FTC Holds Event on Digital Marketing and Blurred Advertising's Impact on Children – Wilson Sonsini Goodrich & Rosati

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On October 19, 2022, the Federal Trade Commission (FTC) held a virtual event to explore the concept of “blurred” advertising in digital media and its impact on children. As the FTC is considering updates to rules related to both the Children’s Online Privacy Protection Act (COPPA) and advertising, Chair Lina Khan suggested that children are likely to be more susceptible to deceptive or harmful practices caused by blurred advertising because they may provide their personal information or unknowingly engage in commercial transactions. This event addressed a variety of topics but focused on three main areas: children’s cognitive abilities when processing advertising content, quantifying harm under the current legal and regulatory landscape, and possible solutions to address how children can more intelligently engage with blurred advertising content.
Opening Remarks
Chair Khan opened the event by emphasizing how much advertising directed towards children has evolved over the last few decades. Particularly, as children have developed an interest in and natural competency with digital technologies, advertising in digital spaces has shifted to mix organic content with advertising content, thus exposing children to as many as a thousand advertisements a day. She explained that the FTC is particularly concerned with this exposure because children may be vulnerable to advertising designed to exploit them for commercial gain as their brains are still developing.
Chair Khan closed her remarks by mentioning that the FTC is exploring several options to tackle issues with advertising, including updating the commission’s rule implementing COPPA, engaging in a proposed rulemaking related to commercial surveillance, and continuing to aggressively pursue law enforcement actions using existing legal authorities.
Presentation: Children’s Advertising Show and Tell
Mamie Kresses, vice president of the Children’s Advertising Review Unit (CARU) of BBB National Programs, analyzed the FTC’s current authority to address children’s advertising. When the FTC tried to place restrictions around all advertising directed towards children in the 1970s with its KidVid rulemaking, U.S. Congress revoked the Commission’s authority to adopt a children’s advertising rule based on an “unfairness” theory. This restriction is still in place today. Kresses also mentioned that although COPPA isn’t focused on advertising, it is relevant in helping determine what content is child-directed, as it is the only federal law that defines what “directed to children” means.
Kresses then provided screenshot and video examples of content that children and teens are likely to see that may contain blurred advertising. The first set of examples looked at gaming websites designed for children with inviting colors and cartoon-like graphics, but either required children to click through branded content or potentially make a purchase before they could continue playing the game. She mentioned that young children may be particularly susceptible to financial and emotional manipulation for this type of digital media. The second set of examples were videos of kids or teens using certain products. Kresses claimed it was unclear whether the kids or teens in these videos were paid or not, demonstrating the importance of disclosing relationships between influencers and brands in a way that kids can understand. 
First Panel: Children’s Cognitive AbilitiesWhat Do They Know and When?
The first panel explored how children’s cognitive abilities at different ages and developmental stages affect the way they understand advertising content. Panelists were asked to discuss factors that impact a child’s ability to process both advertising messaging and an advertisement’s persuasive intent.
The panelists emphasized the importance of children being able to recognize advertising as advertising so they can make informed decisions about the content they consume in digital spaces. All panelists agreed and noted that children’s ability to recognize an advertisement involves different processing skills from their ability to understand the persuasive intent behind an advertisement.
Second Panel: The Current Advertising Landscape and Its Impact on Kids
The second panel focused on the strategies for evaluating and addressing the harms presented by blurred advertising through legal, regulatory, and self-regulatory mechanisms.
Panelists debated whether the FTC had the authority to issue rules for advertising directed to children. One panelist noted that Congress specifically limited the FTC’s regulatory authority over children’s advertising through the FTC Improvements Act of 1980,1 and said that this prohibition would extend to digital advertising. Other panelists disagreed, arguing that advertising today is not “substantially similar” to the advertising the FTC tried to regulate under KidVid. One panelist also suggested that the FTC would have the authority to regulate blurred advertising under its deception authority.
Panelists were asked to discuss how they would quantify financial, psychological, physical, and privacy harms caused by blurred advertising. Notably, one panelist expressed skepticism about measuring financial harm caused by blurred advertising in a post-AMG world.2 Instead of the FTC being able to look at a company’s revenues generated from blurred advertising, it would have to examine whether the existence of blurred advertising had a material impact on a child’s decision to make a purchase. The issue with this approach is that if a child cannot identify the presence of an advertisement, there may not be a material difference when the child decides to make a purchase based on a blurred advertisement. Another panelist stated that financial harms should be thought about more broadly since unintended purchases are likely to impact a child’s parents as well.
Third Panel: Looking Forward and Considering Solutions
The third and final panel examined different methods for, and challenges in, crafting solutions to protect children from blurred advertising. Discussion topics included the benefits and challenges with designing iconography that may help alert children to the existence of paid advertising, the need for media literacy campaigns, and the benefits and limitations of self-regulation compared to FTC enforcement.
The moderator asked several questions, including about whether the FTC should take the lead on addressing harms caused by blurred advertising, encouraging ad blocking, or providing guidance on the design of disclosures. The panelists mostly agreed that blocking ads is not the ultimate solution because it prevents families from engaging with free, ad-supported content, but there should be a balance between industry-led solutions and regulatory guidance. Several panelists also said that self-regulation is useful since technology is constantly changing, but one cautioned that it cannot be the primary solution because the advertising industry is still operating within outdated legal frameworks.
Public Comment
The FTC is seeking additional public comment on how children are affected by digital advertising and marketing messages that may blur the line between advertising and entertainment. Comments must be submitted by November 18, 2022.
Wilson Sonsini Goodrich & Rosati routinely helps companies navigate complex privacy and data security issues. For more information or advice concerning cybersecurity compliance or investigations, please contact Libby Weingarten, Lydia Parnes, or any member of the firm’s privacy and cybersecurity practice.
[1]FTC Improvements Act of 1980, Pub. L. No. 96-252, 94 Stat. 374 (1980). Section 18(h) of the FTC Act prohibits the Commission from promulgating “any rule in the children’s advertising proceeding pending on May 28, 1980, or in any substantially similar proceeding on the basis of a determination by the Commission that such advertising constitutes an unfair act or practice in or affecting commerce.”
[2]AMG Capital Management, LLC v. FTC, No. 19-508, slip op. (Apr. 22, 2021), https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf (holding that Section 13(b) does not give the FTC the authority to seek restitution or disgorgement monetary relief for consumers under the FTC Act).

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