United States: FTC Updates Endorsement Guidance

In 2009, the Federal Trade Commission ("FTC") introduced a revised version of its Guides Concerning the Use of Endorsements and Testimonials in Advertising ("Guides"), with a primary goal of demonstrating how the Guides applied to new marketing channels and techniques like blogs and social media. Basic truth-in advertising principles are at the core of the Guides, which require that endorsements must be honest and not misleading. In addition, the Guides require disclosure of a material connection between an endorser and the advertiser that consumers would not expect and which could affect how consumers evaluate the endorsement. As trends and topics continue to evolve, on May 29, 2015, the FTC issued updated answers to its frequently asked questions ("New FAQS") about compliance with the Guides, providing much needed guidance on endorsement-related issues such as incentivizing "likes" on social media, making disclosures on Twitter, celebrity endorsements, social media promotions, online review programs and employee endorsements. A few highlights are discussed below.

Social Media Promotions

The FTC reiterated its prior guidance that entry into a sweepstakes or contest for a chance to win a prize in exchange for an endorsement could affect how people would view that endorsement such that a disclosure would be required. A disclosure that merely included the name of the product in the hashtag would not be sufficient because the hashtag does not convey that the posts were incentivized by an entrant's receipt of something of value (i.e., a chance to win a prize). Making the word "contest" or "sweepstakes" part of the hashtag would likely be sufficient but, notably, the FTC clarified that the word "sweeps" would not be sufficient because people may not understand what that term means.

Twitter Disclosures

The FTC does not mandate specific wording of disclosures. Regardless of the advertising medium and its limitations, however, the general principle that people get the information they need to evaluate sponsored statements will still apply. Consequently, while the FTC recognizes Twitter's 140 character-limitation, a disclosure is still required. The FTC suggests that the words "Sponsored", "Promotion" or "Paid Ad" use few characters and are likely effective, as is starting a tweet with "Ad" or "#ad". Note that abbreviating "Sponsored" to "#Spon" is viewed as inadequate.

Celebrity Endorsements

Whether or not celebrities must disclose that they are being paid every time they tweet about a product depends upon whether or not their followers understand that the tweets are paid endorsements. Under the New FAQs, if a "significant portion" of the celebrity's followers does not know that the tweets are paid endorsements, a disclosure of the relationship is required. Since determining whether followers are aware of a relationship "could be tricky", the FTC recommends a disclosure.

Social Media Likes, Pins and Shares

Per the New FAQs, clicking a "like" button, pinning a picture or sharing a link as part of a paid campaign "probably" requires a disclosure of the material connection between the endorser and the company. For example, if someone clicked "like" to show that they were a fan of a particular business or product and, in exchange, they received a discount on a future purchase or received entry into a sweepstakes for a prize, then a disclosure would be appropriate.

According to the FTC, because certain platform functions (such as the Facebook "like" button) do not allow for disclosures, advertisers should not encourage endorsements using features that do not allow for clear and conspicuous disclosures. That said, the FTC acknowledged that it does not know how much stock social network users actually put into "likes" when deciding to patronize a business, so the failure to disclose that people were incentivized to give a "like" might not be a problem. In contrast, if an advertiser buys fake "likes" from non-existent people or people who have no experience using their product or service, those "likes" are clearly deceptive and both the advertiser and seller of the fake "likes" could face enforcement action.

YouTube and Online Videos

Disclosures for a YouTube video (such as, for a video product review) should not be made in the video description because consumers might watch the video without seeing the description page or, if they do, they might not read the disclosure. According to the FTC, the most effective way to make the disclosure is in the video itself (or both in the video and the description), preferably at the beginning of the video or, better yet, multiple times during the video. Live streams are of particular concern since viewers can tune in at any time and could easily miss a disclosure at the beginning of a stream or at any other single point in the stream. The FTC recommends multiple, periodic disclosures throughout the stream or, as best practice, a continuous, clear and conspicuous disclosure throughout the stream. The FTC also cautioned against promoting links to videos that bypass the beginning of the video and skips over the disclosure, as well as ads that obscure a disclosure.

Online Reviews

A retail website that includes customer reviews of products and encourages reviewers to be honest, whether the review is positive or negative, must still disclose which reviews, if any, were made by consumers who received free products for review. Knowing that reviewers got free product to review would probably affect the weight that customers would give to those reviews, even if the retailer did not intend for that to happen. In addition, the reviews could be impacted by a reviewer's concern that the retailer might stop sending them free product if they wrote a negative review.

