2022 has the potential to be a major year for the advertisingand marketing industry - new laws and guidance are going intoeffect, the Federal Trade Commission (FTC) is reviewing variousguides, and new enforcement priorities have emerged. We expect thata number of trends will most likely continue - including thepopularity of non-fungible tokens (NFTs), sponsorships navigatingCOVID-related issues, and heightened scrutiny of environmentalmarketing. Areas of the law governed by a patchwork of stateregulations - including name, image and likeness rights, cannabismarketing, and subscription marketing - will be subject toheightened compliance obligations in certain states. We alsoanticipate that the FTC and state regulators will increaseenforcement efforts, including with regard to endorsements,children's advertising, and supply chain issues.
The ten key areas that marketers should pay attention to in 2022include:
Non-fungible tokens, or NFTs, exploded in popularity in early2021, and as the market has begun to mature, brands have beenpiling in to leverage the trend. NFTs give users the ability to ownunique pieces of property in the digital space, and with the worldbecoming increasingly digital, brands can leverage NFTs as part ofgiveaways and sweepstakes prizes even though they cannot interactwith users in person.
Meanwhile, iconic brands and IP owners like film studios havebeen leveraging NFTs to open up a new way to earn revenue bylicensing their intellectual property. Though traditional IP,licensing, and promotional legal issues apply to NFTs as with anyother marketing tactic, the unique nature of NFTs creates a host ofnew legal issues and requirements, and marketers need to ensurethat their terms and conditions and licensing agreementsappropriately reflect the nature of the NFT marketplace.
Recreational cannabis is now legal in more than a third of U.S.states, medical marijuana is legal in a majority of U.S. states,and cannibidiol or "CBD" - cannabis' non-intoxicatingcousin - is legal in nearly every state. However, despite thedramatic rise in legality of marijuana and near ubiquity of CBD,both areas face complicated regulatory schema.
Marijuana is still illegal on the federal level, meaning thatstate-legal marijuana sales are still federally illegal, and thoughCBD is generally legal at the federal level, thefood and drug administration prohibits the use of CBD in foods anddietary supplements, including in drinks, gummies, tinctures orother ingestible products. In addition, those states that havelegalized recreational or medical marijuana have detailedadvertising guidelines governing disclosures, targeting, health andwellness claims, and other content-relatedconsiderations.
If you do not know what a Tiktokker is, now is a good time tolearn, as Tiktokkers will only grow in popularity in 2022, asbrands continue to put their marketing dollars behind them andother influencers. But it is not all fun and games anymore, asbrands need to ensure their influencers are complying with theirdisclosure and other obligations under the FTC Endorsement Guides.We expect to see increased enforcement as a response to the FTChaving sent notices to more than 700 companies regarding misleading endorsements. Enforcement isexpected to increase even further once the FTC releases it updatedEndorsement Guides later this year. Brands arenot the only ones that need to worry about the regulators - asinfluencers grow in popularity, they too will become the targets ofregulatory actions, as well as competitor and consumer classactions.
The Children's Advertising Review Unit (CARU)self-regulatory guidelines went into effect on January 1,2022. The updated CARU guidelines replace CARU's TV-centricguidelines and address the new media formats that are popular withchildren these days, including digital media, influencer marketing,apps, games and social media. At the heart of CARU's guidelinesis the principle that advertising must be truthful andnon-misleading and material disclosures must be clear andconspicuous in language that children can understand (e.g.,"this is an ad for x brand" in influencer marketingdirected to children). CARU vowed to actively investigatenon-compliance shortly after the updated guidelines went intoeffect. Now is a good time for children's marketers to reviewtheir marketing practices to ensure they are in compliance withCARU's updated guidance.
After a banner 2019 when the FTC brought actions against TikTokand YouTube for violations of the Children's Online PrivacyProtection Act (COPPA), the FTC has been largely quiet on the COPPAfront. We expect that to change in 2022 as enforcement ramps upagainst apps, websites, social platforms and other online servicesthat are directed to children and violate the law.
By the end of 2021, more than half of U.S. states had passedlegislation governing college athlete name, image and likeness(NIL) rights. 2022 will see the majority of the remaining statespassing similar legislation. With no uniform federal legislation insight, the NIL landscape is about to become significantly morecomplicated. As NIL sponsorship activity ramps up, ambiguousboundaries are certain to be pushed and sponsors andstudent-athletes will need to navigate a patchwork of stateregulations and school rules to ensure that eligibility is notjeopardized.
The NCAA has already begun investigating NIL arrangements whichmay be potential violations of its amateurism rules and, on thehorizon, a class action lawsuit in Florida indicates that thebattle will shift to high school. Expect continued tension betweenwhat is permissible and what is not as schools, athletes andsponsors define the market for NIL rights and the parameters forcompliant deals.
