Businesses operating in the online advertising industry are required to abide by specific laws and regulations. These laws create frameworks that ensure a fair and competitive business environment while protecting the rights of consumers. Whether you’re a business looking for online advertising solutions or a marketing company that offers such services, it’s essential to know what your legal obligations are.
While this guide introduces and explores significant ground with respect to digital advertising regulations, it’s by no means exhaustive. Consult legal expertise to help understand the laws that impact you as a digital advertiser. Additionally, you should consult legal expertise to understand the measures you need to take to ensure ongoing compliance within your industry as well as both within the U.S. and any other countries in which you operate.
The Purpose of Digital Advertising Regulations
Advertising regulations exist in order to ensure that businesses are advertising products in ways that are not just legal but also ethical. Regulations hold companies to consistent standards. At the same time, they ensure that consumers are aware of their rights and have the means to seek recourse in case of non-compliance.
To Prevent Harmful or Explicit Content
Digital advertising regulations help prevent the dissemination of harmful or explicit content. In the BBB National Programs’ Self-Regulatory Program for Children’s Advertising, for example, one of the guidelines references “not portraying or encouraging behavior inappropriate for children (e.g., violence or sexuality) or include material that could unduly frighten or provoke anxiety in children.” It goes on to say that advertisers targeting children should avoid “displaying or knowingly linking to pages of a website or online service that portray such behaviors or materials” as part of their advertising campaigns.
Regulations also help eliminate misleading content and deception in digital advertising services. Take the specific case of native advertising regulations. In native advertising, ads appear to be cohesive within the environment in which they are placed, potentially making them appear to be organic or editorial content. This is why requirements exist that ensure native ads are identifiable as advertising before the user clicks through to the main content. This doesn’t only protect the consumer; it prevents a negative impact on a brand’s reputation as they avoid being unintentionally misleading.
To Protect the Consumer and the Advertiser
Advertisers who follow applicable rules and regulations have an advantage over other businesses since they appear more immediately credible and trustworthy to consumers. Consumers can have greater confidence that the business is following fair marketing practices. The advertiser also has consistent boundaries to stick to, so there’s no gray area regarding what’s expected from them. At the same time, everyone can be aware of their own rights.
The Consumer Review Fairness Act (CRFA), for instance, came into effect to address complaints of businesses attempting to prevent consumers from posting negative reviews online through prohibition or threat of legal action. The act prevents companies from:
- Barring or restricting the ability of a person who is a party to a contract to review a company’s products, services, or conduct;
- Imposing a penalty or fee against someone who gives a review; or
- Requiring people to give up their intellectual property rights in the content of their reviews.
Companies can no longer penalize or threaten for posting honest reviews. At the same time, the advertiser has protective rights too. The law allows for prohibiting or removing reviews that:
- Contain confidential or private information — like a person’s financial, medical, or personnel file information or a company’s trade secrets;
- Are libelous, harassing, abusive, obscene, vulgar, sexually explicit, or inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristics;
- Are unrelated to the company’s products or services; or
- Are clearly false or misleading.
Digital Advertising Regulatory Bodies
Every digital advertiser needs to keep abreast of news and updates from regulatory bodies to ensure compliance. Especially significant for advertisers in the U.S. are the Digital Advertising Alliance and the Federal Trade Commission.
What Is the Digital Advertising Alliance?
The Digital Advertising Alliance (DAA) is an independent non-profit consortium led by prominent advertising and marketing trade organizations in the U.S. The DAA includes associations like the 4A’s (which is the national-level trade association for the advertising industry), the American Advertising Association (AAF), the Association of National Advertisers (ANA), BBB National Programs, the Interactive Advertising Bureau (IAB), and the Network Advertising Initiative (NAI).
The DAA aims to create and enforce responsible privacy practices within the digital advertising industry, fostering transparency and control for the end consumer. The organization provides guidelines (primarily self-regulatory) for several sub-categories such as addressable media identifiers, political advertising, data used across devices, data from within the context of the mobile environment, multi-site data, and online behavioral advertising (OBA).
The DAA is one of the critical organizations businesses need to be aware of from the perspective of digital advertising regulation.
The Federal Trade Commission and Its Role
The Federal Trade Commission (FTC) is the governing body protecting both consumers and competition. They work to prevent anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education. The FTC provides guidelines for specific aspects of advertising and marketing, including children’s online privacy, endorsements, influencers, and reviews, online advertising and marketing, disclosures, and health claims, which you can find here.
Examples of Advertising Policies and Regulations You Should Be Aware of
While the DAA provides a framework for self-regulation in a wide variety of digital marketing services, it’s also necessary for businesses to be aware of core advertising regulations in the U.S. that impose additional obligations.
Bear in mind that unlike in Europe with its recently instituted General Data Protection Regulation (GDPR), the U.S. has a complex mesh of state and federal laws to navigate for privacy, often further complicated by the fact that these laws relate to specific types of data (related to health, financial, or population-specific such as students, etc.). Currently, only the states of California, Virginia, and Colorado have state-level legislation for data privacy protection, and there is a need for a more consistent approach at the federal level.
Digital Advertising Act
The Competition and Transparency in Digital Advertising (CTDA) Act was introduced in May this year to level the playing field for competitors in digital advertising by eliminating the monopoly and conflicting interests of big tech giants like Facebook and Google through their online platforms. Some of the criticisms that have prompted the bill include the manipulation of ad auctions, monopolization of rents, privacy concerns, and concerns over privacy and censuring speech.
