Updated FTC Guidance

Online advertising and promotion first attracted the attention of the FTC in 2009. In that year, the FTC revised its longstanding Endorsement Guides to include guidance regarding online promotions and advertising. Recently, the FTC updated its guidance in the form of additions to the “What People Are Asking” section of the Endorsement Guides. As the FTC notes in its press release about the updated section, more than five years have passed since the initial release of the “What People Are Asking” section—“a lifetime in blog years.”

In the revised “What People Are Asking” section, the FTC provides answers to trending and topical questions that it believes are on advertisers’ minds. Through this informal publication, the FTC reconfirms prior guidance and provides new guidance on a host of different topics, including endorsements that result from contests or employment, as well as the nature of the disclosure needed on newly popular formats.

Topics covered (and the FTC guidance provided) include:

• The disclosure requirements for individuals who received products for free with the expectation that they will publish an endorsement, or who participate in network marketing programs where they receive free product samples for endorsements. In both cases, full disclosure of the relationship is required to comply with the Endorsement Guides.

• Disclosures in connection with sweepstakes or contests with a social media component (regardless of the social media vehicle used) must be made. This confirms the warning that the FTC issued to Cole Haan less than a year ago for lack of sufficient disclosure under the Endorsement Guides after the company had entrants to a sweepstakes “pin” photos of Cole Haan shoes to “Wandering Soles” boards for a chance to win a $1,000 Cole Haan shopping spree.

• Posting a video where an individual discusses a product received from a marketer or an affiliate for free constitutes an endorsement in the same way as discussing the product on a blog, with disclosure being required about both the relationship and the free goods.

• Any employment—full-time or part-time, employee or contractor—must be disclosed regardless of whether the endorser is formally working at the time of any statement about the product.

• “Liking,” “pinning,” or “sharing” a link with others can be an endorsement if done as part of a sponsored campaign. In these situations, disclosure is required. Companies should refrain from encouraging endorsements on platforms where clear and conspicuous disclosures cannot be accommodated.

• “Likes,” “pins,” or “shares” that appear to be from actual consumers when they are not are deemed deceptive under the Endorsement Guides.

The FTC also provides guidance about how to disclose relationships, while adhering to its prior advice that there is not a single form of disclosure that covers all of the Endorsement Guides; the disclosure required will be dictated by the actual circumstances of the endorsement.

Ultimately—regardless of the medium and its limitations—the FTC’s touchstone is transparency. There is a need to completely disclose what is received for any endorsement. If a product is provided for free and something more (such as a payment) is also made, it is not enough only to disclose the receipt of the product. Similarly, if a “sneak peak” of a product is provided and, in addition, payment for a review of the product is received, it is not sufficient only to disclose the “sneak peak.” Early access and payment both need to be disclosed. This full disclosure responsibility resides with the “poster” (blogger, reviewer, etc.), as well as with the retailer whose product or service is the subject of the endorsement.

Regarding videos, the FTC advises that a disclosure in the description of a video does not suffice. The disclosure needs to appear in the video itself—preferably at the beginning and repeated periodically throughout—since consumers can easily miss disclosures at the end of a video. Similarly, the FTC states that links to “Disclosures” on websites are not prominent enough to meet the standards outlined in the Endorsement Guides.

With respect to “tweets,” the FTC states that it does not consider the medium’s space limitations a bar to full disclosure. Even with its 140 character limitation, the FTC notes that effective disclosure may be made by beginning a sponsored tweet with “Ad:” or “#ad.” Thus, the use of three characters may suffice for compliance, depending on the accuracy of the disclosure.

Further, the FTC suggests that customers who are incentivized to post reviews about products through discounts or other means (even with incentives that may have only a subjective value) should be instructed to disclose the incentive they received. In all events, if there is a question about whether the incentive offered could affect the review, the best practice is to disclose the incentive.

Practical Advice for Avoiding an FTC Enforcement Action

The FTC’s “What People Are Asking” publication reiterates that having a formal program that provides a policy for employees and others to ensure compliance and identifies what is and is not allowed in terms of product endorsements is a critical element of compliance with the Endorsement Guides for any marketer.