On May 4, 2017, the public received access to the U.S. Federal Trade Commission’s (FTC) advisory letters to approximately 45 companies and 45 celebrities/bloggers relating to potential “endorsements” on Instagram. As a result, we now have some additional guidance on the FTC’s expectations with respect to its Endorsement Guides.
Background of Endorsement Guides
The FTC’s Endorsement Guides require a disclosure in a product endorsement if there is a “material connection” between an endorser and the manufacturer/marketer of a product. The FTC considers a “material connection” to be “a connection that might affect the weight or credibility that consumers give the endorsement.” These connections can not only be the payment of money to the endorser, but also the provision of free products, or an ownership interest in the marketer, or being a family member of the marketer.
The FTC has previously issued letters and has occasionally brought an enforcement action relating to its Endorsement Guides. We have previously covered an FTC matter where the FTC applied its Endorsement Guides in the context of social media (Pinterest in that instance).
The Advisory Letters
In late March of 2017, the FTC sent advisory letters to approximately 45 companies and 45 celebrities/bloggers regarding certain images that appeared on Instagram, which the FTC indicated may raise issues under the Endorsement Guides. Keep in mind that celebrities/bloggers can certainly express personal opinions without triggering the Endorsement Guides, but these 45 images raised questions for the FTC.
In general, the FTC sent three types of letters to the manufacturers/marketers:
- Letters advising companies that if there was a material connection between the company and the celebrity/blogger, it should be clearly and conspicuously disclosed. These letters typically went to companies where the Instagram post included a prominent photo of the company’s product with a complimentary comments such as “obsessed with <product X>.” It was unclear if the post was a personal opinion or an endorsement.
- Letters where “it appears that <celebrity> has a business relationship with your company” and that material connection should be clearly and conspicuously disclosed. These letters typically related to Instagram posts where the celebrity/blogger indicated a way to get a discount on the company’s products using a certain code, or stating that the celebrity was an “ambassador” of the brand.
- Letters where the celebrity was an owner, director, or family member of the company.
The letters included not only a copy of the FTC’s Endorsement Guides but also provided some additional specific guidance in the context of social media:
- Because many consumers view social media on their smartphones and devices with small screens, the FTC stated that the “clear and conspicuous” disclosure should appear no later than the third line of the post. In other words, the consumer should not have to scroll down (or click “more”) to see a disclaimer.
- Although the FTC had previously indicated that a hashtag, such as #Ad, at the beginning of a post could be a sufficient disclosure, the FTC does not consider a hashtag as part of a long string of hashtags at the end of a post to be “clear and conspicuous.”
- A statement like “Thanks@<product/brand name>” does not meet FTC standards “because it does not sufficiently explain the nature of the endorser’s relationship to your company; consumers could understand it simply to mean that the person is a satisfied customer.”
- The FTC found that a hashtag with “#<product abbreviation>partner” was ambiguous. The FTC felt consumers would be able to understand “#<full product name>partner” but “#partner” was not a sufficient disclosure.
- The FTC also felt that a hashtag of “#sp” was ambiguous: “Many consumers will not understand ‘#sp’ to mean that the post is sponsored.”
Our readers should note that the FTC letters were advisory, rather than enforcement notices. Although the FTC sent these notices to celebrities/bloggers, in its previous actions, the FTC has named the companies—and not the celebrities/bloggers—as defendants. Settlements have included obligations on companies to include disclosure requirements in blogger agreements, and requirements that companies monitor the celebrities’/bloggers’ compliance with the Endorsement Guides.
As a result, companies that wish to engage “influencers” on social media should incorporate compliance with the FTC Endorsement Guides not only into their contracts but into monitoring the behavior of the “influencers” relating to the company’s products.