FTC Updates Guidance to Search Engine Industry on the Need to Distinguish Between Advertisements and Search Results

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The Federal Trade Commission recently sent letters to a number of search engine companies regarding what the FTC perceives to be "a decline in compliance" with the FTC's 2002 guidelines requiring that search engine results clearly and prominently distinguish natural search results from paid advertising. In the letter, the FTC notes that the failure to properly distinguish natural results from paid advertising could create a potential for consumers to be deceived in violation of Section 5 of the FTC Act.

Search engines sell "keywords" to vendors who want their product advertising to be displayed when a person searches for a term containing that keyword. A law firm, for example, might be willing to pay a search engine to prominently display the firm name and website link when someone searches for "law firms New York." Search results often contain both natural results generated by the search method used as well as paid results. The problem, as the FTC sees it, is that consumers might not be able to tell the difference.

The FTC originally issued a guidance letter on the need to distinguish the two types of results in 2002 and expressed satisfaction with the initial level of compliance. Since then however, the FTC has observed what it believes to be a decline in compliance with the 2002 letter. For example, the FTC contends that to the extent a search engine may use shading and text to differentiate the results, the shading has become significantly less visible and the font size of the text reduced. The difficulty in distinguishing between the two types of results, under these circumstances, may have become more acute with the increased use of smaller devices, such as smart phones, to conduct searches. 

On June 24, 2013, the FTC sent a updated guidance letter to general-purpose search engines AOL, Ask.com, Bing, Blekko, DuckDuckGo, Google, and Yahoo!, as well as 17 of the most heavily trafficked search engines that specialize in the areas of shopping, travel, and local business and that display advertisements. The letter emphasizes the importance of using labels, visual cues and other techniques that are sufficiently noticeable and understandable to effectively distinguish advertisements in order to avoid misleading consumers.

In particular, the FTC recommends more prominent shading or a border for top ads or other advertising results integrated into natural search results. Additionally, the FTC suggests that search engines use a text label to distinguish advertising. The text label should: (1) use language that explicitly and unambiguously conveys if a search result is advertising; (2) be large and visible enough for consumers to notice it; and (3) be located near the search result (or group of search results) that it qualifies and where consumers will see it. The FTC recommends that any text label used to distinguish advertising results should be placed immediately in front of an advertising result or in the upper-left hand corner of an ad block.

The FTC letter also emphasizes that while online searching is evolving in a rapid fashion the need to do what is necessary to make advertising distinguishable from search results will remain constant. The basic message is that consumers should always be able to easily distinguish natural search results from the advertising that search engines deliver. The letter asks search engines to review their websites and methods of displaying search results and make any necessary adjustments to ensure they are clearly and prominently disclosing any advertising. 

As stated in the FTC's original guidance in 2002 and in the updated guidance in June of 2013, the failure to clearly and prominently distinguish advertising from natural search results could be a deceptive practice in violation of Section 5 of the FTC Act.  

Links to the June 25, 2013 FTC Press Release and the prototype FTC June 24, 2013 Letter are set forth below.

This guidance is another step in the FTC's ongoing effort to stay current with the constant changes in digital media. It has also recently updated its guidance to the Dot Com Disclosures and the Endorsements and Testimonial Guides.