules or standards; and the degree to which transparency of information sharing is possible on mobile devices.
Vladeck next described investments that the FTC has made in enhancing its enforcement capabilities in the mobile advertising area. For example, the FTC has recently purchased equipment, including a fleet of smartphone devices on various platforms and carriers, to better conduct investigations in mobile advertising and enable the staff to collect evidence from mobile devices. Vladeck has also assembled a team to specifically monitor developments in mobile technology and watch for unfair and deceptive practices in mobile advertising. The FTC recently brought a case this year against companies marketing products in the mobile space. In August, the FTC entered into a consent agreement with the marketing company, Reverb, which it accused of deceptively endorsing mobile gaming applications online (see prior blog here). The FTC alleged that Reverb was having its employees pose as ordinary consumers and post positive reviews of the games at the online iTunes store without disclosing that the reviews came from paid employees working on behalf of the game developers. The FTC alleged that this information would have been material to consumers reviewing the iTunes posts in deciding whether or not to buy the games. In the consent order, Reverb agreed to stop making such representations unless it discloses a material connection, when one exists, between the company and the product.
Vladeck warned that in order for mobile advertising to avoid regulatory scrutiny, marketers must not be deceptive or unfair; marketers should not mislead consumers about what they are downloading on their mobile devices or treat them unfairly; and consumers should have clear information so they can make informed choices. Issues with negative options or programs with recurring charges present particular issues on mobile devices where due to the screen size the room for disclosures may be more limited than with a traditional computer screen. (Last week the FTC filed a complaint against companies accused of running illegal negative option schemes.) With the increased scrutiny and investigative resources targeting mobile advertising, Vladeck said that he expects that there will be more law enforcement actions against mobile advertisers in the near future. Finally, Vladeck stated that the FTC has expanded their consumer educational materials on mobile use. In the latest update of the brochure: “Net Cetera: Chatting with Kids About Being Online” includes information on the potential pitfalls teens can fall into when using their mobiles phones.
Overall, companies intending to advertise over mobile devices should be aware that the FTC has expanded its capabilities in identifying deceptive practices in mobile advertising and that the FTC will apply the same legal standards to mobile advertisements as they do to both offline and online advertising.