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FTC Declines to Take Action on Product Placement

 

On February 10, the FTC announced that it would not propose rules requiring advertisers or television networks to disclose product placements in a clear and conspicuous manner or require them to specifically identify product placements when they appear on screen with the disclosure "ADVERTISEMENT". 

Commercial  Alert, a consumer watchdog group, had asked the FTC to investigate the growing practice of product placement in television shows and had asked the agency to issue guidelines that would require, among other things, an on-screen disclosure every time a product placement appeared.  Commercial Alert argued that consumers are misled about whether a product placement is an ad unless consumers are told that an advertiser paid for the placement.

The FTC responded by letter to Commercial Alert and explained that failing to tell consumers that a product placement is an advertisement does not violate Section 5 of the FTC Act (which prohibits unfair and deceptive acts or practices).  The FTC also said that most product placements do not contain any objective claims about the product, and if such claims were made and those claims were deceptive or misleading, the FTC could take action against the advertiser under existing laws.  Regarding spokespersons appearing on television shows who may praise certain products, the FTC noted that its Guides Concerning the Use of Endorsements and Testimonials already require the disclosure of any “material connection” between an endorser and an advertiser. 

The FTC also addressed Commercial Alert’s concerns about the effect of product placement on children.  Commercial Alert had suggested that programs containing product placement be clearly labeled so that parents can decide whether or not they want their children to watch the program.  In response, the FTC again stated that if an objective claim in a product placement were likely to deceive children, the agency would take action under existing laws.  Regarding product placements that cause children to demand that their parents buy certain products, the FTC said that product placement seems no different from ordinary advertising in this case, but it does not constitute a deceptive practice just because children ask their parents to buy the product.

The FTC concluded by saying that the existing statutory and regulatory framework provides sufficient tools for challenging deceptive acts and practices, even though there may be instances in which the line between advertising and programming may be blurred.

The FTC letter is online at http://www.ftc.gov/os/closings/staff/050210productplacemen.pdf.


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