The Do’s and Don’ts of Social Media Advertising

One of the most common ways to advertise and market products and services in social media is to use celebrity or consumer endorsements and testimonials. Like other types of advertising, endorsements and testimonials must be truthful and not misleading.

In 2009, the FTC released a new version of its Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides), which provide guidelines to assist advertisers in meeting their legal obligations when using endorsements and testimonials in advertising. The FTC uses “endorsements” and “testimonials” interchangeably, often referring to them as endorsements.

In the revised Endorsement Guides, the FTC clarified that the terms endorsement and testimonial apply to comments made in social media.

The Endorsement Guides include various provisions that pertain to messages in social media, such as blogs, word-of-mouth marketing, and other promotions in which companies encourage consumers to speak on their behalf.

Identifying Endorsements

According to the FTC, a statement made by a consumer in social media will be treated as an endorsement subject to the Endorsement Guides if, viewed objectively, it appears that the relationship between the advertiser and the speaker is of a type that the speaker’s statement can be understood to be sponsored by the advertiser. The FTC encourages advertisers to ask whether speakers are acting independently or on the advertiser’s behalf in their statements about a product or service. The FTC expressly states that not all social media endorsements are subject to the Endorsement Guides. If the speaker is acting independently, the statement will not subject to the Endorsement Guides. However, if the speaker is acting on behalf of the advertiser, the FTC considers the statement to be a “sponsored” endorsement and therefore subject to the Endorsement Guides.

The FTC has stated that the relevant facts in determining whether an endorsement is sponsored vary and cannot be fully set out, but include:

• Whether the speaker is compensated by the advertiser or its agent.
• Whether the product or service in question was provided for free by the advertiser.
• The terms of any agreement.
• The length of the relationship.
• The previous receipt of products or services from the same or similar advertisers, or the likelihood of future receipt of products or services.
• The value of the items or services received.

The question of whether a specific statement is subject to the Endorsement Guides often must be determined case by case. However, the greater the connection is between a company and the speaker, the more likely it is that the company will have to comply with the Endorsement Guides.

Liability For Claims Made in Sponsored Endorsements

Advertisers must ensure that claims in their ads are truthful. They may be held liable for any false or
misleading claims.

Advertisers may also be held liable if they include a false or misleading claim made by a consumer in their ads. While this is not a new concern, the Endorsement Guides go a step further regarding claims made in sponsored endorsements in social media. The Endorsement Guides provide that an advertiser may be liable for claims made by consumers even if the advertiser does not use those claims itself.

The Endorsement Guides state that even though an advertiser may not have control over a specific statement made in new forms of consumer-generated media, the statement may still be treated as an endorsement under the Endorsement Guides if the statement is deemed sponsored by the advertiser. Therefore, an advertiser may be liable for an endorser’s statements, even if the advertiser:

• Did not authorize the consumer’s statements.
• Had no ability to control the consumer’s statement.

The FTC’s position on liability for statements made by sponsored endorsers expands the scope of
content for which advertisers are responsible.

In the Endorsement Guides, the FTC provides an example of an advertiser that uses a blog advertising service to match bloggers with its skin care products. Through this service, the advertiser asks a blogger to try the advertiser’s new lotion. Even though the advertiser does not make any claims about the lotion’s ability to cure skin conditions, the blogger writes that the lotion cures eczema. Because the blogger-advertiser relationship is sponsored, the FTC states that the advertiser is liable for the misleading or unsubstantiated representations made through the blogger’s endorsement. Most campaigns in social media inherently involve giving up some level of control over an advertiser’s messages. Therefore, advertisers assume additional advertising risk when engaging in social media campaigns involving sponsored endorsers.

While the FTC acknowledges that an advertiser may have no control over statements made by an endorser, the FTC still believes liability may be appropriate on the general basis that, by engaging in social media:

• It is foreseeable that an endorser may make a false claim.
• The advertiser has assumed the risk and any potential liability that accompanies this risk.

The FTC does note, however, that before prosecuting advertisers in these circumstances, it would exercise its prosecutorial discretion and consider:

• Efforts made by advertisers to advise endorsers of their responsibilities.
• Actions taken by advertisers to monitor endorsers’ online behavior.

To date, none of the FTC’s actions in the social media space have focused on false claims made by endorsers. Instead, the FTC actions have focused on whether endorsers appropriately disclosed their connections to the companies that are marketing and selling the endorsed products.

FTC Education Letters

In April 2017, the FTC sent more than 90 letters to companies and influencers, reminding the recipients of their legal obligations under the Endorsement Guides.

The letters stated that consumers need to know if there is a material connection between a company and an influencer who promotes the company’s products or services. Unless the connection is otherwise evident from the context, the influencer is required “clearly and conspicuously” disclose the connection.

There are at least four noteworthy aspects to these letters:

• Previously, the FTC’s enforcement efforts have been focused primarily on companies. Some of these letters, though, were sent to celebrities, athletes, and other influencers. This could signal broader enforcement in the future.
• The letters addressed some issues that are unique to Instagram. Consumers who view Instagram posts on mobile devices typically see only the first three lines of a longer post, unless they click “more.” When making endorsements on Instagram, influencers should generally disclose any material connection above the “more” button, so that the disclosure is less likely to be missed.
• The letters also noted that when posts include multiple tags, hashtags, or links, readers may just skip over them, especially when they appear at the end of a long post. It is important to ensure that important disclosures do not get lost in the mix. Therefore advertisers should lead with the important disclosures or make sure that they otherwise stand out.
• Some of the letters addressed particular disclosures that the staff believed were not sufficiently clear. For example, some letters pointed out that consumers may not understand a disclosure like “#sp,” “Thanks [Brand],” or “#partner” in an Instagram post to mean that the post is sponsored. Although there is no one-size-fits-all way to make that disclosure, a term that is subject to multiple interpretations may not be sufficient.

In addition, the letter to advertisers reminded them to:

• Establish a social media policy if they do not already have one.
• Train their endorsers on their policy.
• Monitor the posts of their endorsers.

If you want to discuss a social media endorsement policy let me know!

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The Do’s and Don’ts of Social Media Advertising

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