social-150x150.jpgAs a result of expanding technology, companies are faced with increasingly more choices when deciding how to spend their advertising dollars to promote their products.  Some companies choose traditional methods, such as print, radio or television ads.  Others use digital advertising, such as Google AdWords or placing ads on popular social media sites.  Still others may try more non-traditional methods, such as seeking out influential bloggers to try out and review their products, or encouraging social media users to share their experiences with the products.  Indeed, in some cases no amount of expensive paid advertising can quite compare to hearing it straight from the mouth of a fellow consumer.  Although these campaigns can be extremely valuable and often cost-efficient methods of advertising, companies need to make sure they do not run afoul of the law in the process.

The U.S. Federal Trade Commission (the “FTC”) is the federal agency that enforces laws to protect consumers against fraudulent, deceptive, and unfair business practices.  One area on which the FTC focuses is the use of “endorsements” in advertising, which mean any advertising message that consumers are likely to believe reflects the opinions or experiences of a party other than the sponsoring advertiser.  The FTC has taken the position that such endorsements include statements made by bloggers when reviewing products at the request of the product manufacturer.  However, what constitutes an endorsement may not be so clear to companies that interact with their consumers using newer features on social media.  Fortunately, the FTC released new guidelines in May 2015 that address the application of the previously-published Endorsement Guides to some of these newer features on social media.

First, the FTC provided further clarification on what activity can amount to an endorsement when it comes to social media.  As mentioned above, blog postings that contain product reviews made on behalf of the product’s manufacturers are endorsements.  Also, product reviews on other media such as YouTube, when made on behalf of an advertiser, constitute endorsements.  Further, not only are words used to convey a positive message in product reviews considered endorsements, but:

Simply posting a picture of a product in social media…, or video of you using it could convey that you like and approve of the product.  If it does, it’s an endorsement.

Thus, advertisers who encourage consumers to post a picture of their product on sites such as Facebook or Pinterest should be aware that such activity could constitute an endorsement.   Likewise, pinning a picture on Pinterest, sharing a link on Facebook, or clicking the “like” button on Facebook could be viewed as an endorsement.

The Guides discuss various requirements that such endorsements must comply with, such that they must reflect the honest opinions of the endorser and must not contain unsubstantiated claims.  However, one important requirement that is often the issue in social media-related endorsements is that any connection between the endorser and the advertiser that “might materially affect the credibility of the endorsement” must by fully disclosed.

It is clear that there is a material connection between an advertiser and a blogger when the advertiser provides the blogger with compensation in exchange for him or her writing a review of the advertiser’s product.  Such compensation is often monetary or in the form of free product.  However, even a blogger that receives minimal compensation, such as a $1-off coupon or an entry in a sweepstakes, should probably disclose this, as it could affect the credibility of the blogger’s statement.

Of course, it may not be technically possible to make disclosures using some of the social media features discussed above, such as Facebook “likes.”  Although the FTC takes the position that advertisers should not encourage users to endorse products using features that do not allow for “clear and conspicuous” disclosures, it does leave some room for ambiguity:

However, we don’t know at this time how much stock social network users put into “likes” when deciding to patronize a business, so the failure to disclose that the people giving “likes” received an incentive might not be a problem.

The FTC also clarified how consumers may make these “clear and conspicuous” disclosures on social media platforms.  While consumers do not need to hire lawyers to help them write the disclosures, they should write something that effectively gives readers the information they need, such as “Company X sent me product Y to try,” in text that is clear and easy to read.  In social media platforms with limited space, such as Twitter, starting a tweet with #ad would likely be efficient.  Further, when an endorsement is made in a YouTube video, the disclosure should be made in the video itself, as opposed to the textual video description that consumers may not read.  In cases where companies allow employees to use social media to talk about their products, the employee should make the disclosure directly in the posting, rather than relying on the relationship listed in the social media profile.

You may be asking by now, why should companies care about this, when it is the endorser’s duty to disclose?  It is because the FTC states that advertisers are subject to liability not only for false or unsubstantiated claims made through endorsements, but also for the failure to  disclose material connections.  Thus, advertisers should have reasonable programs in place to train and monitor those who make endorsements on their behalf.  Such a program should include explanations of what can (and can’t) be said about the products, to make sure that no unsubstantiated claims are made, and also instructions for making appropriate disclosures.  Beyond this, companies should periodically search for what endorsers are saying, and follow up as needed.

What if your company engages a public relations firm to run its social media programs?  The FTC states:

Your company is ultimately responsible for what others do on your behalf…  Delegating part of your promotional program to an outside entity doesn’t relieve you of responsibility under the FTC Act.

As a rule of thumb, advertisers should put themselves in the reader’s shoes.  Is the connection between the endorser and the advertiser one that you would want to know before relying on someone else’s product endorsement?  If so, you should make sure it is disclosed.  Further, is the disclosure made in a manner and location that you would read and understand?  If not, you should make sure it is revised to meet the “clear and conspicuous” standard.

As the FTC continues to enforce ad disclosure obligations, it is ever the more important for advertisers to ensure compliance with these requirements.