The United States Federal Trade Commission (“FTC”) is targeting “deceptive endorsements” appearing through social media accounts. For the past several years, fashion, music, and lifestyle social media personalities have been associating themselves with a brand or products online for compensation. The FTC is planning on requiring celebrities to be clear when they are receiving payment to promote a product or brand on their social media accounts. Previously, Users would designate “paid posts” with subtle forms of identifications such as hashtags at the end of the post. However, Michael Ostheimer, a deputy in the FTC’s Ad Practices Division, states this is not effective disclosure, particularly if the hashtags are mixed with other things making it easier for viewers to skip it entirely. “The real test” states Ostheimer, “is did consumers read it and comprehend it?” Now the FTC is calling for disclosures to be at the beginning of the post, said out loud, or displayed clearly on the screen.
Examples of past enforcement include the FTC reaching a settlement with Warner Bros. Home Entertainment Inc., over charges of deceiving customers by paying internet personalities to promote video games with a positive review without disclosing that the reviews had been paid for. As part of that settlement, Warner Bros. was required to implement an internal compliance system in order to ensure that advertising partners are also aware of the rules regarding disclosure. Another example is when the FTC issued a complaint against Lord & Taylor for paying online fashion personalities to post information on clothing without disclosing that those items of clothing had been given to them for free.
Any online advertising by businesses will need to be careful so as not to violate FTC regulations related to disclosures of paid media content. Ostheimer has warned that the FTC will be increasing the requirements for disclosure on sponsored posts and that the burden will fall on the advertisers. The FTC’s interview can be found on Bloomberg.