In this latest installment of our On Notice series on the FTC’s Notice of Criminal Offenses Related to Endorsements, we discuss when and how to properly disclose a substantive connection between the advertiser and the supporting party.
According to the FTC’s Notice of Penal Offenses, “[i]It is unfair or deceptive business practice to fail to disclose any connection between an endorsement body and the seller of an advertised product or service, if such communication would materially affect the weight or credibility of the endorsement and if the communication was not reasonably expected by consumers.” In support, FTC cited Cliffdale Assocs., Inc., 103 FTC 110 (1984), a case where “[n]One of the testimonials used in respondents’ advertisements and promotional materials indicates that at the time of writing, the trainers either knew personally the manufacturers or various marketers…or were related to them in any way.” FTC endorsement guides contain the same Instructions. We see 16 CFR § 255.5 Code of Federal Regulations.
The Federal Trade Commission (FTC) does not require disclosure of every communication—only communications that are intrinsic to a consumer’s perception of endorsement, and that consumers would not reasonably expect. A “physical connection” can include a payment, a free product, or a family or employee relationship with the advertiser. As to whether a consumer would reasonably expect such contact, endorsement evidence provides an example where an advertisement for an anti-snoring product features a physician’s endorsement. The FTC notes that while consumers can reasonably expect a physician to be compensated for appearing in an advertisement, consumers are less likely to expect a physician to receive a percentage of total product sales or to own a portion of the company—knowing this materially affects the weight and credibility of the endorsement. Accordingly, the Federal Trade Commission (FTC) advises disclosure of the last two findings.
When consumers do not reasonably expect a particular physical connection, FTC Endorsement Guidelines instruct that the person making the advertisement must “clearly and conspicuously disclose” (i) either payment or promise of compensation prior to and in exchange for the endorsement, or ( 2) The fact that the endorser knew or had reason to know or believed that he would obtain some benefit if he preferred the advertised product. Validation guides provide an example where a college student who has earned a reputation as a video game expert receives a free game system from the manufacturer in exchange for a product review on their personal website or blog. Noting that because his review is published via “a form of consumer-generated media whose relationship to the advertiser is inherently unclear,” the FTC recommends that the blogger clearly and unambiguously disclose that he got the game system for free.
In general, the primary question is whether knowledge of compensation or other benefits will affect the weight or credibility that the public will attribute to the recommendation. These requirements apply equally across different platforms and media types, whether the endorsement appears in a TV ad, YouTube video, or Instagram post.
So, what does it mean for a disclosure to be “clear and clear?” While there is no special wording to be used, disclosure must effectively make it clear that the endorsement has been offered in exchange for some benefit. For example, if a validator is sent out for free in exchange for providing a video review, it would be appropriate to say something like “Company X gave me this product to try” or “Company X gave me this product.” [name of product] And I think it’s great.” For video reviews, the FTC requires audio disclosure as well as written disclosure in the description or caption of the video. For sponsored social media posts, hashtags like #sponsored, #advertised, or #[Brand]_Am Ambassador can be used, but ambiguous or ambiguous hashtags such as “#sp”, “#spon”, “#thanks” or the word “#ambassador” alone are not enough. As with any disclosure, tags should be clear and easy to find. A hashtag buried in a series of other hashtags, or that only appears if a viewer clicks to see “more” will not be considered a proper disclosure.
Factors that the FTC considers in determining whether a particular disclosure is unequivocal include:
The position of the disclosure in the declaration and its proximity to the eligible claim;
the importance of disclosure;
whether the disclosure is prominently placed so that the consumer will always see it;
the extent to which elements in other parts of the advertisement may be distracting from the disclosure;
whether the disclosure needs to be repeated several times in order to communicate it effectively, or because consumers may enter the site at different locations or travel through the site on paths that cause them to miss the disclosure;
whether detections are presented in voice messages at an appropriate volume and tempo;
whether the visual disclosures appear for sufficient duration; And
Whether the disclosure language is understandable to the intended audience.
The FTC has been particularly active in monitoring this space in recent years as partnerships between advertisers and “influencers” on social media have become increasingly popular. The Federal Trade Commission has issued warning letters and taken enforcement action against both advertisers and influencers for their alleged failure to comply with FTC regulations regarding undisclosed material.
In one recent example, the Federal Trade Commission (FTC) filed an enforcement case against Teami, LLC, the manufacturer of many diet and detox tea products, and issued warning letters to several Teami influencers. We referred to this procedure in a previous post titled On Notification. In addition to allegations with unsubstantiated testimony, the FTC’s complaint noted a failure to disclose that Teami paid well-known Instagram influencers to promote its products. Although Teami implemented a social media policy in May 2018 specifically instructing its paid influencers to make clear and conspicuous disclosures, the FTC found that Instagram posts it subsequently sponsored clearly violated these guidelines. This case confirms that simply instructing influencers to comply with disclosure requirements is not sufficient; The advertiser should actively monitor influencer ads, and take proactive steps to remove any non-compliant ads.
Following the guidance of the Federal Trade Commission (FTC), the NAD and ERSP have also made non-disclosure of physical communications a priority. For example, in one case, ERSP was concerned that social media influencer ads for sportswear did not contain clear or sufficiently clear disclosures. Alo, LLC (Alo Yoga), ERSP Issue No. 429 (2019). In particular, the ERSP identified some posts where the disclosure was not visible until viewers pressed the “more” button, where the disclosure was worded between several hashtags, and where the reveal was made in a different language than the original post. Although Alo provided influencers with “Ambassador Program Guidelines,” which directed influencers to comply with the FTC’s disclosure requirements, the ERSP found this insufficient because the company did not follow up with social media influencers engaging in questionable practices.
In addition, NAD has recently rolled out a fast-track “SWIFT” process, which speeds up the individual dispute process that does not require complex evidence or argument. The NAD’s SWIFT process can only be used for three types of cases – one of which is cases involving salience or adequacy of disclosures, including disclosure issues in influencer marketing, local advertising, and motivational reviews. We will monitor whether and how NAD uses SWIFT to look into influencer advertising issues.
© 2022 Proskauer Rose LLP. National Law Review, Volume XII, No. 13