In June 2015, the Federal Trade Commission ("FTC") updated the Endorsement Guides Frequently Asked Questions ("FAQs") that provide its interpretation of Section 5 of the FTC Act. Specifically, the Endorsement Guides and FAQs address the use of unfair and deceptive practices in online advertising. The updates are the first provided by the FTC since 2009, and have been highly anticipated since 2014 when the FTC demonstrated a strong position in the widely discussed Closing Letter to Cole Haan (FTC File No. 142-3041).
The Endorsement Guides follow the basic "truth-in-advertising" principle that online promotions, reviews and endorsements must be honest and not misleading to consumers. Some of the key takeaways include:
- Disclosure is required if there is payment in any form.
If an endorser is paid to promote a product via any internet medium (e.g., blog, social media account, etc.), then the endorser must make clear to consumers on each individual advertisement that he or she has been paid to promote the product. "Payment" means any form of consideration, including the receipt of free products (even if the product is returned after the promotion is complete).
On YouTube (and other video platforms), paid promotions must be disclosed in the actual video content - preferably at the beginning of the video. It is no longer enough to simply include it in the accompanying text description. Additionally, companies that use paid endorsements on their marketing materials must also disclose that the endorsers are paid and/or given free products.
- Advertisement via social media posts requires clear and conspicuous hashtags.
Hashtags, usually denoted by "#" followed by text, are the most common method used to notify consumers that a particular social media post is a paid advertisement. While there are many variations of appropriate hashtags that an advertiser may use, the FAQs provide that #ad would likely be effective. With only three characters, #ad is the shortest example listed, which is especially important for use on platforms such as Twitter where there are character limitations. Other examples cited in the FAQs are: #paidad, #sponsored and #promotion.
- Online contests and sweepstakes require appropriate disclosure.
When running a promotion (i.e., contests or sweepstakes) via social media, appropriate disclosures are necessary. Specifically, if a promotion requires entrants to post to social media, then the official rules should require that an appropriate hashtag is used by the entrant to identify the post as a contest/sweepstakes entry. Good examples of hashtags include: #contest or #sweepstakes. An example of a bad hashtag is #sweeps because it is likely that many people would not understand what the term means without proper context. Further, the FTC strongly discourages requiring an entrant to "like" or "follow" a social media page because it does not allow for clear and conspicuous disclosures.
The FTC's updates demonstrate its efforts to continue, and potentially increase, enforcement of Section 5 of the FTC Act.