United States: New Insights From FTC On Its Endorsement Guides To Reflect Continued Focus On Disclosures

After the FTC revised its Guides Concerning the Use of Endorsements and Testimonials (the "Guides") in 2009, it followed up with a set of frequently asked questions entitled "What People Are Asking" (the "FAQs") to address questions that were on advertisers' minds.  More than five years later, the FTC has updated the FAQs to address new questions frequently being posed to the FTC about a variety of topics, including, among others, "like" buttons, employee endorsements, online reviews and incentives, and contest and sweepstakes.  Many of these new topics are clearly meant to reiterate messages the FTC has made through enforcement actions and inquiries over the past few years.  While the FAQs continue to reflect the FTC's emphasis on clear and conspicuous disclosures of all material connections, they also highlight the increasing responsibilities the FTC is placing on marketers to ensure proper disclosures in social media posts.

The following highlight some of the key take-aways from the FAQs:

  1. Pictures can be endorsements.  The FTC previously addressed pictures as endorsements in its letter to Cole Haan regarding its Wandering Sole Pinterest Campaign. The FAQs reiterate the FTC's view that you don't have to use words to convey a positive message.  Even if you are only posting a visual that could imply an endorsement, you still need to disclose any material connection to the company marketing the product represented in the picture.
  2. Employees Must Make Disclosures, Too.  The FAQs are clear that an employee's disclosure of his or her place of employment on that employee's social media profile is not likely sufficient if the employee is promoting its employer's or its client's products or services in social media.  As reasoned by the FTC, businesses are often diversified and readers of the employee's social media post may not know which brands are manufactured by which company.  The FTC suggests making disclosures in all posts promoting an employer's or client's products or services.  Further, the FTC emphasizes that employers should never ask their employees to post anything that is not true or endorse a product they have never used, or say things they don't believe.
  3. Place Less Emphasis on "Likes."  The FTC acknowledges that some platform features, like the Facebook "like" button, do not allow for disclosures.  The FTC suggests that advertisers should not encourage endorsers to use features that don't allow for disclosures.  The FTC emphasizes that "likes" must be authentic, and writes that if "likes" are from non-existent people or from people who have no experience using the product or service, they may be deemed deceptive and could elicit enforcement action.
  4. Disclose Free Items and Compensation.  The FTC emphasizes that endorsers are responsible for disclosing the full nature of their material connection.  Therefore, if a person receives a free product to review in addition to another monetary benefit—such as money or gift cards—the person should disclose not only that he received free product, but also that he was paid.
  5. Social Media, Contest, Sweepstakes and Video Disclosures.  Consistent with the principles set forth in the Dot Com Disclosure Guidance, the FTC indicates that even where space is limited, disclosures of material connections need to be made. The FTC suggests that for platforms such as Twitter, starting the tweet with the clear and concise disclosure "Ad" or "#ad" would likely be effective.  The FTC also indicated that hyperlinks or buttons with the words DISCLOSURE or LEGAL are likely insufficient means of disclosing material connections as consumers may not click on the link and they may not understand the important nature or relevance of the information to which the hyperlink leads.  With respect to sweepstakes and contests, advertisers should require that entrants disclose in their social media posts if the post was made as part of a contest or sweepstakes entry.  The FTC noted that a hashtag with the word "sweeps" is probably not be enough of a disclosure as many people (according to the FTC) may not know what that means, but "contest" or "sweepstakes" as part of an entry hashtag should be enough of a disclosure.  For video disclosures, the FTC states that disclosing a material connection only in the video description section of a YouTube video or only at the end is insufficient as consumers may not see these disclosures.  According to the FTC, a disclosure "has the most chance of being effective if it is made clearly and prominently in the video itself."  The FTC suggests that a disclosure at the beginning would be good, but multiple disclosures throughout a video would be even better.  And if a video is being streamed live, a continuous clear and conspicuous disclosure throughout the video is the best way to ensure that no matter when a person tunes-in to the feed, he or she sees a disclosure.
  6. Even Celebrities Need Disclosures.  The FTC acknowledges that in the context of celebrities, determining whether followers are aware of a celebrity's relationship with an advertiser is tricky, but stressed that if a significant portion of the celebrity's followers don't know that the celebrity has a relationship with an advertiser, then a disclosure needs to be made.
  7. Use Caution when Incentivizing Reviews.  Consistent with the FTC's recent consent order with AmeriFreight, the FTC's guidance explains that soliciting reviews is permissible as long as reviewers are required to disclose that they were incentivized for their review. Moreover, the FTC cautioned that advertisers should not incentivize reviewers to post positive reviews.  Endorsements must reflect the honest opinions or experiences of the endorsers.

What to make of this? 

Remember that the Endorsement and Testimonial Guides are not "the law."  The FTC must still prove that an act or practice is deceptive or unfair in order to enforce its will on any advertiser.  And, an FAQ has even less authority than a guide.  FAQs can change from year to year and even from month to month.  There are ways in which the FTC can index their predictably restrictive viewpoints in a manner that it believes will be more digestible and accessible to the great multitude of marketers, than making them read the tea-leaves of enforcement actions.

Also, remember that the standard for "clear and conspicuous" disclosure is a performance standard.  If a substantial number of people are confused then the disclosure isn't working.  We are not aware of any legitimate study conducted by the FTC or anyone else that would show that American consumers are generally confused by "#sweeps," or that they would understand better the compensated nature of a Tweet if it included the extra characters for "#sweepstakes" or "#contest."  (As a practical matter, notwithstanding a technical difference between contests of skill and sweepstakes that involve chance, "#contest" would seem to be the disclosure of choice moving forward in light of only requiring one more character.)

Finally, review your "ambassador" or "advocate" guidelines.  Get them in sync with the FTC staff's frame of mind.  It would be a small investment that will pay dividends if someone downstream, whether an employee or simply some kind of affiliate marketer, slips up and fails to include sufficient information in an endorsement to make the viewer aware of the material connection between him and the sponsoring advertiser.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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