Hot Topics in Advertising Law 2024: Priorities and Risk Mitigation

In 2024, brands and their agencies confront a heightened regulatory climate with enhanced legal risk. Twelve hot topics in advertising law for 2024 deserve priority.

The Federal Trade Commission (FTC) is activist and pursuing creative ways to obtain financial penalties. In so doing, it is working with state attorney-generals to investigate and pursue settlements. At the same time, the class action bar is similarly active, filing lawsuits that pursue the regulatory trends. Below are twelve areas of risk for advertisers and their agencies. In preparing a business plan for 2024, brands should work with their legal advisors and address  all of these hot topics to mitigate their risk.

The Hot Topics

1. Artificial Intelligence: 2023 brought an explosion of generative artificial intelligence. Despite the flurry of intellectual property litigation around the input/output of generative AI, it is here to stay. Each brand or agency needs internal policies and guidelines governing use of AI and disclosure around its use. It will take time for the market to adjust and technology solutions to emerge that contend with the intellectual property legal issues. For now, brands and agencies need to consider closely the impact of AI use on their third party relationships and contractual obligations In addition, AI targeting of consumers can result in bias and discrimination. Systemic review and policies are important here.
2. Influencer Marketing: In 2023, FTC issued revised endorsement/testimonials guides that impose strict standards for legal compliance. FTC’s proposed rule, expected to be implemented in 2024, would attach substantial financial penalties to violations of many of the same items mentioned in the guidelines. It is crucial to review influencer marketing programs and ensure compliance with updated guidance. In addition, now is the time to verify that brand training and compliance programs are sufficiently robust. If marketers are content with using #ad as a disclosure, they should be aware that this hashtag, that used to be the gold standard, may not be an appropriate disclosure in all situations. Finally, brands should consider auditing their agency and influencer contracts for possible amendments and optimal brand protection.
3. Reviews: Brand use of reviews is closely connected to influencer marketing. We can expect to see continued legal enforcement regarding evaluation, solicitation, moderation, screening, and posting practices. The days of only posting five star reviews or squashing low star reviews are over if a brand wants to avoid legal risk. In addition, repurposing organic reviews can create heightened legal risk, depending on the content of such reviews.
4. Dark Patterns: The phrase “dark patterns” identifies a now rampant regulatory lens for reviewing advertising/marketing practices. It is a high priority for regulators to view campaigns aggressively and seek out any potential manipulations of the consumer experience. So far, we have seen regulators apply this concept to the following marketing types of campaigns: auto-renewals, junk/hidden fee situations (pending active review at FTC now), pricing/discounts/free, cancellations and save-a-sale practices, refunds, sweepstakes, pre-approvals/qualifications, opt-in/opt-outs. Settlements with FTC have ranged from $3 million to $245 million. State regulators are in the game as well. Marketers should be auditing the consumer experience closely with legal involved.
5. Junk Fees: While the junk fees issue fits neatly into dark patterns, it is its own category for marketers auditing their practices. Passage of a new FTC rule and California Junk Fee law is imminent. Teams will need to consider the use of all-in pricing as a best practice. In addition, unfairness, rather than deception may become the applicable regulatory standard for judging how pricing is disclosed. (Note NY has pending legislation to expand its regulatory authority to unfair advertising. It is unclear yet whether that will include a private right of action.)
6. Disclosures: We are expecting new updated DotCom Guidelines sometime this year. Previously issued FTC consent orders, however, clarify the expected updates. The FTC is trending towards a new definition of “clear and conspicuous” and “prominent.” Disclosures need to be unavoidable. Implementation will be different depending on the context.
7. Puffery: In light of the above, the definition of puffery is narrowing. Marketers need to consider if it’s possible to substantiate claims before assuming they are puffery. In particular, with financial products, consumers are at high risk, and this historically activist regulatory climate will not be kind to “puffery” claims.
8. Health Claims: The Prevagen case is finally coming to trial in NY. That will certainly be one to watch in terms of understanding substantiation for health claims. In addition, NAD and FTC are pushing more scrutiny of studies, with more demands for randomized, controlled human clinical trials. Brands may want to have experts ready to explain the studies and how they support marketing claims. In preparing and maintaining a claims library, a marketing team needs to work with legal to determine if results have changed over time, remain statistically significant, and are relevant to consumers.
9. ESG & Aspirational Claims: To the extent a brand is involved with this kind of marketing, there is close scrutiny again to substantiation. Review needs to be ongoing to determine if any modifications to claims are needed. So, determining the lifecycle of a claim is important. In addition, reliance on seals/certifications continues to be potentially risky. On the environmental side, “free of” or “made with” may imply product benefits that don’t exist. FTC will likely issue revisions to its Guides for the Use of Environmental Marketing Claims (Green Guides) this year. The agency may also engage in rulemaking around these guides to increase the chances of financial penalties.
10. Prize Promotions: Regulators are taking a closer look at the concept of substantial effort as consideration. In addition, marketing, entry, and fulfillment execution may create as much legal risk as inadequate terms and conditions. Ideally, brands should invite legal involvement in every aspect of creating prize promotions. Vendor contracts need scrutiny as well for warranties and indemnities.
11. Auto-renewal, Negative Option, and Continuity Programs: There is a cascade of regulation out of states in this area, as well as pending changes on the federal law. The focus is on communication of terms, clear and easy cancellation, and reminder notices. This area of marketing is likely to result in large figure settlements if legal action is brought by regulators or plaintiffs’ attorneys.
12. Arbitration and Terms of Services: We are continuing to see an evolution of mass arbitration and risks to clients. It may be appropriate to consider all options on dispute resolution, including providers of arbitration services to avoid large administrative fees. It also may be appropriate to redraft consumer-facing arbitration and other dispute resolution clauses. On a related note, brands should not rely on browsewrap agreements or email to gather consumer consent to terms of service. It is best to obtain explicit consent from the consumer, such as clicking a button or checking a box.

WHAT TO DO

With all of the above hot topics in advertising law in mind, what should  advertisers and agencies prioritize?
• Clarify policies and contractual relationships around the use of generative AI.
• Audit your customer interactions to identify what regulators or plaintiffs’ attorneys may see as a “dark pattern.” 2024 should be the year to focus on unavoidable disclosures. The more a brand can prove clarity around consumer decisions, the better legal position it will have.
• Substantiate your claims and do not assume the puffery defense will work in this regulatory climate. Be careful of claims embedded in organic consumer posts.
• Clarify your contractual positions, training programs, and monitoring programs around influencer marketing. Do not assume the rogue influencer will not be a threat to the brand. While influencers need freedom, they need to understand that they have legal obligations. You may need to update your endorser/influencer agreements.
• Review your collection and use of customer reviews. With a proposed FTC rule about to be codified, the financial stakes are high. Your use of reviews should be transparent, truthful, and honest.
• Consider your pricing. The FTC and California are paving the way for new law around junk fees.
• Review your terms of service and consider how you may need to update the consumer experience around consent. Think proactively about future disputes and consider the implications of an arbitration clause and the potential for mass arbitration.

If you need legal advice on these twelve hot topics in advertising law, contact us here.