A resurgent COVID-19 variant, once again, wreaked havoc on thesports and live event industry as 2021 came to a close. At the sametime, the sports betting, crypto and NFT industries funneled newmoney into sponsorships, providing a lifeline for teams, leaguesand facilities still coping with the effects of thepandemic.
2022 promises new challenges as sponsors in industries stillimpacted by the pandemic will be increasingly likely to seek toextricate themselves from sponsorship agreements impacted by twoyears of disruption in live events and a forecast where a return tonormalcy remains uncertain. Meanwhile, teams and leagues will carveout new categories of sponsorship to embrace and leverage themeta-landscape.
It may become harder to sustain those sustainability claims, asenvironmental marketing claims promise to be an area of heightenedfocus in 2022. The FTC has indicated that it intends to review itsGuides for the Use of Environmental Marketing Claims, which werelast updated in 2021, and lack clarity on some of today's mostpopular environmental marketing claims. In addition, a number ofhigh profile class actions were filed late last year against brandswith green-centric marketing, and green claims were challenged atthe National Advertising Division (NAD, a self-regulatoryadjudicative body) by both competitors and by the NAD as part ofits independent marketplace monitoring - indicating an enforcementtrend that we expect to continue.
At the state level, California passed sweeping legislationgoverning recyclability claims, which significantly limits theclaims that can be made about the recyclability of a product or packaging, andNew York introduced The Fashion Sustainability and SocialAccountability Act, which generally seeks to impose sustainabilityreporting requirements on the fashion industry.
States have continued to adopt (or update) automatic renewallaws, which generally impose disclosure, consent and noticerequirements on sellers. We expect that state laws (and enforcementactions) will most likely reflect a heightened focus on disclosureand notice requirements for free-to-pay trial offer conversions,under which consumers receive goods or services for free during alimited trial period, and then automatically begin charging a feeunless consumers affirmatively cancel. We also expect cancellationmethods to be an area of focus, as cancellation should generallyshould be easy to use, immediate and entirely online if theconsumer is able to accept the automatically renewing offeronline.
In addition to likely state enforcement (and continuing consumerclass actions), this year could include increased federalenforcement. At the end of 2021, the FTC released an enforcementpolicy statement warning companies about their complianceobligations relating to negative option programs and against usingwebsite design features to deceive consumers into signing up forsubscription services (i.e. by using "dark patterns").While non-binding guidance, this statement is indicative of theFTC's interpretation of existing law as it applies to negativeoption practices. The FTC has also indicated that it is conducting rulemaking on negative optionmarketing and operating.
Products can only be advertised as "Made in the USA"if their final assembly occurred in the United States and all orvirtually all inputs were sourced from within the United States.Though this is not a new requirement, the FTC has significantlyincreased enforcement in recent years, and has assessed over $3million in monetary penalties between 2020 and 2021, including a $1million settlement with Williams Sonoma and a $753,000 settlementwith Nectar Sleep.
The FTC's new Made in the USA Labeling Rule came into effectin August 2021, giving the FTC authority to seek civil penalties ofup to $43,280 per violation. Given the significant monetary risksinvolved, brands, manufacturers and marketers need to understandthe full picture of their manufacturing process and supply chainbefore claiming that their products are "Made in theUSA."
The disruption to the global supply chain caused by the pandemicis having far reaching impacts on the economy and consumers alike,and brands will feel the effect even more this year. As inventorylevels decrease and shipping times increase, advertisers should paycareful attention to what they're telling theircustomers.
Remember that both state and federal laws and guidance generallyprohibit advertising a product without having a sufficient supplyto meet the reasonably anticipated demand for such product. TheFTC's Guides Against Bait Advertising, in particular, adviseagainst promoting a product that is not "available at alloutlets listed in the advertisement a sufficient quantity of theadvertised product to meet reasonably anticipated demands, unlessthe advertisement clearly and adequately discloses that supply islimited and/or the merchandise is available only at designatedoutlets."
Accordingly, if the quantity of items a company has on handisn't sufficient to meet the "reasonable demand"standard, it's important to clearly and conspicuously disclosethere this is limited availability. In addition, the FTC's MailOrder Rule requires that mail, internet and telephonic sellers havea reasonable basis for advertised shipping times. If sellerscan't meet their promised shipping times, if there is nopromised shipping time, or if they cannot ship within 30 days, theymust offer consumers the option to consent to a delay or canceltheir orders and receive a prompt refund. Sellers must remember tofollow the rule and obtain consent from consumers for the delay, when necessary.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
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The Top 10 Advertising And Marketing Issues To Watch For In 2022 - Media, Telecoms, IT, Entertainment - United States - Mondaq News Alerts