BizTech Law Blog

Free Speech on Social Media: FTC Updates its Guidance on Social Media Endorsements

Social media is a great tool for companies to build their brands. Many have moved from nearly invisible to viral superstar status, thanks to a well-timed Tweet, Facebook post or clever YouTube video. But with this power comes risks.

One tried and true marketing tactic - both in social and traditional media - is leveraging the power of endorsements. If others are happily using or consuming a product it must be worthwhile, right? While the law and regulatory framework regarding social media promotion is still evolving, social media endorsement is an area that has recently received additional scrutiny from government regulators.

The Federal Trade Commission (the “FTC”) first issued advertising endorsement guidelines in the 1980s. In 2009, the FTC updated the Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Guides”) to address endorsements in social media.

The FTC recently added updates to its “What People are Asking” page, which informally addresses questions related to the Guides. The revisions do not change regulations or policies. Underlying principles such as the fact that a material relationship between a brand and endorser on social media must be “clearly and conspicuously” disclosed, and that endorsements must be truthful and not misleading, remain the same. The revisions address current and evolving trends - trends that weren’t necessarily on the FTC’s radar screen when the Guides were last revised - such as the use of Twitter endorsements and video upload endorsements.

Recently, shoe company Cole Haan received a warning from the FTC after Cole Haan urged its Pinterest followers to post photos of themselves wearing the brand’s shoes in creative settings. It ran this promotion as a contest, offering a $1,000 shopping spree to the winner. The FTC warned that this promotion ran afoul of the endorsement guidelines.

The recent updates suggest that the FTC is keeping a close eye on social media activity, and may become more aggressive in the future.

The new “What People are Asking” guidance is intended to help brands better navigate the rules concerning the following issues:

Disclosure: The FTC explains that “special wording” is not required to disclose that the endorser was given something for his or her endorsement. Rather, providing “essential information such as “Company X game me this product to try…” will typically be sufficient.

Twitter: Twitter poses a special disclosure challenge because of its 140-character limit, however disclosure is still required. The FTC indicates that beginning a Tweet with “Ad:” or using words such as “Sponsored,” “Promotion” and “Paid ad” would likely be effective to disclose sponsorship on social media.

Contests and Sweepstakes: If a company runs contests and sweepstakes in social media, it must notify readers that posts are incentivized. Requiring participants to send a Tweet or make a pin with the hashtag “#XYZ_Rocks,” for example, is not sufficient because, according to the FTC, many readers would not understand such a hashtag to mean that those posts were made as part of a contest or that the people posting had received something of value for doing so. Making the word “contest” or “sweepstakes” part of the hashtag should be enough, according to the FTC.

Affiliate Marketers: Affiliate marketers who receive a commission for a purchase made through their links must clearly and conspicuously disclose their relationship with the retailer. Including “affiliate link” or a “buy now” button would itself not be an adequate disclosure because a consumer might not understand that the person placing these links is getting paid for purchase through the link.

Facebook “Likes”: The FTC recognizes that platforms such as Facebook, which utilize “like” buttons, don’t allow for disclosure. The FTC notes, however, that advertisers should not encourage endorsements using features that do not allow for disclosure, but that the FTC is not sure how much “stock” social media users put into “likes” when deciding whether to patronize a business. Thus failing to disclose that people “liking” a business received an incentive “might not be a problem.” However, an advertiser who buys fake “likes,” and a party that sells fake “likes,” could face enforcement actions.

YouTube Videos: Disclosing a relationship solely in the description of a YouTube video is insufficient. The disclosure is most likely to be effective if it is made clearly and prominently in the video itself.

While not binding, nor necessarily comprehensive in terms of addressing all aspects of social media endorsements, the FTC’s guidance is helpful to those doing business via social media. If you have any questions about whether your business is operating in a lawful and compliant manner on social media, please contact a member of the Foster Swift Technology Team.

Categories: Social Media