• FTC Rejects Bid to Label Product Placement
  • March 17, 2005
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • The Federal Trade Commission on February 10, 2005, denied a request from a consumer advocacy group asking that product placement on television be clearly labeled "Advertisement" during each instance it occurs.

    As reported in the November 15, 2004, issue of [email protected], in October 2003 Commercial Alert filed a complaint demanding that the television networks identify paid placement, or branded entertainment, in their programming with real-time pop-up disclaimers. The complaint cited examples ranging from Fox Broadcasting's American Idol show to ABC's Who Wants to Be a Millionaire. The existing FCC rules permit a program containing product placement to be broadcast as intended by a network as long as the presence of any product placement is noted, which typically occurs during the closing credits.

    Concluding its 16-month investigation, the Commission said it found little evidence that the marketing practice misleads or confuses consumers. In a letter to Commercial Alert executive director Gary Ruskin, the FTC said that product placement does not violate deceptive practices statutes because it does not make any objective claims regarding the quality of the product. "In most instances, the product placement appears on-screen or is mentioned, but the product's performance is not discussed. Therefore, the rationale for disclosing that an advertiser paid ... is absent," the agency wrote.

    The FTC also outlined what it considers to be deceptive ad practices by marketers, citing as an example a case involving BluBlocker sunglasses. The BluBlocker marketer created a 30-minute infomercial disguised as an investigative report, called "Consumer Challenge," that purported to objectively rate the product's attributes. The FTC added that if "false or misleading objective, material claims" about a product's attributes are made in a program, it will investigate. The agency said its current case-by-case approach to evaluating whether an ad format is deceptive remains the best way to protect consumers from misrepresentation.

    The FTC also said it would reexamine requirements for disclosures of payments to celebrity spokespeople who hawk their products on entertainment and news shows. Commercial Alert had complained that NBC didn't disclose that Lauren Bacall was paid by a pharmaceutical company when she talked about a drug on NBC's Today Show, one of several similar incidents.

    Commercial Alert's complaint prompted a major offensive by a coalition of advertising groups, media organizations, and First Amendment advocates, who countered that product placement can be an essential ingredient in the story being told through a program. They also contended that from a practical standpoint, Commercial Alert's proposal would have been difficult to implement and disruptive to programs.

    Significance: Although the ruling does not come as a surprise to most observers, it is a relief to marketers and media organizations alike. The FTC also refrained from taking any number of more moderate measures toward regulating product placement that went beyond the current rules.