This month, the Federal Trade Commission (“FTC”) issued a revised version of “Endorsement Guides: What People Are Asking,” a series of questions and answers pertaining to the conduct of “influencers,” that is, anyone who endorses a product or service. The basic premise of the Endorsement Guides is that, if there exists a material connection between the influencer who is endorsing the product and the company that is marketing the product (e.g., a payment, a free sample, a family connection, etc.), that connection must be disclosed. If the connection is not adequately disclosed, consumers might give the endorsement more credence than they would have given it otherwise, and the endorsement is considered by the FTC to be a deceptive business practice in violation of Section 5(a) of the Federal Trade Commission Act.
Most of the updates to the Endorsement Guides involve social media influencers. Perhaps to drive that point home, the FTC simultaneously announced its first-ever complaint (and proposed settlement) against individual social media influencers, specifically Trevor Martin and Thomas Cassell, two officers/owners of the gambling site CSGO lotto. Martin and Cassell allegedly presided over a promotional campaign in which influencers were paid to promote the site on YouTube, Twitch, Twitter and Facebook, but these promotions were not accompanied by adequate disclosures. This included posts by the owners themselves. In one tweet, Cassell failed to disclose his ownership stake in CSGO and wrote:
Bruh… i’ve won like $8,000 worth of CS:GO Skins today on @CSGOLotto I cannot even believe it!
The FTC responded to Martin and Cassell thusly:
Well, Bruhs, while we’re on the subject of things we cannot even believe, did either of you like consider clearly disclosing that you like owned the company – a material connection requiring disclosure under FTC Law?
Did the FTC really say that? Yes — on their website, at least — courtesy of the incomparable Lesley Fair. The FTC also issued a more formal response, filing a three-count complaint alleging violations of Section 5(a), specifically for a “False Claim of Independent Reviews,” “Deceptive Failure to Disclose Endorsers Were Owners and Officers” and “Deceptive Failure to Disclose Endorsers were Paid.” The proposed settlement, open for public comment until October 10, 2017, will require Martin and Cassel to establish a monitoring and review system to ensure that future paid endorsements are accompanied by clear and conspicuous disclosures.
Revised Endorsement Guidance
The revised Endorsement Guides included well over twenty additions, edits and updates. Here is our rundown of the substantive social media-related revisions:
- Instagram Tag Endorsements: Let’s say you are a D-list social media celebrity. You post a picture of yourself on Instagram wearing some designer sunglasses. You don’t say anything about the sunglasses in the description, but you do include a tag of the designer’s brand name. Is that alone really an endorsement? Yes, says the FTC – if you have any material connection to the product marketer, the connection needs to be disclosed, for example, by starting the description with “AD” or “#AD.”
- Where does the disclosure go? The revised Endorsement Guides also contain some specific advice about the placement of disclosures on social media. This includes:
- Previous FTC literature has recommended that a good disclosure may include placing “#AD” at the beginning of a paid social media post. The revised Endorsement Guides clarify that this placement is not an absolute requirement; the important thing is that the disclosure is easily noticed, which is more likely at the beginning than at the end of a post. Note that the FTC advises against incorporating “AD” into a larger hashtag, because such a disclosure might not be noticed at all
- Instagram may truncate descriptions more than four lines long, so that if a user wants to see the rest of the description, he or she has to hit the “more” button. The FTC wants those disclosures “above the fold” in the first few lines, so they are seen by all consumers, not just those who bother to click “more.”
- If your endorsement is in a blog, the FTC frowns on shoving the disclosure towards the bottom of the page or even hidden somewhere way at the top. It is recommended that the disclosure being “placed where it easily catches” attention, ideally somewhere near the endorsement it is qualifying.
- No “Thank You”! Earlier this year, the FTC sent about ninety “educational” letters to social media influencers reminding them of the Endorsement Guides and cautioning them over what may have been inadequate disclosures. Many of those letters concerned posts where the influencer simply said “Thanks” to a brand instead of adequately disclosing what the thanks was for (e.g., thanks for the $5,000 check, or thanks for the free sample). The revised Endorsement Guides specifically state that saying “thanks” to a brand is not a sufficient disclosure of a material connection. Note that some of those ninety social media influencers may not have gotten the memo because, on the same day the FTC announced the revised Endorsement Guide, it also announced that it had followed up with twenty of these influencers, asking for a response with specific information about their connections to the brands they have been endorsing online.
