Let’s face it, the fact that a celebrity or industry influencer can cause a sell-out of your products after just a few endorsements is a testament to the value of social media.  But given that the FTC and other agencies and organizations involved in regulating advertising don’t often bring enforcement actions against small companies, you may not be aware that the there are regulations and guidelines for how your employees and people you pay or send free products for review need to fully disclose those relationships – even in 140 characters or less.

The Federal Trade Commission’s guidelines amount to a basic rule – “being upfront with consumers.”  In fact, failing to disclose a paid relationship, employee, endorser, consultant… is the number one reason companies run afoul of advertising laws.  Back in 2009, the FTC updated its guide for deceptive advertising to include social media matters.  Since then, there have been updates and guidance in 2013 for digital advertising, a Q&A published in 2015 as well as guidelines for native advertising.  Basically, if someone is promoting your product, that is an endorsement – the real question is whether you incentivized them or whether it was gratis.

It is important, for example, Lord & Taylor paid some influencing instagrammers to wear a dress and it sold out.  Then the FTC got involved.  The FTC filed a complaint against the store alleging that the store failed to disclose that they had given each influencer the clothing and had paid them money.  The store settled with the FTC entering into a consent order that:

  1. prohibits the company from misrepresenting that paid commercial advertising is from an independent or objective source;
  2. prohibits the company from misrepresenting that any endorser is an independent or ordinary consumer;
  3. requires the company to disclose any unexpected material connection between itself and any influencer or endorser; and
  4. establishes a monitoring and review program for the company’s endorsement campaigns.

Apart from the monitoring program, the order really just affirms that L&T is going to be doing what anyone else advertising will do.  Since it is the advertiser and not the promoter or employee that bears the burden (that’s right, you’re the one getting hit with the fines of up to $16,000 per instance (per day!), not the person you paid to endorse your product.)

So what are some helpful tips?  For starters:

  • Employees should plainly disclose in the posting that they are employees.  Remember disclosing in a bio section would not appear in a feed, only the disclosure in the posting, tweet, etc., would.
  • Paid advertisers or influencers should tell their audience that they were given the product or that they were paid money.
  • Founders or partners should let their audience know they have a stake in the company.
  • The disclosures you pick should be forthright and full – the limitations on space of some platforms is no justification for not making full disclosures.  I was at an event the other day where an FTC spokesperson said frankly – “if you cannot make your disclosure under the limitations, then you shouldn’t be using it.”  The FTC sucges #Ad or Ad: or “Sponsored” might suffice, but they do so by saying they cannot be hidden and should be at the beginning, not at the end of a post or tweet.  “Paid ad” or “Promotion” are also examples.
  • Ensuring the disclosure is replicated across the platforms is important, and if you are running a series, having it in each post or tweet is important.
  • For photographs, remember that just a photo can be an endorsement, so ensuring that someone discloses in front of or on the photo is necessary.  If the photo shows a blogger or influencer endorsing your, food, wine, beer, etc., you’ll want to have the blogger, employee, influencer fully disclose.
  • As a rule, remember that every disclosure needs to be clear and conspicuous – so it should be close to the claims it relates to (not at the bottom of a tweet or picture or ad); easily readable; should stand out and not have colors that hide it; in video and audio it needs to be clear and understandable and long enough that in is noticed.

What other steps should you take to handle this to help in case a regulator takes action? 

  1. For employees, you want to have a policy for social media use, either within a handbook or as a separate policy, delineating best practices and instructing employees what kind of disclosures they need to make.  E.g. #employee
  2. For paid advertisers, having a contract provision that states what rules need to be adhered to and that disclosures must be made is necessary.  E.g. #ad or #paid

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