FSA warns advertisers over web ads and sponsored link clichés

Website sweep

The Financial Services Authority tested 77 firms' websites. Most met the FSA financial promotions requirements, but 25% were "difficult for consumers to navigate and failed to sign-post key information," according to an FSA statement published yesterday.

Sites were criticised for "not placing enough emphasis on the customer journey and general website design when placing key information." The FSA also found evidence of poor website maintenance, resulting in out-of-date or incorrect information being provided to consumers.

Other examples of bad practice included failing to give advantages and disadvantages the same weight and prominence in the same web page, burying fees or exclusions, making it too easy to bypass risk information, and poor use of font, colour and text boxes. The FSA has published a list of examples of good and bad practices.

Sponsored links

The FSA has also reminded firms that sponsored links can be financial promotions – and therefore must be fair, clear and not misleading. The FSA studied 200 sponsored links and found mortgage advice being advertised as free when it was not, and low interest rates advertised that were either unavailable or subject to onerous conditions that were not disclosed in the ad.

The FSA found that 23% of the sponsored link ads for general insurance promised price savings but failed to substantiate the percentage of individuals receiving that saving.

The challenge for advertisers of sponsored links is to attract consumers and comply with these FSA rules in a very limited space. Google's market-leading AdWords service accommodates a headline and two lines of text that in total cannot exceed 95 characters. But the FSA has criticised a choice of wording that is common to many adverts for financial products.

It gave a fictional example of an ad for the keywords "car insurance":

The FSA considers that these ads would create an expectation in customers' minds that they could receive the savings quoted because they fail to substantiate the percentage of people actually receiving the savings.

OUT-LAW asked the FSA how advertisers should fit price claims into the limited space of an AdWords ad without breaching its guidance. A spokesman acknowledged the challenge; but he said it would not be sufficient for the landing page to qualify the promise of the text ad, however clear that qualification might be.

The FSA is asking advertisers to go further than Google's own guidelines for AdWords. These state: "If your ad includes a price, special discount, or 'free' offer, it must be clearly and accurately displayed on your website within 1-2 clicks of your ad's landing page."

But even an explanation on the landing page could be insufficient for the FSA's purposes.

"If it becomes immediately apparent once you click through that the criteria are such that you stand little chance [of qualifying for the top saving advertised], that is a problem," he said. "How many people experience [the saving advertised] in reality?"

"The impression created by the promotion has to accurately reflect the experience that the consumer is likely to have," he said. "If it's up-front that, say, one in five benefit from this discount, that's clear and fair."

An unqualified statement in a text ad that you can "save up to £155" is unacceptable if most consumers will not save that sum, he warned. "If most consumers don't receive that saving, it's not good enough," he said. "It's not good enough if just a small proportion receive that."

Asked how ads can substantiate figures within a small number of characters, the spokesman said the FSA does not want to be prescriptive. He observed that brand advertising, rather than product advertising, presented few problems in the FSA research; but he also confirmed that the FSA is not suggesting that firms should avoid all reference to potential savings in text ads.

Is this how ads should be written? (An OUT-LAW example, not an FSA example)

The FSA said that there are also instances where the sponsored link returned by a search engine may be compliant on its own but could be misleading by omission when taken in the context of the particular search term used.

"Firms should pay particular attention to the search terms they purchase or instruct media agencies to purchase from search engine providers," said the FSA's guidance. "They need to assess whether purchasing a term has a potential to create misleading expectations. Firms should also consider negatively excluding terms in the search terms purchased in order to ensure that their sponsored links do not mislead consumers."

The FSA spokesman told OUT-LAW that its reference to "negatively excluding terms" is about making sure you do not display an ad for your services as a firm of financial advisers when someone searches on "independent financial advisers" unless you are in fact independent. Its researchers saw ads for firms that were not independent in response to this search term.

Exclusions like this are possible with the major sponsored ad programmes. In Google, an advertiser can sponsor "financial advisers" and list the term "independent financial advisers" in its 'Negative Keywords'. In Yahoo!'s service, the term would be listed as 'Excluded Words'.

The FSA also found that a search for 'guaranteed returns' returned ads for firms whose investment products were linked to the performance of stocks and shares where returns could not in fact be guaranteed. And a search for 'free advice' included links to firms whose advice was not free.

Enforcement action

Fines are a possibility for non-compliance, but the enforcement approach is typically to ask firms to withdraw or amend their ads, the spokesman said. "We speak to firms and ask them to justify their ads," he said. Fines are a last resort and the size of a fine "depends on factors like the nature of the breach, the potential detriment, the actual detriment and size of firm," said the spokesman.

The regulator has contacted the firms that appeared to break the rules, but has not named them. That decision prompted criticism from Which?, the consumer group. It wants a 'naming and shaming' approach and told The Times newspaper that the FSA should "police by example." The FSA countered that it was prevented from naming firms under the confidentiality rules of the Financial Services and Markets Act (FSMA). Offenders can only be named after being found guilty under the FSA enforcement process.

The FSA said it will be carrying out a further review in March 2008 and will take action if it finds further failings. In the meantime, it encourages consumers to report misleading promotions.

The FSA has referred some findings from its sponsored links research to the Office of Fair Trading, where advertisers were outside its regulatory remit. It said that it is collaborating with the OFT to produce a guide for firms on sponsored links.