Recent actions by the Federal Trade Commission highlight the need for companies to review the sufficiency of their advertising disclosures. Companies should take particular care when launching an ad campaign using social media.
Last fall, immediately after announcing its Operation Full Disclosure, the FTC sent warning letters to more than 60 advertisers on the basis that their ads failed to adequately disclose conditions of offers and thus violated the FTC Act. The warning letters charged that key details of the offers were missing (such as a requirement to use automatic billing or a particular service limitation) and that “fine print” disclosures were too difficult to read and easy to miss. In short, the FTC confirmed that “fine print” is not adequate for disclosing material information to consumers. Disclosures must be sufficiently prominent, located where consumers will see them, close to the applicable advertising claim and easy to understand. These requirements apply even when space is limited.
Furthermore, it is clear that any “material connections” between endorsers and advertisers must be disclosed. These connections can arise in novel places, including social media. Companies need to be on the lookout for inadvertent “material connections” created with bloggers, contest entrants, brand ambassadors and others and be sure those connections are clearly and conspicuously disclosed.
One example of FTC activity in this area is a warning letter issued regarding a consumer prize promotion. A retail company sponsored a contest in which entrants could pin an image featuring the company’s products with a hashtag followed by the contest name on the Pinterest website as an entry into the contest, and the winner would receive a shopping spree. In its letter, the FTC charged that this violated Section 5 of the FTC Act for failure to disclose a material connection between the company and the contest entrants, that “connection” being the fact that Pinterest users were adding pins of the company’s products, thereby endorsing them, because they were trying to win a shopping spree. The FTC was concerned that the company did not instruct contestants to label their pins and Pinterest boards to disclose that they pinned the company’s products as part of a contest, and the FTC did not believe the contest name hashtag the contestants used with their pins adequately communicated that.
In another recent action, the FTC challenged an advertising agency, Deutsch LA, because its employees were encouraged to participate in an ad campaign by posting comments about Deutsch LA’s client’s new product on Twitter. The employees then posted positive tweets about the client’s products on Twitter, without disclosing their connection to the ad agency or its client. The tweets were misleading, the FTC alleged, because they were not actual consumer views and because they failed to disclose that they had been posted by employees of the advertising agency.
In February 2015, AmeriFreight, an automobile shipment broker, agreed to settle FTC charges that it failed to disclose it provided discounts and incentives to online reviewers of the service for writing reviews. AmeriFreight offered a $50 discount to its customers who agreed to review the services, and administered a Best Monthly Review promotion in which online reviewers were automatically entered to win a $100 Best Monthly Review Award. The FTC also took issue with AmeriFreight advertising that had failed to disclose these reviewer incentives when it claimed to have “more highly ranked ratings and reviews than any other company in the automotive transportation business.”
These developments in advertising law highlight the complexities around advertising claims and the importance of crafting and displaying meaningful consumer disclosures. Looking at advertising claims through social media adds yet another perspective to compliance. Given the FTC’s commitment to ensuring transparency of disclosures, companies should look carefully at the sufficiency of their disclosures, even in the context of what may be perceived by consumers as casual exchanges over social media.