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Advertising, Marketing & Promotions Alert >> FTC Updates Answers to Frequently Asked Questions About Endorsement Guides

June 4, 2015

The Federal Trade Commission (FTC) recently updated its answers to a series of frequently asked questions (New FAQs) about its Guides Concerning the Use of Endorsements and Testimonials in Advertising (Guides) (to see a previous D&G alert on the FTC’s Guides, click here). The New FAQs provide long-awaited guidance on endorsement-related issues with respect to incentivizing “likes,” pinning photos, streaming videos, and making disclosures on Twitter. The New FAQs also include sections on employee endorsements, social media promotions and online review programs – areas of recent FTC enforcement and concern (to see a previous D&G alert on social media promotions and online reviews, click here).

Social Media Likes, Pins, and Posts
According to the FTC, clicking on the “like” button, pinning a photo, or sharing a link as part of a paid campaign “probably” requires a disclosure of the material connection between the endorser and the company.

Because certain services (i.e., Facebook’s “like” button) do not allow for disclosures, companies should not encourage endorsements using features that do not allow for clear and conspicuous disclosures. That being said, the FTC is unsure how much stock consumers actually put into “likes” when deciding to patronize a business. As such, a company’s failure to disclose that a “like” was incentivized may not be problematic.

In contrast, if a company buys fake “likes” from non-existent people, or people who have no experience using the product or service, the “likes” are clearly deceptive, and both the advertiser and the seller of the fake “likes” could face enforcement action.

Twitter Disclosures
The FTC does not mandate the specific wording of disclosures. However, the same general principle – i.e., that people get the information they need to evaluate sponsored statements – applies across the board, regardless of the advertising medium and any limitations of that medium. Therefore, while the FTC recognizes Twitter’s character limitations, a disclosure is still required. The words “Sponsored,” “Promotion,” or “Paid ad” are likely effective and use only a few characters. While starting a tweet with “Ad:” or “#ad” may also be effective.

YouTube and Online Videos
According to the FTC, disclosures for a YouTube video should not be placed in the description of the video because consumers could easily miss them. The disclosure has the best chance of being effective if it is made clearly and prominently in the video itself (although the disclosures could be placed in both the video and the description).

As for when in the video the disclosure should appear, the FTC recommends having the disclosure at the beginning of the video and recommends multiple disclosures during the video. The FTC cautioned against promoting links to videos that bypass the beginning of the video or disclosures that have been obscured by YouTube ads.

The FTC noted particular concern for disclosures that take place over several hours (such as with live streams) because they could easily be missed by viewers who miss the beginning of the stream, or at any other single point in the stream. The FTC recommends multiple, periodic disclosures throughout the stream or, as a best practice, a continuous, clear and conspicuous disclosure throughout the entire stream.

Influencers and Ambassadors
In response to whether the Guides applied to influencers and ambassadors who are hired to promote a product or business on social media outside of their work hours, the FTC cautioned that these influencers and ambassadors have a financial connection to the company that hired them, and that relationship exists whether or not they are being paid for a particular tweet. For example, if an ambassador is hired by a conference and endorses the conference in his or her tweets, the audience has a right to know about the relationship between the ambassador and the conference. That said, if the ambassador’s tweets simply respond to questions about the event, those tweets may not constitute endorsements because they do not communicate the ambassador’s opinions about the conference (e.g., if a person asks for a link to the conference agenda).

However, if the ambassador is responding to a person’s questions about the event via email or text, that person may already know about the ambassador’s affiliation with the conference so that a disclosure may not be required in that context. However, when the ambassador responds via social media, all of the ambassador’s followers will see the posts and may not know that the ambassador has a relationship with the conference.

In response to whether posting the conference’s badge on the ambassador’s Twitter profile page would be a sufficient disclosure, the FTC advised that a disclosure on a profile page is not sufficient because many people in the audience will not see it. In addition, depending upon what it says, the badge (e.g., a logo or hashtag) may not adequately inform the audience about the ambassador’s connection to the conference.

Celebrity Endorsements
Whether celebrities who regularly charge advertisers to mention their products must disclose that they are being paid to tweet about products, depends on whether their followers understand that their tweets are paid endorsements. If a significant portion of their followers do not know that their tweets are paid endorsements, a disclosure would be required. Because this may be difficult to show, a disclosure is recommended.

Social Media Promotions
The FTC reiterated its guidance in the Cole Haan investigation – entry into a sweepstakes or a contest for a chance to win a thousand dollars in exchange for an endorsement could very well affect how people view that endorsement so that a disclosure would be required.

A disclosure that includes the name of the product in the hashtag (e.g., #XYZProduct) would not be sufficient because the hashtag does not indicate that the posts were in response to a contest, or that the entrants received something of value (e.g., a chance to win the contest prize) in return for the posts. Making the word “contest” or “sweepstakes” part of the hashtag would likely be sufficient, but the word “sweeps” would not be sufficient because people may not understand what that the term means.

Online Reviews
According to the FTC, a retail website that includes customer reviews of the products and encourages honest reviews of its products, regardless of whether the reviews are positive or negative, should disclose which reviews were made in connection to free products. Knowing that reviewers received the product they reviewed for free would likely affect the weight the audience gave to the reviews, even if the retailer did not intend for that to happen. In addition, reviewers could fear that they might stop receiving products if they wrote negative reviews about the products.

Employee Endorsements
Employees should first check with their employer before they mention their company’s products in social media posts to ensure compliance with company’s policies.

If the company allows employees to use social media to talk about its products, employees should make sure that their relationship is disclosed to the audience. An employee should disclose his or her relationship with the employer when posting a review on a review site. Listing the employer on employee’s profile page would not be a sufficient disclosure.

Monitoring
The FTC does not expect large companies to monitor every social media posting by their employees. However, companies should establish a formal program to remind employees periodically of the company’s disclosure policy, especially if the company encourages employees to share their opinions about the company’s products on social media. If the company learns that an employee has posted a review on the company’s website or a social media site without adequately disclosing his or her relationship to the company, the company should remind the employee of its company policy and ask him to remove that review or adequately disclose that they are an employee of company.

According to the FTC, if a company’s social media program is run by an outside public relations firm, the company is ultimately responsible for what the firm and others post on its behalf. The company should make sure that its public relations firm has an appropriate program in place to train and monitor members of its social media network, and should ask for regular reports confirming that the program is operating properly. Delegating part of a promotional program to an outside entity does not relieve a company of responsibility under the FTC Act.

To view the FTC’s full FAQs, click here.

Conclusion
The New FAQs show that the FTC is increasingly aware of advertising practices on social media and is renewing its focus on FTC endorsement violations. As social media is an evolving medium, the updated FAQs illustrate how the FTC’s rules regarding endorsements and testimonials adapt to new platforms. When a new social media platform makes it difficult to determine what constitutes an endorsement, it is advisable to play it safe and make a disclosure.

Bottom Line

Marketers and their agencies should remember that the fundamental requirement of the updated FAQs remains the same: when someone receives something of value in exchange for marketing or reviewing a product, a disclosure is necessary. Disclosures should be made clearly and conspicuously, and should be tailored to the user experience of respective social media platforms. Marketers should also make reasonable efforts to monitor and train those that make statements on their behalf, including influencers, public relations agencies, and employees.