The Federal Trade Commission (“FTC” or “Commission”) issued a closing letter on November 16, 2011, to Hyundai Motor America (“Hyundai”), ending its investigation into the company’s blogging campaign that was intended to build interest in advertisements scheduled to premiere during the Super Bowl. The investigation had focused on whether bloggers, who were given gift certificates as an incentive to promote the Hyundai videos and comment on the advertisements, were or were not told to disclose to readers that they had received such compensation for their recommendations. The Commission initiated its investigation under the auspices of section 5 of the FTC Act, which the FTC interprets to require disclosure of a material connection between an advertiser and endorser when that relationship would not otherwise be apparent from the endorsement.
Without declaring that no violation of section 5 had occurred, the Commission ultimately closed the investigation after determining the following:
- Hyundai did not know in advance that the gift certificates would be used as incentives, and of the few bloggers who received the gift certificates, some disclosed the incentive.
- An employee of Hyundai’s media firm, and not Hyundai, offered the incentives, which were contrary to the social media policies of both Hyundai and the media firm. (Hyundai’s social media policy requires bloggers to disclose compensation they receive.)
The Commission also noted that the media firm had been quick to address the conduct of its employee.
The FTC’s Hyundai closing letter marks at least the fourth instance in which the FTC has investigated endorsement issues under its revised Guides Concerning the Use of Endorsements and Testimonials in Advertising. In 2010, the FTC investigated Ann Taylor Stores Corp. for providing bloggers with gifts with the expectation that they would blog on a division of the company. The Commission eventually issued a closing letter and chose to forego seeking an enforcement action after finding that: the event where bloggers were provided with gifts was a one-time occurrence; some bloggers disclosed that they had received an incentive to blog (and a posted sign at the event had asked bloggers to disclose the gifts); and the company had adopted a written policy after the event requiring bloggers to disclose receipt of incentives. Also in 2010, the Commission settled two cases involving allegedly misleading endorsements. In the first case, the FTC settled with Legacy Learning Systems Inc. for engaging online affiliate marketers to pose as consumers who wrote product reviews without disclosing that they were paid for sales from their reviews. In the second case, the Commission settled with Reverb Communications, Inc. after its employees posed as consumers and wrote reviews about the company’s products without disclosing their connection to the company.