August 07, 2010
Internet & E-Commerce, Telecom, Broadband & Media Alerts

FTC Sets Guidelines for Endorsements in Social Media
by Cyrus Wadia

"Clear and conspicuous disclosure" is the Federal Trade Commission's (FTC) standard for endorsement ads, and social media is no exception.  Recently the FTC released a short follow-up to its 2009 Revised Guides Concerning the Use of Endorsements and Testimonials in Advertising (Guides).  The FTC used this opportunity address how and when bloggers and other users of social networking websites should inform their public about connections to advertisers, if any.
What are the Endorsement Guides? 
The Guides address the application of Section 5 of the FTC Act (15 U.S.C. § 45) to the use of endorsements and testimonials in advertising. The Guides address the FTC's three basic truth-in-advertising principles: 

  • Endorsements must be truthful and not misleading.
  • If the advertiser does not have proof that the endorser's experience represents what consumers will achieve by using the product, the advertisement must clearly and conspicuously disclose the generally expected results in the depicted circumstances.
  • If there is a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed. 

An endorsement on behalf of a sponsoring advertiser is considered commercial speech and can be regulated if considered deceptive to the consumer.  The FTC has now made it clear that truth in advertising principles apply equally to blogs and social networking sites.
How Do the Guides Apply to Endorsements in Blogs and Social Networking Sites? 
Not much differently than in traditional media.  Essentially, any relationship between the blogger that is endorsing a product and the company that makes the endorsed product should be disclosed so the consumer can make an informed purchasing decision.  The FCC is concerned that unlike with traditional reviews in newspapers, television or websites with similar content, "on a personal blog, a social networking page, or in similar media, the reader may not expect the reviewer to have a relationship with the company whose products are mentioned."
The Guides do not apply, for example, when the blogger pays for the product, or receives a product as a free sample.  However, when a product is given free, at a discount, or free for a trial period, or the advertiser pays a blogger or gives a blogger something of value to mention a product,  the endorsement blog post should contain a disclosure to that effect.   

The FTC mentions bloggers who are part of advertisers' network or "viral" marketing programs where the bloggers sign up to receive products in exchange for writing about them as a specific example of when such disclosures must be made.  Similarly, if a blogger reviews local restaurants and receives meals for free, such disclosures should be made.  If a famous athlete were to "tweet" his or her endorsement of a product when they are being paid to do so, disclosure would also have to be made. 
How Should I Make the Endorsement? 
The FTC is not mandating a specific form of endorsement, simply setting forth general guidelines.  However, the FAQs recently released indicate that there are three general rules for ensuring that the endorsement represents the accurate experience and opinion of the endorser:

  • You can't talk about your experience with a product if you haven't tried it.
  • If you were paid to try a product and you thought it was terrible, you can't say it's terrific.
  • You can't make claims about a product that would require proof you don't have.  For example, you can't say a product will cure a particular disease if there isn't scientific evidence to prove that's true. 

How Should I Make the Disclosure?  
The FTC is not mandating a specific form of disclosure (yet) Disclosures should generally be made explicitly for each endorsement blog post or tweet, not a single catch-all disclosure in a separate hyperlink.  A simple "Company X gave me this product to try…" would suffice without the need for legal jargon.  In the case of twitter, hashtags such as "#paid" or "#ad" are suggested.
The Revised Guides have more than 35 examples of how to apply the rules in practical settings, along with video clips discussing marketing issues. 

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