FTC Updates to Endorsement Guidelines

By Caitlin Cleary

On May 29, 2015 the FTC announced that it updated its FAQ’s to its “Guides Concerning Use of Endorsements and Testimonials in Advertising,”to cover the latest issues relating to advertising on the web. Special focus is placed on social media platforms such as Facebook, Twitter, and Instagram, as outlets for endorsing consumer products. Relevant issues are when disclosure needs to be made, what needs to be said, and how to properly format the disclosure to fit platform. The FTC provides the following guidance:

1. Wording:

 There is no set formula for a disclosure other than in a manner that is “clear and conspicuous.” The disclosure must be clearly stated and obvious to the consumer.  In most instances, a simple and straightforward disclosure will do: “Company X gave me a free product to try.” However, in dealing with platforms that implement character restrictions, such as Twitter, “#Ad” or “#Promo” will suffice.  So long as consumers are made aware of any affiliation with a company that may affect their judgment in regards to the product, the short character disclosure will fulfill the FTC requirements. In addition, affiliate marketing practices must include a more specific hyperlink statement than, for example, “buy now” or “affiliate link.”  There must be a clear disclosure that the company is receiving funding for each click on the link.

2. Placement:

The placement of the disclosure depends upon the media platform.  For example, a video on YouTube should make the disclosure, “clearly and prominently” in the video itself. Notably, the message should be at the beginning of the video rather than at the end, and it should certainly not be buried in the description beneath the video screen where people do not normally look.  The policy behind disclosure placements is that it must be somewhere where the consumer cannot miss it.

This, at times, may call for a reiteration of a fact already disclosed somewhere else on the platform. For example, many Facebook users already have their place of employment under their mini biographies. If a Facebook user is promoting a product on behalf of her employer, then it is advised that the user restate her affiliation with that company when/where the promotion is made, leaving little to no room for miscommunication.

3. “Liking” and “Favoring”:

This practice is often referred to as “Like-gating.” Social media users often want to share with their friends what is the “it-item” of the day and what products they are using.  The Guide responds to that gray area, of whether or not this constitutes as product promotion.  The answer is no, as long as you are not receiving compensation for your favoritism.  In that case, there is no need for disclosure.  On the other hand, if a company is running a sweepstakes contest for whoever promotes the company’s products on Instagram or Twitter, for example, then a hash tag disclosure such as “#Sweepstakes” must be used.  Notably, the FTC mentions in their update that if the company falsely displays their amount of “likes” or “favored tweets”_, for example by buying them_, then that constitutes as grounds for legal action for misleading the public.

4. Payment for Product Review:

Consumers often search the web for reviews about products prior to purchase.  The consuming public’s reliance on such reviews has led the FTC to broaden its Guide to include product review disclosures. The Guide had already included a mandatory disclosure when an online reviewer has received a free product to try out and review. The Guide mandates that this compensation be disclosed.  Similarly, a blogger may not only be sent a free product to review, but may also receive a monetary incentive as well.  In those circumstances the fact that they received compensation must be stated in a disclosure.

5. Employers and Advertising Companies:

The FTC geared statements in the updated Guide to employers and advertising companies. With on-line marketing as the go-to outlet for product and business promotion, companies often have a network of employees in charge of their online advertisements. The FTC advises that companies establish a business wide policy calling for disclosures when employees promote the employer’s products online through a social media platform.  Furthermore, employers need to establish a checks and balance system whereby employers shall make a “reasonable effort” to keep tabs on what their employees are posting.

The core premise of the Guide has not changed; it has only become more specific to expanding areas of social media marketing.  The FTC follows the basic truth-in-advertising principle that endorsements must be honest and not misleading.  An endorsement cannot be made to claim facts about a product that the products actual marketer could not legally make.  Furthermore, if there is a special relationship between the endorser and the marketer, or if the endorser is paid, then the audience must be informed of such fact.  In other words:

 1.            Endorsements must be truthful not misleading

2.            If there is a connection between an endorser and the marketer of the product that would affect how people evaluate the endorsement, it must be disclosed clearly and conspicuously.

3.            In a paid advertisement, if the advertiser does not have proof that an endorser’s experience represents what consumers will achieve using the product, the advertiser must clearly and conspicuously disclose the generally expected results in those circumstances.

To find out about more updates to the guidelines look to the FTC's Frequently Ask Questions.