Fine Print, Decoded: The FTC, Social Media and Endorsements

Business.com / Marketing Strategy / Last Modified: February 22, 2017

From large scale companies to individual bloggers, promotions, sponsorships and freebies need to be publicly disclosed to the consumer.

Businesses, small and large, are well aware that the Federal Trade Commission (FTC) keeps a close watch on advertising and promotional materials. The goal: protect consumers from deceptive or unfair business practices.

Back in 2009, the FTC issued the Testimonials and Endorsement Report, which set out the requirements for disclosure of endorsements, sponsorships and other payments for online endorsers, including bloggers.

The most important issue to have come from the 2009 report was the requirement that if you, as business or advertising company, hire a blogger to endorse your company or product in a post, they must clearly disclose any material connection to you or your product in their post.

Related Article: Mobile Marketing: Growth Tactics from Google's Latest Announcement

Disclosure of Payments

In the context of blogs or social media, an endorsement is considered an advertising message that consumers are likely to believe reflects the opinions, beliefs, findings or experiences of a party other than the sponsoring advertiser. The main inquiry into whether someone is endorsing a product is whether that person has a relationship with the company marketing the product.  

Bloggers who clearly state in their post that they paid for a product themselves or received a product through a general affiliate program are not typically at risk of FTC scrutiny. Neither are bloggers who receive a product for free when a store is giving out that product to all its customers at no charge. The gray area for endorsements is when bloggers receive free products from a company without a pre-determined exchange to write about it. 

The Report required that disclaimers must be clearly and conspicuously displayed so that a reader can easily ascertain that the product being discussed was received for free. The disclosure itself does not need to be complicated or filled with legal jargon, as a simple “(Company Name) sent me (Product Name) for free and . . .” will suffice.

The duty to disclaim any material connections to the company or product falls on both the blogger and the advertisers.  Specifically, the FTC requires advertisers to provide training to bloggers about what can and cannot be said about a product. Additionally, advertisers should actively monitor blog posts to prevent any deceptive practices, which is why it is strongly recommended that advertisers keep a close and trusted network of bloggers that understand and follow the FTC guidelines.

The “.com Disclosures” – Disclosures of User Generated Content

Although The Report and its requirements are now commonplace, in 2013 the FTC issued an update to the guidelines, the .com Disclosures, which focuses on disclosures in digital advertising. It was written in direct response to the widespread use of microblogging (e.g. Twitter, Pinterest, Snapchat, Vine) in advertising.

#SponsoredBy

Short-Form media has no excuse to bypass the FTC guidelines, regardless of the limited number of characters allowed on such platforms. For a Twitter endorsement, a conspicuous disclosure could be a simple “#AD” “#Promotion” or “#Sponsoredby(Company Name)” at the beginning of the tweet. For a contest entry, a “#[name of contest]promo” will help ensure FTC compliance. Failure to clearly and conspicuously disclaim material connections to a company or product, even when constrained by a limited character context, may result in a violation of the FTC guidelines. 

How the “.com Disclosures” Affects Your Business

As a business owner, you should be aware of when and where The Update comes into play in your day-to-day advertising schemes, including scenarios you would not expect.

For example, in native advertising, where the online advertisement tries to imitate the form and function of the platform where it appears (e.g. a Buzzfeed article with a link to another article that is actually an advertisement), the FTC requires a clear and conspicuous disclaimer in the advertisement linked or embedded in the article indicating the link leads to an advertisement. A simple “Advertisement” or "Promoted By" subheading underneath the link is sufficient. 

Buzzfeed Native Advertising

Image via dbd media

More importantly, The Update now makes it a requirement to provide a clear and conspicuous disclosure on any social media sweepstake or contest entry that also serves as a product endorsement.

Related Article: Native Advertising: What Is It Exactly?

Pinning vs. Promotions

For example, in 2014 Cole Haan held a contest where they asked consumers to post five pictures on a Pinterest board of their favorite Cole Haan shoes along with images of their favorite places to “wander.” Participants were instructed to tag the images with #WanderingSole for a chance to win $1,000. 

The FTC viewed this contest as a crowd sourced endorsement which required proper disclosure, which #WanderingSole did not meet. Although Cole Haan received only an office action letter, the FTC used the opportunity to publicly address that this type of social media contest would be considered a form of endorsement with a material connection that requires disclosure under the 2013 updated guidelines. 

Since the Cole Haan office action letter, companies have paid close attention to their advertising schemes and work in the word “promo” to comply with the FTC requirements.

Wandering Soles; Cole Haan; Pinterest

Image via Truth in Advertising

For example, Tempur-Pedic ran a Father’s Day promotion asking contest participants to post a picture of “a napping dad” to their Facebook Timeline with the handle “‪#‎NappingDadsPromo” for a chance to win a Tempur-Pedic. By inserting “Promo” into their contest handle, Tempur-Pedic abides by the FTC rules and is able to employ a clever advertising campaign that involves user generated content. 

Going forward, as social media continues to grow and allow for further clever advertising schemes, The Report and The Update guidelines will continue to be of interest and importance to all businesses hoping to use these new forums.  As always, keeping an open dialogue with your trusted bloggers, marketing and legal departments will ensure you can stay away from any #FTCproblems.

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