- Ambiguous Hashtags: Other ambiguous words that may not be adequate disclosures of a material connection include “#client,” “#advisor,” “#ambassador” and “#consultant.” On the other hand, stating that “XYZ Company asked me to try their product” may be sufficient depending on the circumstances.
- But you said Facebook “likes” weren’t a problem! Well, yes, the FTC did sort of say that once, but this language has changed. As background, let’s say you promise to give customers a coupon for 10% off their sunglasses if they “like” your Facebook page (otherwise known as a “like-gated” promotion). Do you need to tell consumers to disclose their receipt of the coupon along with the “like,” and how exactly would they do that? A “like” is a binary exercise: you either press the “like” button or you do not, and Facebook doesn’t offer a space for explaining why you pressed the “like” button. Because there is no practical way to disclose the reason for a “liking” a page, both the FTC and the National Advertising Division (a self-regulating organization of the advertising industry) have been more or less agnostic on the issue. Indeed, the prior version of the FTC Endorsement Guides stated that, because it was not clear if anyone was putting any stock in these “likes,” “the failure to disclose that the people giving “likes” received an incentive might not be a problem.” In the newly revised Endorsement Guides, however, this language has been deleted and replaced with a warning that: “whether the Commission may take action would depend on the overall impression, including whether consumers take “likes” to be material in their decision.” We asked the FTC about this update during one of its live Twitter chats last week, and the FTC stated that its enforcement policy has not changed, despite this new language. That may be the case, but we have a feeling that this is not going to be the last word on the subject. As the saying goes, “Watch this space!”
- Employee social media posts. The revised Endorsement Guides also offer a framework for determining whether an employee can use his or her personal social media account to “like” or “share” a company’s post. If the post being liked or shared is considered to be an “advertisement” by the company, than a disclosure of the employment relationship is required. If the post is just being shared by the employee, a disclosure is easy as a practical matter: just include a note saying something like “Check out my company’s new product…” or include a hashtag such as “#XYZEmployee,” which the FTC says may be sufficient depending on the context. But if you are just “liking” your employer’s post, where do you put the disclosure? The FTC doesn’t offer any answer except: “see what we said above about ‘likes’.” Since the FTC repeated itself, so will we: Watch this space!
- Can I rely on the social media platform to do it for me? Some social media platforms are now including a built-in tool that offers automatic formatting for the disclosure of paid endorsements. If you use one of these tools, are you complying with FTC guidance? Long story short – it depends. If the tool creates a clear and conspicuous disclosure, then the FTC is happy. But if the tool stinks, so does your disclosure, and you (the endorser) are responsible. To learn about one of these tools, see this blog post about Instagram “paid partnership” tagging.
- Time-limited “story” posts. “Stories” (a feature originated on Snapchat and later also incorporated by Instagram; see here for more info) are photos or videos broadcast to followers or friends for a limited period, usually twenty-four hours, after which they disappear. The revised Endorsement Guides warn that if a “story” is a paid endorsement, there must be a disclosure (superimposition of the disclosure over the image is recommended), and the same rules apply regarding the disclosure having to be clear and conspicuous. Notably, since a “story” can feature both video and audio, you can’t stick the disclosure in the audio only because not everyone turns on the sound.
- Solicited Endorsements. Other new guidance appears to be directed at consumer review programs that were designed to avoid disclosures. For example, the Endorsement Guides indicate that some reviewers are apparently being told that if they disclose a material connection on one review site, they don’t have to do it on other sites. The Endorsement Guides debunk this incorrect advice, and also address various mechanisms that some marketers may be employing to compensate reviewers without disclosing the compensation (e.g., indirectly distributed discount codes to consumers who are not “required” to review the product). The bottom line is that disclosures are generally required.
You can read the full Endorsement Guides on the FTC website here. Since the FTC didn’t publish a list of the recent revisions to the Endorsement Guides, we created a redline comparison showing the changes since the prior version, which you can access here.