Last month the FTC issued revisions to its FAQs on the Testimonial and Endorsement Guides. In general the Guides require that any material connection between an endorser and an advertiser must be disclosed. Over the course of the last year the FTC has been taking a much more restrictive approach to these Guides and has essentially said that almost any interaction with a brand's product, pinning the product, taking a photo with the product constitutes an endorsement and any incentive no matter how nominal constitutes a material connection.
For MCNs this means that even if you are just receiving a free product or video game, you must make the disclosure, and if you are also being compensated, that has to be disclosed as well. That has been the law for the last few years.
With its newly issued FAQs, however, the FTC has clarified some issues that might directly impact how MCNs attempt to comply with the FTC's Guides and may cause you to revisit some of what you are doing. Some of the highlights that should be particularly relevant to the MCN community are as follows:
- The FTC says that disclosure of the material connection cannot be made in the "Description" section of a video posted on YouTube. The disclosure has to be on the video itself.
- The FTC says that for all video endorsements the disclosure has to be at the beginning of the video and if the video is lengthy the disclosure may need to be repeated multiple times.
- The FTC has a specific question relating to MCNs—the question concerns whether it is sufficient for the influencer to disclose that it has been paid by the MCN. The FTC says no, the disclosure must indicate that the payment is coming from the brand or that the influencer has a material connection to the brand.
- The FTC also specifically addressed the situation of a playthrough video where an influencer has been asked to play the video game and provide commentary throughout. In that situation the FTC says that the disclosure of the material connection must be made multiple times throughout the video. Once, even at the beginning, is not enough.
- The fact that a celebrity is well known as being a spokesperson for a brand is no longer an exception to the disclosure requirement. Unless you can show that a significant percentage of the talent's followers know that the celebrity is connected to the brand, a task that the FTC acknowledges is "tricky," disclosure is required.
There are many other issues and requirements addressed in the new FAQs that you can access here. It is clear, though, that the FTC is continuing to very aggressively monitor sponsored social media campaigns, and we can expect more actions in the future. Now would be a good time to review your business practices to make sure you are in compliance.