Native advertising—or advertising that appears to match the form and function of the platform upon which it appears—and social media endorsements provide considerable opportunities for companies to strengthen their brands and reach consumers in innovative ways. More and more, “influencers” like Instagram “models,” fashion and lifestyle bloggers, “pinners,” and “vloggers” are joining the ranks of A-list celebrities in receiving substantial sums, or freebies like helicopter rides and luxury cars, to endorse products in their social media posts. Companies stand to gain sizable increases in their brand value and sales by capitalizing on the fame of social media influencers. But they must also be careful to follow the requirements when it comes to native advertising, product placement, and endorsements.
The Federal Trade Commission (FTC) has jurisdiction over most advertising practices in the U.S. In May 2015, the FTC updated the FAQs on its Endorsement Guides (“Guides”), last updated in 2009, to address social media promotions like online reviews and Twitter endorsements. In short: the FTC considers product placement or an endorsement in an Instagram post, tweet, or Facebook status to be an advertisement, and viewers have the right to know when the poster was given a freebie or paid to promote the product or service. The FTC does not require disclosure for run-of-the-mill product placement in TV shows (although the FCC does), but the FTC made clear in its FAQs that product placement in a social media post may constitute an advertisement if there is any hint of praise or endorsement for the product. Translation: that Instagram posing with your ahi tuna poke bowl with the caption “#yummy” needs a disclosure if the restaurant either paid you, gave you the meal for free, or offered some kind of incentive to post. (See our previous post on how the FTC considered users’ “pinned” photos for contest entries to constitute endorsements for the contest sponsor.)
The FTC states that practices inconsistent with the Guides may result in corrective action under Section 5 of the FTC Act if the FTC determines, upon investigation, that the practices fall within the conduct proscribed in the statute as unfair competition. Recently, it has charged or issued warning letters to numerous companies for failing to have social media endorsements and native ads properly disclosed as sponsored.
Although influencers should be aware of the FTC’s guides, the FTC has made clear that the companies requesting the endorsements will be held responsible if the influencers fail to make the proper disclosures.
How can companies take advantage of the power of social media influencers while minimizing the risk of sanctions from the FTC?
- First, be sure to follow the FTC’s three fundamental rules:
- Endorsements must be truthful and not misleading.
- If there’s a connection between an endorser and the marketer of the product that would affect how people evaluate the endorsement, disclose it clearly and conspicuously.
- If the advertiser doesn’t have proof that an endorser’s experience represents what consumers will achieve by using the product, clearly and conspicuously disclose the generally expected results in those circumstances.
- Second, create social media policies that require influencers to make the proper disclosures, put those policies in writing, and be sure to enforce them.
- Third, the FTC has indicated what it considers to be some best practices to comply with the Endorsement Guides: (1) require signed acknowledgement from endorsers of disclosure policies, (2) monitor endorsers’ posts, and (3) terminate relationships with endorsers who fail to disclose.
- And fourth, consult with an experienced attorney before launching an advertising campaign involving social media endorsements and/or native advertising.
The author gratefully acknowledges the assistance of Stephanie Schmidt.