The top advertising and marketing issues this year are largely
focused on one theme: Protection. Marketers will need to be aware
of various trends that could threaten their intellectual property
rights, reputations and market shares. Meanwhile, regulators are
focusing on ensuring consumers – especially children – are
protected from dark patterns, privacy breaches, false claims and
other unscrupulous marketing practices.
Below are the issues that marketers must be aware of in 2023
and, in some cases, address immediately.
Top 10 Issues for 2023
1. Artificial Intelligence
Artificial intelligence (AI) is an increasingly popular tool
used to create a variety of content – including images, sounds, and
text. AI platforms can generate content from text prompts, images
and other materials uploaded to the platform. AI platforms may use
a limited set of inputs (e.g., those uploaded by the user), or a
wide range of inputs (e.g., scraping from various sources on the
Internet).
Using AI-generated content in advertising presents unique legal
issues, including that:
- An AI platform may not permit commercial use of content
generated by the platform. Before using AI-generated content in
advertising materials, it is critical to review the platform’s
terms of service to understand the scope of permissible use. - Many AI platforms do not provide representations and warranties
that AI-generated materials will not infringe on the rights of
others. This means that you may be using the platform’s
AI-generated content at your own risk. - Users of AI platforms may not be able to obtain exclusive
ownership of AI-generated content (and, relatedly, may not be able
to transfer ownership rights to clients). - While this area continues to evolve, the U.S. Copyright Office
has taken the position that AI-generated works do not qualify for
copyright protection and cannot be registered. Accordingly, you may
not have legal recourse against third parties who use the
AI-generated work without permission. - AI-generated content may infringe the copyright in a
pre-existing work (including, for example, if the AI-generated
content is substantially similar to protectable expression in a
copyrighted work used to train the AI platform).
2. Influencers, Endorsements and Consumer Reviews
The FTC’s updated Endorsement Guides, expected to take
effect later this year, will result in increased enforcement
against deceptive influencer marketing practices. This includes
actions involving virtual influencers, who are expressly covered by
the updated Endorsement Guides. As influencers continue to reap
millions of dollars in return for their posts, they will be held
directly liable for their violations. In addition, the FTC has made
it clear that agencies will be held liable for their client’s
influencer campaigns when they intentionally engage in
deception.
Riding high on last year’s $4.2 settlement with online retailer Fashion Nova, the FTC will
continue to bring actions against companies that suppress negative
reviews and ratings and review sites that allow companies to pay
for higher rankings.
3. Negative Social Stereotyping
The NAD announced in September that it would begin addressing
advertising that is “misleading or inaccurate due to its
encouragement of harmful social stereotyping, prejudice, or
discrimination.” Although the NAD has not brought any
proceedings based on this authority, CARU – the NAD’s sister
agency charged with reviewing child-directed advertising – has used
similar authority against clothing and toy companies that allegedly
promoted harmful ethnic and gender stereotypes. Whether, and the
extent to which, the NAD will leverage this authority (as well as
whether the FTC would ultimately enforce a decision by the NAD)
remains an open question. However, marketers should be on alert
that stereotyping in advertising will now entail more than just
negative PR implications.
4. Children’s Advertising and Privacy
As the “kid influencer” marketplace continues to
explode, the FTC will determine whether additional regulations are
needed to protect children from influencer marketing and native
advertising content that blurs the lines between advertising and
content. The Children’s Advertising Review Unit (CARU) will be
monitoring the metaverse, where it intends to strictly enforce its
Guidelines, including the blending of influencer marketing and
advertising into content and games.
On the privacy front, the FTC will continue its review of the
Children’s Online Privacy Protection Act (COPPA) to determine
whether additional changes are warranted. Congress will look to
enact new laws to extend COPPA and other privacy protections for
children and teens online, as states decide whether to follow
California’s lead in enacting its own Age-Appropriate Design Code Act.
5. Name, Image and Likeness
The most significant development in college athletics in 2022
occurred off the field. Prompted by a lack of rules and oversight
over athlete name, image and likeness (NIL) rights, boosters began
to pool funds to help facilitate NIL deals for athletes and create
their own ways for athletes to monetize their brands. By the end of
2022, more than 200 NIL collectives were formed, supporting
student-athletes at colleges and universities nationwide.
Some NIL collectives operate as marketplace collectives,
providing a digital meeting place for student-athletes and
businesses/sponsors to monetize NIL rights. But most NIL
collectives are donor-driven. Boosters and school supporters pool
together, in many cases, millions of dollars to distribute to
student-athletes and their families in exchange for NIL rights
benefiting the donors. Donor-driven NIL collectives are a direct
challenge to the NCAA’s rules against “pay for play.”
Yet antitrust concerns continue to hamper the NCAA’s
enforcement efforts. Expect continued tension between the NCAA and
NIL collectives and renewed efforts to find a federal legislative
solution.
