United States: NAD Again Finds Colorable Concerns Regarding Disclosure Obligations in Social Media

Last Updated: November 8 2013
Article by Amy R. Mudge and Randal M. Shaheen

As we have written before, NAD is using its monitoring of advertising function to bring cases examining native advertising.  And on the eve of the FTC's upcoming workshop on native advertising the NAD has made its views in this area known again in another monitoring case.

While much of what NAD does is involves competitive, or an occasional consumer, challenge, it also monitors ads to bring its own cases.  Often it has brought cases in product categories like cosmetics where there are relatively fewer competitive disputes.  We have seen this, for example, with the cases NAD has brought against makers of mascara looking at whether celebrity pictures are literal product demonstrations.

In eSalon, NAD expands upon the views on native advertising it expressed in Qualcomm.  Read together these two decisions suggest that NAD is setting a high standard for disclosures.  It will be interesting to see where the FTC eventually comes out on many of these same issues.  NAD's summary headline perhaps says it best: "Advertisers are required to identify a message as advertising when it appears in a context that consumers may reasonably understand to be editorial in content."

But now let's go to the facts.  eSalon makes custom hair color that can be purchased on the Internet and sent to buyers for home use.  Its claims center on the ability to make a perfect color match.  In the dull and flat part of the decision, NAD found all of these express claims to be substantiated.  However, the vibrant and shiny part of the decision involved eSalon's use of  different online social media strategies and whether disclosures of sponsorship of content was required and, if so, was it clear enough.

NAD's primary concern centered around a site hosted by eSalon called www.haircolorforwomen.com.  (HFW) The site consists primarily of blogs written by HFW and also hair coloring FAQs.  While a few of the posts are directly related to hair coloring and eSalon's products, others discuss issues seemingly unrelated to product claims, for example, "How to Style a Hairline Braid."  However, most if not all of these posts also include at some point a discussion relating to hair coloring.  The site had a disclosure at the bottom of the page stating that it was sponsored by eSalon.

In NAD's view the material on the blog would appear to consumers to be from third parties rather than eSalon.  NAD felt that the disclaimer was not sufficient to cure this problem and that it should appear at the top of the landing page of the blog and on each page or with each blog post so consumers are aware of the connection.  Having such detailed conclusions as to what constitutes a clear and conspicuous disclosure in NAD's view is helpful to advertisers, although certainly eliminates the flexibility of the more general clear and conspicuous standard.  The more interesting question, to us, which the facts did not permit NAD to address, is what, if any, disclosure obligation eSalon would have had if a blog post truly was just about hair braiding?  Is an advertiser's connection to content material if that content does not make relevant product claims?

eSalon also reposts or retweets reviews of its products by third parties on its own webpage, Facebook and Pinterest pages and Twitter feed.  eSalon assured NAD that it used independent reviews and had no control over the content or provided any incentives.  Because eSalon was simply republishing material from third parties, NAD did not require any disclosure similar to that on the haircolorforwomen.com site.  However, NAD said that because there was a link to www.haircolorforwomen.com alongside links to third party content, eSalon should include a disclosure that the HFW site was maintained by eSalon.  This disclosure is presumably in addition to the disclosures that NAD recommended once consumers actually click on the link and go to the HFW site.  Finally, NAD reminded eSalon of its obligation to disclose any material connections with the third parties content providers if and when they exist.  NAD was perhaps skeptical of the claimed lack of material connection given the presence of "third party" tweets such as "Trips to the salon can be time consuming and really expensive!  I love this great option from eSalon!   You can save . . .http://fb.me/2FigYaWPI."

Next eSalon received an award for best hair color for 2013 from a third-party website called www.totalbeauty.com.  Perhaps reacting to the  recent NY AG astroturfing cases and the reports that a growing number of online reviews are fake or invented, NAD looked at the over 200 reviews on this website for eSalon with a review of 9.5 or higher and noted that a number of these reviews were from first-time reviewers.  NAD thought this might suggest that these reviewers had been compensated.  eSalon assured NAD that while it encouraged its customers to provide reviews that it did not give them free product.  NAD accepted this representation but reminded eSalon if it did promote an award that it received in part because it incented reviewers that it would need to disclose this fact.

eSalon also has a Company Pinterest page called Hair Colors We Love with pictures of celebrities.  NAD said these photos implied the celebrities shown endorsed eSalon products.  NAD recommended eSalon discontinue pinning of all celebrity photos unless the famous manes had been colored with eSalon color.  While there may well be considerable issues of potential copyright infringement with pinning celebrity photos or right of publicity issues if the photos could be said to be promoting a product, NAD, in the absence of survey evidence, may have gone too far to say any such photos necessarily imply an endorsement.  NAD used for support an example in the FTC's Endorsement and Testimonial Guides that said "A television advertisement for a particular brand of golf balls shows a prominent and well-recognized professional golfer practicing numerous drives off the tee.  This would be an endorsement by the golfer even though she makes no verbal statement in the advertisement."  This example specifically seems to contemplate the pro golfer being shown using the advertised ball.  Here, eSalon identified these looks as "colors we love," which would seem to be different than if they had simply pinned or posted celebrity pictures on their company pages without more.  How many of you would confess that at some point you brought a picture to your hair stylist and said I want a cut or color just like that?  A company similarly ought to be able to show consumers different "looks" without always creating an implied endorsement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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