A recent investigation by the Office of Fair Trading ("OFT") into the conduct of Handpicked Media ("the company") raises some interesting legal issues surrounding online advertising, particularly in relation to product endorsement through social media.
Handpicked Media is a collective of independent websites and blogs. In July last year, the company found itself subject to an OFT investigation into its advertising practices.
The company had engaged individuals to promote the goods and services of their clients online, including, for example, through the posting of endorsing tweets on Twitter. However, it was not this practice, per se, that the OFT took exception to – rather, they objected to the absence of express notification that the tweets were indeed "paid for" endorsements.
The OFT believed this conduct to be contrary to consumer protection law, namely, the Consumer Protection from Unfair Trading Regulations 2008 ("the Regulations"). In particular, the OFT believed that the absence of a disclaimer could amount to a "misleading omission" likely to cause consumers to transact when they otherwise would not – something prohibited under the Regulations.
In the current case, the OFT closed their investigation into the matter after Handpicked Media agreed to sign an undertaking. The terms of the undertaking require the company not to continue or repeat this conduct, with all future endorsements, including those on "microblogs", such as Twitter, requiring to be clearly identified as being "paid for".
This requirement, however, is not unique to the UK. The issue of social media marketing has been addressed in other jurisdictions – perhaps most notably in the USA, where Federal Trade Commission ("FTC") guidance requires similar disclosure of connections between endorsers and marketers. Interestingly, supplementary FTC guidance also suggests how Twitter users can achieve compliance while limited to 140 characters per "tweet", through the use of hashtags, such as, #Paid or #Ad.
The Handpicked Media case is important, as it reinforces that online commercial activities should follow essentially the same consumer protection laws as those that apply to offline activities. Online businesses require to be clear of the law in this regard in order to avoid falling foul of consumer protection legislation.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.