Social Media Advertising Regulatory Frameworks & Compliance 4 — Questions and Answers
Question 1: What is 'ad fraud' in social media advertising and which regulation most directly addresses liability for it?
- Fake reviews; governed by COPPA
- Invalid traffic inflating impressions; addressed through FTC Act unfair practices provisions (Correct answer)
- Misleading ad copy; governed by CAN-SPAM
- Unapproved testimonials; governed by FCC rules
Correct answer: Invalid traffic inflating impressions; addressed through FTC Act unfair practices provisions
Ad fraud involves invalid traffic or fake engagements that waste advertiser spend, and the FTC Act's prohibition on unfair practices is the primary regulatory framework.
Question 2: Which FTC rule, finalized in 2023, specifically targets fake reviews and testimonials on social media platforms?
- Endorsement Guides revision
- Trade Regulation Rule on Fake Reviews and Testimonials (Correct answer)
- Social Commerce Transparency Act
- Digital Advertising Accountability Program
Correct answer: Trade Regulation Rule on Fake Reviews and Testimonials
The FTC's Trade Regulation Rule on Fake Reviews and Testimonials (2023) prohibits buying fake reviews, insider reviews without disclosure, and suppressing negative reviews.
Question 3: Under GDPR, what is the maximum fine for the most serious violations, such as unlawfully processing user data for ad targeting?
- €10 million or 2% of global annual turnover
- €20 million or 4% of global annual turnover (Correct answer)
- €5 million or 1% of global annual turnover
- €50 million flat fee
Correct answer: €20 million or 4% of global annual turnover
GDPR's Tier 2 maximum fine is €20 million or 4% of the company's total global annual turnover, whichever is higher.
Question 4: A U.S. advertiser using lookalike audiences based on email lists must ensure compliance with which document before uploading customer data to a platform?
- Platform's terms of service and a customer data processing agreement (Correct answer)
- Only a signed NDA with the platform
- FTC pre-approval form
- State attorney general clearance
Correct answer: Platform's terms of service and a customer data processing agreement
Advertisers must comply with platform terms of service and have a data processing agreement confirming they collected the customer data with proper consent.
Question 5: What does 'viewability' compliance require in digital advertising standards set by the MRC (Media Rating Council)?
- 100% of the ad must be visible for 1 second
- At least 50% of pixels visible for at least 1 continuous second for display ads (Correct answer)
- The ad must appear above the fold only
- Users must actively engage with the ad for it to count
Correct answer: At least 50% of pixels visible for at least 1 continuous second for display ads
MRC's viewability standard for display ads requires at least 50% of the ad's pixels to be in-view for a minimum of one continuous second.
Question 6: When must an influencer use '#ad' or '#sponsored' according to FTC guidelines?
- Only when the post is a direct product review
- Whenever there is a material connection between the influencer and the brand (Correct answer)
- Only when payment exceeds $500
- Only on Instagram and YouTube, not Twitter/X
Correct answer: Whenever there is a material connection between the influencer and the brand
FTC guidelines require disclosure of any material connection — including payment, free products, or family ties — regardless of platform or payment amount.
Question 7: Which practice is explicitly prohibited under California's CPRA for advertisers using social media platforms?
- Running retargeting campaigns on opted-in users
- Selling sensitive personal information without an explicit opt-in (Correct answer)
- Using first-party cookies for session tracking
- Displaying frequency-capped ads to logged-in users
Correct answer: Selling sensitive personal information without an explicit opt-in
CPRA created a new category of 'sensitive personal information' and requires explicit opt-in consent before it can be sold or shared with third parties.
Social Media Advertising Regulatory Frameworks & Compliance 4
What is 'ad fraud' in social media advertising and which regulation most directly addresses liability for it?