Who: The Federal Trade Commission (the “FTC”)
Where: United States
When: 29 May 2015
Law stated as at: 11 August 2015
What happened: The FTC has updated the FAQs to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”). This marks the first change to the FAQs since they were introduced in 2010.
The Endorsement Guides interpret laws that apply to the use of endorsements in advertising, particularly section 5 of the FTC Act, which generally prohibits unfair and deceptive advertising. Breaching this section can result in the FTC taking administrative action.
The FAQs are prefaced with a reminder of the “basic truth-in-advertising principle that endorsements must be honest and not misleading”. If there is a connection between the endorser and the advertiser that 1) the consumer would not expect and 2) would affect how the consumer evaluates the endorsement, this connection should be disclosed. A key message is one of caution: disclose if you’re unsure.
Helpful clarifications of the US regulator’s approach in this area include:
- Ads / promotions on social media: The ad should be identifiable as an ad. Starting a tweet with “Ad:” or “#ad” “is likely to be effective”. When running a promotion, “#Sweepstakes” “should be enough”, while “#sweeps#” “probably isn’t” and “#XYZ_Rocks” (where “XYZ” is the name of a product) is unlikely to be, either.
- Video disclosures: Advertisers are advised to include the disclosure at the beginning of a video. Referencing multiple disclosures during the video “would be even better”. If a video game is being played via livestream, viewers “should see a disclosure no matter when they tune in” – “a continuous, clear and conspicuous disclosure throughout the entire stream” is suggested.
- “Likes” on social media: Unsurprisingly, the purchase of “likes” from non-existent people or those who have no experience in using the product or service is “clearly deceptive”. The position on advertisers offering incentives for “likes” (e.g. as part of a promotion) is less clear. The FTC is unsure “how much stock social network users put into “likes” when deciding to patronize a business”. As such, “the failure to disclose that the people giving “likes” received an incentive might not be a problem”.
- Who’s responsible? The advertiser is ultimately responsible for the disclosure requirements being met and for objective product claims being substantiated. Outsourcing, e.g. to a PR agency, will not reduce this responsibility. Advertisers are advised to have a “reasonable training and monitoring program in place”. If this is the case, “it’s unlikely that the activity of a rouge blogger would be the basis of an enforcement action”.
Why this matters:
Since the FAQs were introduced social media advertising has evolved significantly. In an attempt to provide a less intrusive advertisement experience, advertisers are increasingly turning to native advertisements and celebrities. The FAQs address these techniques in the context of endorsements.
UK advertisers are advised to review the FAQs. The UK lacks a single, definitive guidance on online endorsements. Guidance is available in the form of CAP guidance notes (e.g. on testimonials and native advertising), the IAB-ISBA Guidelines on the Payment for Editorial Content to Promote Brands within Social Media, the results of the Competition and Markets Authority’s recent call for information on online reviews and endorsements, and ASA adjudications. Indeed, guidance from these sources is largely consistent with the four points mentioned above. However, the FAQs also contain detail that is not expressly covered by these sources do (e.g. that the language of the disclosure should match the language of the endorsement).
In short, the FAQs matter to US and UK advertisers because they are a timely, practical and single guidance on online endorsements.
