United States: FTC Issues New Guidance On Endorsements And Related Online Disclosures

Last Updated: June 2 2015
Article by Ellen T. Berge, Po Yi, Mark S. Goodrich and Randal M. Shaheen

When preparing to run advertising that includes endorsements, our clients frequently ask whether any "magic words" are necessary and how disclosures should be made on space-constrained forums such as Twitter.  On May 29, 2015, the Federal Trade Commission ("FTC") staff announced it had addressed some of these questions by updating the FAQs to its Guides Concerning Use of Endorsements and Testimonials in Advertising ("Endorsement Guide"), providing some much needed clarity on a variety of endorsement-related issues, including special wording, Twitter disclosures, social media "like" buttons, affiliate marketing, employee endorsements, uploading videos, and more.  

Special Wording: The new FAQs follow the previous version in stating that no special wording is necessary to make endorsement disclosures, but add that it will "usually be effective" to include a simple disclosure that "Company X gave me free product to try."

Twitter:  The FTC updated the FAQs to state that starting a tweet with "Ad" or "#Ad" would "likely be effective" in communicating that a tweet is an advertising message (as opposed to its previous iteration which stated it "might be effective").  As a fundamental matter, the FTC reiterates its previous guidance that there is no specific wording necessary for Twitter disclosures, explaining that it will assess the sufficiency of a disclosure based on the broad principle that the consumer must receive the necessary information to evaluate the sponsored statement.

Employee Endorsements: The new FAQs add an entire section on employee endorsements, again refusing to mandate specific disclosure words for employees (and employees of related ad agencies and PR firms), but explicitly requiring the employment relationship be disclosed when making an endorsement.  The FAQs indicate a company is not expected to monitor every employee post, but they "should establish a formal program to remind employees periodically of your policy, especially if the company encourages employees to share their opinions about your products."  Thus, it is now more important than ever for advertisers to adopt a social media policy.

Social Media "Likes":  " Like-Gating" has received a lot of publicity over the past several years, and the FTC acknowledges that people enjoy sharing their fondness of a particular product.  With that in mind, the new FAQ's add a section on social networking sites, stating consumers are allowed to write about their love of a product without making disclosures – as long as they are not being "rewarded."  However, the FAQs state that "if you're doing it as part of a sponsored campaign or you're being compensated – for example, getting a discount on a future purchase or being entered into a sweepstakes for a significant prize – then a disclosure is appropriate."  The guidance acknowledges that it is unclear at this time "how much stock social network users put into 'likes,'" and giving incentives for "likes" in fact "might not be a problem."  However, the FAQs add that "[a]n advertiser buying fake 'likes' is very different from an advertiser offering incentives for "likes" from actual consumers."  If the likes are from people who are not consumers, they are clearly deceptive.

Social Media Contests:  The new FAQs add guidance reminding businesses engaging in social media contests that they must disclose clearly that the post is being made as part of a sweepstakes or contest.  In other words, simply stating #XYZ_Rocks" is not sufficient without a hashtag disclosure of "contest" or "sweepstakes."  These words should not be abbreviated, as the FTC notes that "Sweeps" probably isn't sufficient because many people "would not understand what that means."

Video Uploads: Video uploads are extremely common in today's Internet and meme crazed world.  You may have noticed disclosures in the YouTube video description, and thus the FTC has added a question addressing this practice in its new FAQs.  The new FAQs indicate any material information related to an endorsement must be disclosed "clearly and prominently" in the video itself.  Many consumers don't read the description and thus watch the video without ever seeing the requisite disclosures.  The FAQs recommend that any disclosures be included at the beginning of a standard video, but if the video is extremely long, such as a live videogame playthrough, multiple, periodic disclosures should be made.

Affiliate Marketing:  As affiliate marketing practices continue to thrive, the FTC has edited its affiliate marketing guidance in the new FAQs.  The FTC expands on its previous FAQs, which stated that an affiliate marketer must disclose the relationship to any online retailers clearly and conspicuously on its site so readers can "decide how much weight to give [the] endorsement."  Specifically, the FAQs clarify that merely including the "affiliate link" by itself or a "buy now" button will not be a sufficient disclosure, as consumers may not know it means the "person placing the link is getting paid for purchases through the link."

Disclosure of Advertiser Payment:  The new FAQs add questions about what information must be disclosed in addition to merely "I got a product for free."  The FAQs explain that it depends on what the blogger received.  If the endorser is compensated in a way that could impact the credibility of a review, it must be disclosed.  For example, if a video game blogger is being paid to try a game, the fact he or she is paid must be clear.  Cryptic language such as "I got a sneak peek of the game" is not sufficient.

Online Review Programs:  The FTC expanded its guidance related to online reviews, adding a section in the new FAQs that provides examples for when a website with online reviews must provide disclosures.  To the extent a retailer sends a consumer a free product, even if the reviewer is told to be honest whether positive or negative, the retailer must disclose that information.  In addition, if a multi-channel network (Company XYZ) on YouTube enters into a contract with a videogame marketer, in which XYZ will pay its reviewers to upload reviews of the videogame marketer's games, it is not sufficient for a "sponsored by XYZ" disclosure to be made.  The name of the videogame marketer, who has an interest in positive reviews, should be disclosed.

Social Media Influencers:  The FTC added minor tweaks to its guidance on social media influencers, clarifying an advertiser's liability for "what others say in social media."  In part, the FTC states that companies using a network of bloggers should instruct members of the network on their responsibilities for disclosing connections, "periodically search for what people are saying," and generally make a "reasonable effort" to know what people in the network are saying.  Therefore, as a best practice, each advertiser should adopt a social media influencer policy to ensure it has effective processes to comply with this guidance.

A common theme across much of the new guidance is the FTC addressing questions raised by the proliferation of Internet and social media.  As the FTC's blog announcing the FAQs notes, the legal principles remain the same, but online developments require new application of these principles.  There is a natural level of overlap between the Endorsements Guide and Dot Com Disclosures Guide. As such, advertisers should examine FTC guidance as a whole when creating the requisite disclosures.

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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