The Federal Trade Commission has declined to take action against a company and its public relations firm for alleged violations of the Endorsement Guides that arose from a recent advertising campaign where gifts were provided to bloggers in exchange for product coverage.
In late 2009, the FTC updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising that are applicable to social media, word-of-mouth marketing, and other promotions and advertising in which consumers or celebrities are given inducements to provide endorsements of products and services.
Pursuant to the Guides, the endorser must disclose any material connection between an advertiser and the endorser when the relationship is not otherwise apparent from the context of the endorsement. Thus, the Guides require bloggers to disclose whether they receive gifts from a company, or have any other “material connection.” Both companies and endorsers can be held liable for failure to make the required disclosures.
In a letter from Mary K. Engle, the FTC’s Associate Director of the Division of Advertising Practices, the agency said it closed its investigation into the Hewlett-Packard Company and its public relations firm, Porter Novelli, Inc.
According to the letter, the companies provided gifts to bloggers who encouraged consumers to use original HP printer ink and other HP printer products. Bloggers received two $50 gift certificates – one for the blogger and one to give away to readers – as well as printable items, the agency said.
“We were concerned that most of the bloggers who posted after receiving the gift pack said that HP gave them a $50 gift card to give away and/or that HP gave them a holiday gift pack with printables, but failed to disclose that they received the $50 gift cards to keep for posting blog content about HP Inkology,” the FTC wrote.
According to the letter, the agency decided not to initiate an enforcement action for several reasons. First, only “a relatively small number” of bloggers actually posted content about HP Inkology after they received the gift pack. And a few of those bloggers actually did adequately disclose their material connections. The agency cited one example of a blogger who kept both gift cards and called herself “a compensated brand ambassador” and another example of a blogger who described the “goodies” she received from HP.
The agency also abandoned enforcement action against HP and its PR firm because both companies revised their social media policies “to adequately address our concerns,” Engle wrote. Nevertheless, the agency made clear that it expected the companies to “take reasonable steps to monitor bloggers’ compliance with the obligation to disclose gifts they receive.”
The HP investigation is factually very similar to the FTC’s aborted 2010 Ann Taylor investigation, where the agency sent the company a letter after it provided gifts to bloggers who attended a runway show in the hopes that they would blog favorably about the brand.
To read the FTC’s letter closing the investigation, click here.
Why it matters: The FTC’s decision not to pursue an enforcement action does not necessarily mean that no violation occurred. Like the Ann Taylor investigation, the minimal number of non-compliant bloggers and the fact that the companies revised their social media policies appear to have played a significant role in this decision. Companies cannot underestimate the importance of implementing a social media policy that comports with the FTC’s guidelines. The policy should be closely monitored to ensure compliance with the Guidelines.