Soliciting Endorsements

A company may ask its customers about their experience with the company's service or products and feature those comments in their ads, whether or not the company pays the customer for its endorsement, providing that the customer had no reason to expect compensation or any other benefit before they gave their comments. If, however, the company gave the customer a reason to expect a benefit from providing their thoughts about the company's product, the company should disclose that fact in its ads. According to the FTC, even telling a customer that they will not be paid but that they might be featured in the company's advertising might be an opportunity that is seen as having a value, such that the fact that they knew this when they gave the review should be disclosed in the ad (for example, by stating "Customers were told in advance they might be featured in an ad").

Employee Endorsements

Before using social media to post about an employer's products, employees should first check with their employer to ensure compliance with the company's policies. If allowed to use social media to discuss the employer's products, the employee should ensure that their relationship to the company is clearly disclosed to the audience reading the posts. Per the New FAQs, listing the employer on the employee's profile page is not sufficient. The employment relationship must be disclosed when making the endorsement.

Ambassadors

If a person is hired by a company to be their "ambassador" and promote their products/services, there is a financial connection between them and that relationship exists whether or not the person is being paid for a particular tweet or post. The New FAQs give example of an ambassador hired by a trade association to promote its upcoming conference on social media for five hours a week. The ambassador must disclose the relationship if it is endorsing the conference on social media, regardless of whether or not those tweets/posts are made during the five hours in which the ambassador is working or during its off time. If, however, the ambassador's tweet/post does not communicate the ambassador's opinion about the conference (for example, if it merely responds to a question about the event, such as where to find a link to the agenda), then it is not an endorsement and no disclosure is required. Similarly, if the ambassador is responding to a question about the event via email or text, the person making inquiry probably already knows the ambassador's affiliation with the conference so that disclosure may not be required. If disclosure is required, the FTC advises that posting the conference badge or a disclosure on the ambassador's profile page is not sufficient because many people in the audience may not see it and, depending upon what it says, it may not adequately tell consumers of the ambassador's relationship to the association.

Social Influencers

The FTC recognizes that it is unrealistic for an advertiser to be aware of every single statement made by its bloggers and other social media influencers. That said, the FTC does expect an advertiser to make a "reasonable effort" to know what people in its network are saying. Advertisers need to have reasonable programs in place to train and monitor members of their network, the scope of which depends on the risk that deceptive practices by network participants could cause consumer harm (whether physical injury or financial loss). By way of example, the FTC compares a network devoted to the sale of health products to a network promoting a new fashion line. According to the FTC, every program should include: (1) explanation of what the endorsers can and cannot say about the products; (2) instruction to network members on their responsibilities for disclosing their material connection to the advertiser; (3) periodically searching for what your people are saying; and (4) following up if the advertiser find questionable practices. Therefore, as a best practice, advertisers should adopt a social media influencer policy to ensure it has effective processes to comply with these guidelines. Similarly, if an advertiser uses a public relations firm to run its social media program, the advertiser must ensure that its firm has an appropriate program in place to train and monitor members of its social media network, since the advertiser is ultimately responsible for what others do on its behalf. As best practice, the FTC recommends that the advertiser request regular reports from the public relations firm confirming that the program is operating properly and periodically monitor the network.

Affiliate Marketing

An affiliate marketer's relationship to any online retailer must be clearly and conspicuously disclosed on its site so readers can decide how much weight to give the affiliate marketer's endorsement. The New FAQs clarify that merely including an "affiliate link" by itself or a "buy now" button will not be a sufficient disclosure, as consumers may not know that it means the "person placing the link is getting paid for purchases through the link". The FTC recommends putting the disclosure in proximity to the affiliate marketer's recommendation. Putting the disclosure in obscure places, such as an "About Us" or "General Info" page, behind a poorly labeled hyperlink or in a "terms of service" agreement is not sufficient. Likewise, it is insufficient to put the disclosure below the affiliate marketer's review or below the link to the online retailer such that readers would have to keep scrolling after they finish reading. Bottom line, consumers should not have to hunt for it.

Conclusion

While the New FAQs clarify the intersection between the Guides and social media, the fundamental requirements of the Guides remain the same: endorsements must be truthful and accurate; when an endorser receives something of value in exchange for its endorsement or review of a product, disclosure of that material connection is required; and, while the FTC does not mandate special wording, disclosures must be made clearly and conspicuously, regardless of the medium in which it is made. An advertiser remains ultimately responsible for what others say and do on its behalf, so it is incumbent upon the advertiser to make reasonable efforts to monitor and train anyone making statements on its behalf, including employees, public relation firms, ambassadors and social influencers.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions