BLURRED LINES: FEDERAL TRADE COMMISSION'S DIFFERENTIAL RESPONSES TO ONLINE ADVERTISING AND FACE TO FACE MARKETING.

• Author: Schmidt, Jennifer L.

1. Introduction

   Commercialism in America rose steadily throughout the 20th century and continues to expand into the everyday lives of Americans today. (1) In times of economic prosperity, shopping boosts capitalism while Americans try to keep up with their peers on the latest trends seen in magazines, television, film and social media. (2) To assist with economic growth, Americans are exposed to advertising in a variety of forms; many of which are hidden and not immediately apparent to the average consumer. (3) Most notably, there are the ever familiar television commercials and print publication advertisements dispersed throughout magazines. (4) In addition, most people can think of a slogan they recognize from a radio jingle. (5) However, without consumer knowledge, hidden articles exist within magazines highlighting specific products without disclosing that the company is paying for that spot. (6) Similarly, with the invention of social media, influencers now receive paid compensation and are sent free products to endorse companies on American's newsfeeds. (7) As time moves on, the lines between reality and advertising are blurring, and the Federal Trade Commission ("FTC") attempts to catch up with these advancing advertising methods. (8) However, this endeavor quickly became a game of cat and mouse as companies develop new methods of advertising at a rate faster than the FTC can keep up. (9)

   While the FTC begins to attack individual influencers on social media, rather than the companies that send them the products, companies adopt new methods to reach consumers. (10) Some of these methods implemented by companies such as Apple, Google, and Microsoft include sending brand ambassadors into public spaces and having them place and utilize products into the everyday lives of Americans. (11) As another method, brands such as the fashion houses of Chanel, Gucci, Louis Vuitton, and Dior provide potential critics with lavish lodging and perks to attend events. (12) This is all done in the hope of receiving a glowing review. (13) As a result, the reviewer receives an incredible life experience, and the company receives great reviews at the expense of the misled consumers who buy the company's products due to the positive reviews of these undisclosed relationships. (14)

   Recently, Silicon Valley companies such as Google, Microsoft, and Apple began sending technology to public school teachers in order to have them implement their products in the classroom. (15) While this may appear to benefit students, it also primes an entire generation to grow up using a specific type of technology. (16) As if the new tech weren't enough, public high schools will rent out advertising spaces within the school or on cafeteria menus to companies in exchange for financial payment. (17) Even other government infrastructures accept this form of commercialism by allowing logos and advertisements to be placed in parks and buildings. (18) The hope of the company is that students and young adults continue to use that brand into adulthood, since they grew up being taught how to use it or recognized the brand name from a childhood location that they often visited. (19) While regulating the advertising content that appears on social media as unsponsored posts is important, the FTC has completely ignored this new practice of face to face marketing that is arguably a step further into unfair business practices relating to advertising. (20)

   This note will begin with a history, highlighting the rapid changes in advertising laws and how the United States has attempted to place regulation on this practice. (21) It will then describe the recent rise of social media, and the relationships that individuals have with companies to become "influencers" and brand ambassadors. (22) Additionally, it will describe the FTC's attempts to catch up with the new forms of advertising that are being created by these companies. (23) This note will go into detail regarding other professions that have had restrictions placed upon their ability to advertise, such as lawyers and optometrists. (24) Furthermore, this note will zero-in on disclosure and why it is necessary in the advertising-ambassador relationship. (25) This note will analyze which entity will have the authority to address the problem of blurring lines between advertising and reality. (26) Finally, this note will conclude that it is necessary to adjust the regulations on advertising in order to protect the public from lack of disclosure and hidden advertising. (27)

2. History

   1. The Federal Trade Commission

      In 1914, President Woodrow Wilson signed legislation creating the FTC to enforce "the law of unfair advertising to protect consumers from unjust business practices." (28) Congress created the regulatory authority in response to Congressional disappointment by the Supreme Court's interpretation of the Sherman Act. (29) The comprehensive Federal Trade Commission Act ("FTC Act") is purposefully broad to avoid further misinterpretation by the Supreme Court in the FTC's powers to regulate commerce. (30) The FTC Act was originally created as a way to combat the new invention of trusts throughout the Progressive Era. (31) However, as of late, Congress passed laws granting the FTC with increased powers to combat new anticompetitive practices. (32)

      The FTC's mission is both to promote business and competition within the United States while protecting consumers from the practices that businesses might use to gain an edge in the marketplace. (33) On the consumer protection front, the FTC develops regulations, educates consumers about their rights, and sues companies and individuals that violate their laws. (34) In terms of business promotion, the FTC enforces antitrust laws, challenges anticompetitive mergers and other business practices that may harm consumers, and monitors business practices. (35) The FTC attempts to balance its missions without unduly burdening business activity, however this proves to be difficult when they act in both the interests of consumers and corporations. (36)

      Generally, the FTC is responsible for "identifying illegal practices, taking action against illegal practices through law enforcement, preventing consumer injury through education of consumers and businesses, and protecting American consumers globally." (37) The FTC Act provides a clear background for the investigative and enforcement authority of the FTC. (38) Section 9 of the FTC Act grants the FTC the power to subpoena witnesses for testimony or attendance in relation to an investigation. (39) Section 20 of the same act allows the FTC to seek enforcement of those subpoenas. (40) Furthermore, Section 6 grants power to the FTC to issue special and annual reports to serve as a guide for businesses to update their practices in order to accord with the regulations put forth by the FTC. (41)

      The Consumer Protection Clause located in Section 5 of the FTC Act provides enforcement power of disclosure by declaring unfair or deceptive acts or practices "unlawful when affecting commerce." (42) The FTC Bureau of Consumer Protection works alongside the Bureau of Economics in order to investigate cases and initiate civil enforcement actions to enforce consumer protection violations. (43) Section 5 is often cited to in regards to the issue at hand because a lack of disclosure in an endorsement or advertising context is typically the offense exercised by companies and endorsers on social media. (44) This section is enforced through settlements in response to complaints or administrative trials conducted by the FTC's complaint counsel, where the losing party may seek appeal through the Supreme Court of the United States. (45)

   2. Emergence of Advertising and Legal Limits Placed Upon Advertising in Early Years

      Advertising can be traced back to painted walls and signs found by archaeologists in the ruins of ancient civilizations. (46) The first modern sign of advertising began in the 1600's in the United Kingdom during the bubonic plague. (47) In 1704, the first newspaper advertisement ran in the "Boston News-Letter." (48) Benjamin Franklin started the rise of print advertising by running published pages of advertisements in the "Pennsylvania Gazette and General Magazine." (49) In 1843, the first advertising agency opened in Philadelphia by Volney Palmer, and the first convention of advertising agents was held in New York thirty years later. (50) In 1893, Munsey's Magazine became the first magazine to sell at stand value less than the subscription cost, thus keeping the magazine running through advertising revenue. (51)

      During the 1920s, radio emerged as a mass communication technology, utilizing voice broadcasting to deliver entertainment to listeners worldwide. (52) Radio began as a hobby for Americans who survived through the economic depression with enough money to purchase this new device. (53) Then, it quickly became a staple in homes as the economy began to regenerate. (54) Originating with a public service financial model, stations were quickly bought out with direct advertising for commercial messages - meeting concern from consumers and a threatened newspaper industry. (55) In 1929, American Tobacco Co. spent the largest amount of money that any company has ever spent on advertising for a single product, resulting in a $12.3 million advertisement on Lucky Strikes. (56) In 1938, radio officially surpassed magazines as the largest generator of advertising revenue. (57) However, in 1956, a videotape recording gave companies a new method of advertising with the rise of television and the ability to prerecord commercials. (58)

      In 1942, the War Advertising Council organized to prepare $350 million of voluntary, public service advertising campaigns during World War II. (59) Before 1976, United States courts drew a sharp distinction between the right to political speech and the right to advertise, as commercial messages could be...