In recent years, companies have increasingly relied on social media platforms to promote their products, often featuring testimonials and endorsements from consumers and public figures as well as other user-generated content. Recognizing the popularity of this promotional vehicle, and the questions that arise when traditional truth-in-advertising principles are applied to new media formats, the FTC revised its Endorsement Guides in 2009, and followed up in 2010 with explanatory FAQs and other guidance about endorsements, testimonials and disclosure requirements in the social media context.
Last week, in an effort to keep up with the fast-changing world of social media and online advertising, the FTC updated its informal publication called What People Are Asking, with FAQs that address real-world examples of promotional programs and advertising methods that are popular in social media. While the FAQs do not have the force of formal rules and regulations, advertisers should pay close attention to the FTC’s explanations about how to avoid unfair or deceptive advertising because many of the FAQs are based on recent enforcement actions or provide valuable insights as to how the agency would evaluate a particular advertising practice.
The FTC prefaced its updated FAQs by reiterating its longstanding principles concerning endorsements and testimonials:
- Endorsements must be truthful and not misleading by implication
- A connection between an endorser and a marketer that could affect how an endorsement is evaluated must be disclosed clearly and conspicuously
- Unless an advertiser can substantiate that an endorser’s experience with a product or service is typical, the endorsement must be accompanied by a disclosure about generally expected results
With these principles in mind, the FTC provided helpful guidance on the following issues:
How do the Endorsement Guides Apply to Contests and Sweepstakes?
Contests and sweepstakes are no different from other types of advertising. If a company runs a promotion on Twitter, Instagram, Pinterest or any other social media platform that requires entrants to use a hashtag like #XYZ_Rocks (where XYZ is the name of your product), the FTC believes that other social media users are unlikely to understand that these posts are made as part of a giveaway. According to the Commission, “[m]aking the word ‘contest’ or ‘sweepstakes’ part of the hashtag should be enough,” but #XYZ_Rocks_Sweeps would not suffice because many consumers may not understand the meaning of “sweeps.”
Small Benefits and Subtle Endorsements
Many advertisers have questioned whether relatively minor benefits, such as a $1 off coupon, a single free product or the opportunity to appear in an advertisement without compensation, rise to the level of a connection between an endorser and a marketer that should be disclosed. The FTC advises that these types of small benefits could affect the weight or credibility of an endorsement, and marketers should err on the side of caution by disclosing the connection.
Exemplifying the adage that a picture can be worth a thousand words, the FTC also observed that simply posting a picture of a product in social media, e.g., on Instagram, or a video showing a consumer using the product, could convey approval or endorsement. Accordingly, if the person posting this type of non-verbal content did receive a benefit from the product marketer, such as a free product, and the picture could reasonably be perceived as a product endorsement, that connection should be disclosed.
Interestingly, the FTC has not definitively determined whether an incentive provided in exchange for a “Like” on Facebook will trigger a required disclosure of a connection with the advertiser. As the agency commented, “we don’t know at this time how much stock social network users put into ‘likes’ when deciding to patronize a business, so the failure to disclose that the people giving ‘likes’ received an incentive might not be a problem.” This observation reflects a degree of doubt that a simple “Like” would have a material effect on purchasing decisions even if the person posting the “Like” received some benefit from the advertiser.
Advertiser Responsibility for its PR Agencies and Social Media Influencers
The FTC is clear: “Your company is ultimately responsible for what others do on your behalf.” Marketers should therefore ensure that their public relation firms and/or network of bloggers and social media influencers are properly trained and that reasonable monitoring is conducted to confirm compliance with the Endorsement Guides. While the Commission has not set forth a one-size-fits-all plan for training and monitoring, it recommends that companies tailor their programs based on the risk that deceptive practices could cause consumers physical or financial harm. Regardless of the degree of risk, the FTC specified four elements that every program should contain:
- Given an advertiser’s responsibility for substantiating objective product claims, explain to members of your network what they can (and can’t) say about the products – for example, a list of the health claims they can make for your products;
- Instruct members of the network on their responsibilities for disclosing their connections to you;
- Periodically search for what your people are saying; and
- Follow up if you find questionable practices.
Do Companies Need to Police Employee Posts?
The FTC seem to have taken the sensible position that a company cannot reasonably be expected to monitor every social media post by all of its employees. Formal social media policies and periodic training are, however, recommended.
As with PR agency employees and social media influencers hired by advertisers, it is recommended that company employees disclose their connection to their employer each and every time they post content on social media that could be considered an endorsement or testimonial. The Commission does not believe that it would be sufficient to merely list an individual’s employer or add the company’s logo on a personal profile page because disclosure of a connection to the advertiser needs to be in close proximity to the endorsement.
When is a Disclosure Clear and Conspicuous?
The FTC mandates that a necessary disclosure about a material connection between an endorser and a marketer must be “clear and conspicuous.” What does that general rule mean in practice? The FTC provides five helpful factors, advising that the disclosure should be:
- close to the endorsement;
- in a font that is easy to read;
- in a shade that stands out against its background;
- for video ads, on screen long enough to be noticed, read and understood; and
- for audio disclosures, read at a speed and in words that will be easy to follow and understand.
The FTC has shown continuous and consistent interest in applying longstanding principles of false advertising law to new digital media platforms. If your company actively uses social media to promote its products and services, it is important to adhere to the FTC’s requirements for transparency and disclosure of material connections between individuals who post testimonials or product endorsements and the product marketers.