The CTDA Act segments operators into two types:
- Large digital advertising companies processing more than $20 billion in digital ad transactions (related to digital ad revenue). The act prevents such companies from owning more than one part of the digital ecosystem. In place are restrictions on the ownership of supply-side and demand-side platforms. So, for example, neither platform type can be owned by ad exchange owners on the one hand and buyers and sellers of digital advertising on the other (unless it’s for advertising their own products). Supply-side advertisers cannot own a demand-side platform, and vice-versa.
- Medium-sized and larger digital advertising companies that process more than $5 billion in digital ad transactions. The act requires such operators to abide by a few specific obligations:
- Operators must act in the best interests of their customers at all times and provide transparency when they do this. This way, customers can authenticate that they are indeed being served in their best interests.
- If the business entity operates on both sides of the market, it is expected to ensure firewalls are in place to prevent abuse and eliminate conflicts of interest.
- Operators are expected to provide fair access to all customers concerning aspects such as performance, transactional information, functionality, and exchange processes.
Privacy Policies and Privacy Rights
We discussed how data privacy policies could vary across jurisdictions, data types, and demographics. Here are just a few examples of some of these laws.
- The Children’s Online Privacy Protection Rule (COPPA). This rule regulates the collection of personal information from children under 13. The exhaustive list of guidelines includes such restrictions as the need to obtain verifiable parental consent prior to any collection, use, and/or disclosure of personal information from children, and providing a reasonable means for a parent to review the personal information collected from a child and to refuse to permit its further use or maintenance.
- The state-level California Consumer Privacy Act of 2018 (CCPA) and its amendment, the California Privacy Rights Act (CPRA) which will mostly come into effect in 2023. One of several rights that a California consumer has under the CCPA is to request the categories and specific pieces of personal information that a business collects from them. The CPRA establishes the California Privacy Protection Agency to implement and enforce the law.
- At a federal level, the Gramm-Leach-Bliley Act requires financial institutions to disclose their information-sharing practices to their customers and to safeguard sensitive data. Financial institutions here refer to companies that offer consumers financial products or services like loans, financial or investment advice, or insurance. More specifically, financial institutions must share their privacy policies and practices related to affiliated and non-affiliated third parties. The customer should also be allowed to opt-out of the disclosure of their non-public personal information to a non-affiliated third party if the disclosure is outside of what’s allowed under the act.
Digital Advertising Accountability Program
A collaborative effort between BBB National Programs and the DAA, the Digital Advertising Accountability Program is an independent third-party program that seeks to empower consumers and build their trust in interest-based advertising by essentially enforcing the DAA’s Self-Regulatory Principles for data privacy and in web and mobile advertising. It achieves this through:
- Monitoring how ad tech entities and content publishers collect and use web surfing and app usage data for interest-based advertising. Also, stepping in to resolve complaints of suspected non-compliance with the DAA Principles. Consumers receive real-time notifications on interest-based advertising and are given the opportunity to opt out from the advertising platforms.
- Resolving complaints connected to interest-based advertising practices and taking the necessary steps to address grievances, whether through a formal inquiry or referring the matter to the appropriate complaint handling mechanism, sometimes a federal or state regulatory agency.
- Enforcing compliance through inquiries, warnings and taking corrective action against non-compliance. Compliance warnings and the results of formal cases are publicly viewable.
- The program ensures that consumers receive the necessary communication when they see political ads and know who is paying for them (contained within DAA’s Political Advertising Principles).
- Engaging with consumers and businesses to educate them about interest-based advertising and the relevance and impact of the Digital Advertising Accountability Program.
SEC Advertising Regulations
The U.S. Securities and Exchange Commission (SEC) effectively attempted to modernize the rules governing investment advisor advertisements under the Investment Advisers Act last year. So, among the general prohibitions would be items like referring to specific investment advice provided by the adviser that is not presented in a fair and balanced manner. There are also regulations on endorsements, testimonials, and performance information. Third-party ratings are prohibited in advertising according to SEC’s advertising regulations unless the adviser provides disclosures and meets specific criteria in relation to how the rating was prepared.
EDAA’s Self-Regulatory Programme
If your company operates outside of the U.S., it’s also important to be aware of global advertising regulations that could affect how you do business in specific countries. For example, the European Interactive Digital Advertising Alliance (EDAA) spearheads the European self-regulatory programme for data-driven (first and third-party) or online behavioral advertising. Like the American program, EDAA’s version allows participating companies to use an AdChoices Icon with approved text for each European market. You can find the specific details in the Technical Specifications for implementing the European Industry Self-Regulatory Framework for Data-Driven Advertising and EASA BPR in Europe.
The Importance of a Healthy Digital Advertising Ecosystem
A healthy digital advertising ecosystem ensures a level-playing field for everyone, whether the business, the consumer, or third-party service providers. It can help eliminate unfair or unethical practices that could eat away at or harm the profits of fair-trade companies. Plus, customers can rest easy knowing that protective measures are in place to protect their rights.
How Does This Impact How We Go About Online Advertising?
While digital advertising laws and regulations can be complex and, at times, a veritable compliance nightmare, they serve to protect the community at large.
Making sense of laws and adapting technological practices and systems can be cumbersome. At the same time, compliance can ensure you work well within accepted frameworks of legality and ethics. It can prevent legal complications going forward, which can prove costly. Also, customers are more likely to trust and engage long-term with businesses prioritizing compliance and consumer protection rights.
Adapting with agility to rules and regulations will therefore be critical in any form of online advertising.
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We are committed to ensuring success for all our partners. For more information on how AUDIENCEX can benefit your business and help you navigate this ever-evolving landscape, connect with a member of our expert team here.