As many know, the Federal Trade Commission (“FTC”) regulates unfair and deceptive business practices including such practices on the internet. One of the more vexing recent issues has been business use of “consumer” reviews, “likes,” rating systems and similar types of product and service endorsements on websites and on social media. In September 2017, the FTC issued revised endorsement guidelines. See the FTC information page here.
FTC Endorsement Guidelines: Being Upfront With Consumers
The title of the FTC’s announcement is: “The FTC’s Endorsement Guides: Being Upfront With Consumers.” That really says it all; the FTC is highlighting the fact that any “consumer endorsement” or testimonial has to be truthful and not misleading. If you and your business and advertisers are upfront with your customers, you are probably going to satisfy the guidelines. If in doubt, disclose.
To What do the Guidelines Apply?
The FTC’s endorsement guidelines apply to endorsements and testimonials in every category of advertising:
- Word-of-mouth marketing
To Whom do the Guidelines Apply? Everyone
Most people probably think that “unfair” and “deceptive” business practices only apply to big businesses and giant corporations; or that the rules only apply to advertisers or promoters or marketers. That is false. The new guidelines make it clear that the consumer protection statutes apply to everyone, even individuals making endorsements on social media.
In April 2017, the FTC sent out warning letters directly to celebrities, athletes, and other individuals who were endorsing products through use of social media. The letters were directed to both marketers and to these so-called “influencers.” The letters reminded the individuals and marketers that they should conspicuously disclose any relationships to the brands/products when promoting or endorsing the brands/products through social media. The letters mark the first time that the FTC reached out directly social media influencers themselves.
In mid 2017, the FTC filed its first complaint against individual social media users. The case settled in September 2017
In that case, the individuals were alleged to have used social media to promote the online gambling company called CSGO Betting that they owned. For example, the company’s owner tweeted: “Made $13k in about 5 minutes on CSGO Betting. Absolutely insane.”
The FTC cited numerous other examples of tweets and instagram and other social media postings. None of the posts disclosed that the individuals owned the company. The FTC’s also alleged that the individuals had organized an “influencer program” and paid other gaming influencers between $2,500 and $55,000 to promote the CSGO website to their social media circles, while prohibiting them from saying anything negative about the site.
According to the FTC, the foregoing constituted unfair and deceptive business practices.
What is Conspicuous?
The FTC is particularly concerned with the issue of conspicuousness and the interplay with how certain social media platforms are normally viewed. For example, the FTC has taken note of the fact that instagram posts are most often viewed by consumers on mobile devices. Such consumers typically only see the first three lines of a longer post unless they click “more,” which many may not do. The FTC has made it clear that conspicuous means that any disclosure must be made above the “more” button.
The FTC also said the following is not considered conspicuous:
- Strings of multiple tags, hashtags, or links — readers likely just skip over them
- Multiple tags, hashtags or link when they appear at the end of a long post — readers often do not read to the end
- Hashtags like “#sp,” “Thanks [Brand],” or “#partner” are not understood by consumers to mean a paid endorsement — disclosure must be clear
- Including “AD” or “#AD” in a larger hashtag or tag — “AD” or “#AD” alone tells the consumer the post is an advertisement; but including “AD” in a larger hashtag might not be noticed or understood
- Making the disclosure only in the audio portion of a video or snapchat “story” — many consumers do not turn on the sound
What is Unfair and Misleading?
In general, the same sort of practices that would be misleading and deceptive in regular advertising or in face-to-face marketing are going to be deemed misleading and deceptive when used in social media and on the internet. Here are some examples:
- Talking about your experience with a product when you never used it
- Testimonials not representative of what normal customers can expect (e.g., “I lost 100 pounds” when most consumers lose three pounds
- Making claims about a product/service when such claim requires scientific proof that does not exist
- Endorsing a product without disclosing a connection between the endorser and the marketer of a product that would affect how people evaluate the endorsement
What Must be Disclosed?
The biggest changes in the new guidelines relate to disclosures and, more specifically, disclosures that are needed for social media like twitter, instagram, and facebook. The basic idea is whether the consumer would give less credence to the review or endorsement if some fact or connection was disclosed. The guidelines suggest that, when in doubt, disclose. Among the things that should be disclosed:
- That you were paid to provide the endorsement or review
- That you received a free copy/sample of the product or service
- Your dad is the owner of the company or you have some other family connection
- You work for the company
- You own the company
What is Endorsement?
- You post a photo of yourself wearing some designer apparel and you include a tag of the designer’s brand name — that is an “endorsement” if you are paid or have any material connection to the designer product marketer
- You provide Facebook “likes” in exchange for a coupon or a free sample — the FTC considers this an “endorsement” but since there is no practical way to disclose why you are providing the “like”, the FTC is likely to focus on the company providing the coupon or free sample and whether that marketing practice is unfair or deceptive
- You “like” or “share” or retweet your company’s or boss’ post or blog — this is an endorsement and you should disclose that you are an employee of the company
Guidelines, Not Regulations
The new FTC endorsement guidelines are not official FTC regulations, so as the FTC says, “there are no civil penalties associated with them.” However, any business that ignores these guidelines — particularly if they ignore them egregiously — could face FTC investigation on whether the business has engaged in unfair or deceptive practices under Section 5(a) of the Federal Trade Commission Act.
If your business has “comments” sections, testimonials or reviews, it may be wise to review company policies and procedures. If you ask your employees to “share” or “like” a company blog or article, it may be wise to rethink how that is done. It may be wise to review the employee handbook if internet protocol is covered.
Contact Revision Legal
To learn more about the new FTC guidelines, contact the professionals at Revision Legal. Revision Legal offers a wide array of legal services related to the internet, business law and consumer protection. We can be reached by using the form on this page or by calling us at 855-473-8474.
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