In light of the OFT’s recent statement that it will be cracking down on product endorsements contained in Tweets that may not be as transparent as they should about their provenance, Tom Harding looks at the regulation and policy driving this and what comparisons may be drawn with regulation in the US.
Topic: Social media
Who: Twitter and the Office of Fair Trading
When: February 2011
Law stated as at: February 2011
The OFT released a statement in January this year stating that ‘online advertising and marketing practices that do not disclose that they include paid-for promotions are deceptive under fair trading laws …. This includes comments about services and products on website blogs and microblogs such as Twitter. We expect online advertising and marketing campaigns to be transparent so consumers can clearly tell when blogs, posts and microblogs have been published in return for payment or payment in kind.' Although this is therefore a clear policy statement from OFT, it is not driven any recent change in regulation. The impetus therefore seems more likely to be driven by an increased policy-led desire to enforce a regime that already exists.
The prohibition on misleading marketing under the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”) has long been clear; under Regulation 3(4)(b) of the CPRs, 'misleading omissions' constitute unfair commercial practices (and are therefore in breach of the CPRs and carry penalties). Failing to disclose that a promotion had been paid for (or is otherwise remunerated) would typically therefore constitute a ‘misleading omission’, and would also most likely be deemed an ‘unfair commercial practice’ under Paragraph 11 of Schedule 2 (namely, where a trader uses 'editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer (advertorial)').
As the CPRs have not been amended since they were introduced, the regulation of paid-for promotions, whether on Twitter or otherwise, has not itself changed. The more pressing issue that marketers now face however, is that OFT's enforcement of the CPRs in the context of Twitter (and other online contexts) is now firmly in its policy agenda.
Part of the backdrop to this area was the OFT's case against Handpicked Media ("HM") late last year, which sent out a loud and clear message that its enforcement action in this area had teeth. HM operates a commercial blogging network. As part of its services to clients, HM engaged bloggers to provide editorial coverage of various topics including fashion, beauty and music. The coverage inevitably included favourable references to HM’s clients or their products, and was published on various sites and blogs including via Twitter. The OFT was concerned that the individuals engaged by HM were publishing online content which promoted the activities of HM’s clients without making it sufficiently clear to consumers that the promotions had been paid for. It subsequently found that HM was in breach of the CPRs in doing so, and required HM to give formal undertakings that it would discontinue the practice.
This was the OFT's first enforcement action in this sphere, but seemingly may only be the start if breaches are found.
The US Picture
The question for UK brands, marketers and blogger therefore now therefore is what they should do (or ensure is done) in relevant Tweets, blogs etc, to stay within the CPRs and out of the OFT’s range. The key is transparency, which in effect goes to the heart of the rationale of the CPRs themselves.
In the US, such transparency has been achieved by the use of ‘ad/spon’ short form disclosures at the start of Tweets, blogs etc. These disclosures have been driven by updated Federal Trade Commission ("FTC") guidelines to existing legislation (the 'Guides Concerning the Use of Endorsements and Testimonials in Advertising'). In effect, these guidelines specify that while enforcement decisions will be reached on a case by case basis, a posting by a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Where endorsements are made, the blogger must disclose the 'material connections' they share with the seller of the relevant product or service.
The FTC guidelines also expressly reference the role of celebrity endorsers of products and services. Here, the FTC state that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional advertisements, such as in social media.
The effect of this has been extremely successful in compliance terms; 'paid for' or influenced blogs and Tweets in the US are now typically highlighted by the 'ad/spon' disclosure as a matter of course. In addition to this, there has also been the emergence of specialist software (such as www.cmp.ly for example), which can track paid-for online endorsements and add clarifying disclosures whenever it finds them in order to ensure compliance.
Will the UK follow?
So, will the OFT's stance ultimately lead to similar practices in the UK? In short, the answer would seem to be yes.
The US is to date far more advanced in the detail to which regulators have applied themselves to this area. This is most probably driven by the larger US economy associated with these types of endorsements (with the most often cited example being that Snoop Dogg reputedly earns around $3,000 a Tweet), but nonetheless demonstrates where the UK may be likely to head in regulatory compliance terms as its own similar industry develops.
And this seems likely as, as the OFT set out its statement, the common driver behind both UK and US regulation is transparency. Although the FTC Act and CPRs differ on a technical level, the rationale of consumer fairness underpins them both. It therefore seems reasonable to assume the practical compliance outcomes will therefore be similar, and 'ad/spon' disclosures may become commonplace in the UK.
An interesting related issue is whether UK bloggers and consumers given free products by brands in the hope that they will try review them should be required to disclose this. In the US, FTC guidance recommends that brands issuing free products in this way should require recipients to make this clear in any reviews and public comments and should operate an adequate compliance monitoring programme. This is probably also a prudent approach for UK businesses to follow to avoid allegations of offences under the CPRs.
Further issues to consider also include to what extent consumer testimonials and endorsements incentivised by the chance to enter prize draws and contests should only be used by brands when accompanied with appropriate caveats for example. These and other compliance issues will no doubt play out over time however.