FTC Issues New Guidance On Endorsements And Related Online Disclosures

When preparing to run advertising that includes endorsements,
our clients frequently ask whether any « magic words » are
necessary and how disclosures should be made on space-constrained
forums such as Twitter. On May 29, 2015, the Federal Trade
Commission (« FTC ») staff announced it had addressed some
of these questions by updating the FAQs to its Guides Concerning Use of Endorsements and
Testimonials in Advertising
(« Endorsement Guide »),
providing some much needed clarity on a variety of
endorsement-related issues, including special wording, Twitter
disclosures, social media « like » buttons, affiliate
marketing, employee endorsements, uploading videos, and more.

Special Wording: The new FAQs follow the
previous version in stating that no special wording is necessary to
make endorsement disclosures, but add that it will « usually be
effective » to include a simple disclosure that « Company X
gave me free product to try. »

Twitter: The FTC updated the FAQs to
state that starting a tweet with « Ad » or
« #Ad » would « likely be effective » in
communicating that a tweet is an advertising message (as opposed to
its previous iteration which stated it « might be
effective »). As a fundamental matter, the FTC reiterates
its previous guidance that there is no specific wording necessary
for Twitter disclosures, explaining that it will assess the
sufficiency of a disclosure based on the broad principle that the
consumer must receive the necessary information to evaluate the
sponsored statement.

Employee Endorsements: The new FAQs add an
entire section on employee endorsements, again refusing to mandate
specific disclosure words for employees (and employees of related
ad agencies and PR firms), but explicitly requiring the employment
relationship be disclosed when making an endorsement. The
FAQs indicate a company is not expected to monitor every employee
post, but they « should establish a formal program to remind
employees periodically of your policy, especially if the company
encourages employees to share their opinions about your
products. » Thus, it is now more important than ever for
advertisers to adopt a social media policy.

Social Media « Likes »:  »
 » has received a lot of publicity over the past
several years, and the FTC acknowledges that people enjoy sharing
their fondness of a particular product. With that in mind,
the new FAQ’s add a section on social networking sites, stating
consumers are allowed to write about their love of a product
without making disclosures as long as they are not being
« rewarded. » However, the FAQs state that « if
you’re doing it as part of a sponsored campaign or you’re
being compensated for example, getting a discount on a
future purchase or being entered into a sweepstakes for a
significant prize then a disclosure is
appropriate. » The guidance acknowledges that it is
unclear at this time « how much stock social network users put
into ‘likes,' » and giving incentives for
« likes » in fact « might not be a problem. »
However, the FAQs add that « [a]n advertiser buying fake
‘likes’ is very different from an advertiser offering
incentives for « likes » from actual consumers. »
If the likes are from people who are not consumers, they are
clearly deceptive.

Social Media Contests: The new FAQs add
guidance reminding businesses engaging in social media contests
that they must disclose clearly that the post is being made as part
of a sweepstakes or contest. In other words, simply stating
#XYZ_Rocks » is not sufficient without a hashtag disclosure of
« contest » or « sweepstakes. » These words
should not be abbreviated, as the FTC notes that « Sweeps »
probably isn’t sufficient because many people « would not
understand what that means. »

Video Uploads: Video uploads are extremely
common in today’s Internet and meme crazed world. You may
have noticed disclosures in the YouTube video description, and thus
the FTC has added a question addressing this practice in its new
FAQs. The new FAQs indicate any material information related
to an endorsement must be disclosed « clearly and
prominently » in the video itself. Many consumers
don’t read the description and thus watch the video without
ever seeing the requisite disclosures. The FAQs recommend
that any disclosures be included at the beginning of a standard
video, but if the video is extremely long, such as a live videogame
playthrough, multiple, periodic disclosures should be made.

Affiliate Marketing: As
affiliate marketing
practices continue to thrive, the FTC has
edited its affiliate marketing guidance in the new FAQs. The
FTC expands on its previous FAQs, which stated that an affiliate
marketer must disclose the relationship to any online retailers
clearly and conspicuously on its site so readers can « decide
how much weight to give [the] endorsement. »
Specifically, the FAQs clarify that merely including the
« affiliate link » by itself or a « buy now »
button will not be a sufficient disclosure, as consumers may not
know it means the « person placing the link is getting paid for
purchases through the link. »

Disclosure of Advertiser Payment: The new
FAQs add questions about what information must be disclosed in
addition to merely « I got a product for free. » The
FAQs explain that it depends on what the blogger received. If
the endorser is compensated in a way that could impact the
credibility of a review, it must be disclosed. For example,
if a video game
is being paid to try a game, the fact he or she is paid
must be clear. Cryptic language such as « I got a sneak
peek of the game » is not sufficient.

Online Review Programs: The FTC expanded
its guidance related to online reviews, adding a section in the new
FAQs that provides examples for when a website with online reviews
must provide disclosures. To the extent a retailer sends a
consumer a free product, even if the reviewer is told to be honest
whether positive or negative, the retailer must disclose that
information. In addition, if a multi-channel network (Company
XYZ) on YouTube enters into a contract with a videogame marketer,
in which XYZ will pay its reviewers to upload reviews of the
videogame marketer’s games, it is not sufficient for a
« sponsored by XYZ » disclosure to be made. The name
of the videogame marketer, who has an interest in positive reviews,
should be disclosed.

Social Media Influencers: The FTC added
minor tweaks to its guidance on social media influencers,
clarifying an advertiser’s liability for « what others say
in social media. » In part, the FTC states that companies
using a network of bloggers should instruct members of the network
on their responsibilities for disclosing connections,
« periodically search for what people are saying, » and
generally make a « reasonable effort » to know what people
in the network are saying. Therefore, as a best practice,
each advertiser should adopt a social media influencer policy to
ensure it has effective processes to comply with this guidance.

A common theme across much of the new guidance is the FTC
addressing questions raised by the proliferation of Internet and
social media. As the FTC’s blog announcing the FAQs notes, the
legal principles remain the same, but online developments require
new application of these principles. There is a natural level
of overlap between the Endorsements Guide and Dot Com Disclosures Guide. As such,
advertisers should examine FTC guidance as a whole when creating
the requisite disclosures.

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.

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