6. Sponsorships
As 2022 came to a close, the sports and live event sponsorship
industry approached a return to normalcy. But with that return to
normalcy came challenges both old and new. The bankruptcy
proceedings and related litigation involving crypto exchange FTX
highlighted the perils of new industries entering the sponsorship
market. The FTX meltdown cast a pall over the entire crypto-focused
industry, one of the fastest growing segments of the sponsorship
market.
The return of large-scale international events in 2022 also
highlighted the risks of local customs to global sponsorships. Just
days before the start of the 2022 FIFA World Cup, Anheuser-Busch
was stung by a decision by the Qatari government to ban alcohol
sales at World Cup venues. The decision took a significant chunk of
value out of its $75 million sponsorship, leading Anheuser-Busch to
reportedly seek a credit of more than $40 million on its 2026 World
Cup sponsorship fee.
Long-term sponsorships will inevitably be faced with unexpected
disruptions. The events of 2022 illustrate the need to create legal
and business frameworks for responding to disruptions in a way that
preserves value and enhances long-term relationships.
7. Dark Patterns
The FTC will continue to focus on “dark patterns.”
These are user interfaces designed to trick or manipulate users
into taking actions they would not otherwise approve of, or putting
obstacles in place to discourage consumers from exercising certain
rights. As discussed previously in FTC Staff Report Brings Dark Patterns to Light
and in FTC to Focus on Subscription Services – Hints at
Taking Action Against “Dark Patterns,” dark patterns
can encompass a wide range of common marketing practices, from
urgency offers to fee disclosures.
Companies should review design techniques and ensure that they
are not using dark patterns in a way that the FTC might consider
deceptive. In particular, the FTC is focused on design elements
that:
- Induce false beliefs (e.g., countdown timers on offers that are
not actually time limited) - Hide or delay disclosure of material information (e.g.,
“drip pricing,” where only part of a product’s total
price is advertised) - Lead to unauthorized charges (e.g., obscuring the fact that a
free trial will convert to a paid subscription absent
cancellation) - Obscure or subvert privacy choices (e.g., making sharing data
the default setting or the more prominent choice)
8. Automatic Renewal
Automatic renewal and negative option offers come in a variety
of forms. Generally, they contain a term or condition under which
the seller may interpret a consumer’s silence or failure to
take affirmative action to reject a good or service, or to cancel
the agreement, as acceptance or continuing acceptance of the offer.
The FTC and state regulators continue to be keenly focused on these
types of offers, which carry the potential to deceive consumers
into making purchases they would not otherwise make.
In particular, the 2022 California updates to its already robust
automatic renewal law include additional notice and
cancellation requirements for free trials, as well as for
automatically renewing subscription plans. The FTC will keep a
close eye on these programs in the wake of its Enforcement Policy
Statement on Negative Option Offers and associated review of its Negative Option Rule. In light of these
developments, retailers and marketers should conduct an audit of
their subscription programs to avoid being in the crossfire.
9. Environmental Marketing and Sustainability
Environmental marketing claims will continue to be the focus of
regulatory, self-regulatory and class action challenges in 2023
particularly with respect to general environmental benefit and
aspirational claims. For example, in the past year:
- The FTC reached a combined $5.5 million settlement with
Kohl’s and Walmart for the retailers’ allegedly making
misleading representations that textile products provided
environmental benefits because they were made of rayon derived from
bamboo, as we previously discussed. - The National Advertising Division (NAD) challenged a wide
variety of environmental claims – including general environmental benefit claims and aspirational
claims – through its independent monitoring of the marketplace
(not by way of a competitor challenge). This activity is another
indicator that these claims are an enforcement priority. - A wave of class action activity focused on alleged
“greenwashing” and general environmental benefit,
recyclability and aspirational claims.
At the end of 2022, the FTC announced that it is seeking public
comment on potential updates and changes to the Green Guides for
the Use of Environmental Claims, which have not been updated since
2012. Notably, the FTC specifically invited comments regarding
whether the revised Guides should provide additional information on
carbon offsets and renewable energy claims, “recyclable”
and “recycled content” claims, and if additional guidance
is needed for claims such as “compostable,”
“degradable,” “ozone-friendly,”
“organic” and “sustainable, as well as those
regarding energy use and energy efficiency.
10. Brand Protection in Digital Media
Digital media allows brands to reach consumers throughout the
global market. However, digital content is also inherently easier
to copy, allowing infringers to easily make unauthorized uses
appear legitimate. Therefore, it is important that brands protect
their intellectual property online to ensure consumers are not
misled by infringing third-party uses – and to prevent the
potential reputational harm that results from those infringements.
Early protection of a brand’s intellectual property allows it
to pursue more efficient enforcement actions against infringers
online. This includes standard takedown reports and Digital
Millennium Copyright Act (DMCA) notices of infringing content
through webhosts or Uniform Domain-Name Dispute-Resolution Policy
(UDRP) proceedings through ICANN’s arbitration procedures.
Having registered trademarks and/or copyrights ensures that the
relevant authority reviewing the enforcement action will take it
seriously, and will often expedite the processing.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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