The Federal Trade Commission has closed another investigation into a social media promotion for an alleged violation of the agency’s Endorsement Guides without taking any action.
The updated Guides Concerning the Use of Endorsements and Testimonials in Advertising took effect in December 2009 and apply to social media, word-of-mouth marketing, and other promotions and advertising in which consumers or celebrities speak on behalf of companies. One of the requirements is that bloggers must disclose whether they receive gifts from a company or have any other “material connection.” A company can be held liable if a blogger fails to make the required disclosures.
Since the updated Guides took effect, the agency has conducted multiple investigations, but closed them without taking any action. In April 2010 the FTC declined to recommend an enforcement action against Ann Taylor when the company gifted bloggers who attended a preview of its LOFT Summer 2010 collection but failed to tell the recipients to disclose their gifts.
The agency similarly chose not to take action in November 2011 against Hyundai Motor America in connection with a Super Bowl-related advertising campaign where bloggers were provided gift certificates as an incentive to include links to the car manufacturer’s Web site in their blogs and/or comment about Hyundai’s ads airing during the big game.
Most recently, Hewlett-Packard avoided legal trouble when the FTC closed an investigation against the company and its public relations firm for providing two $50 gift certificates to bloggers and encouraging them to post about HP printer ink and other products.
Now national retailer Nordstrom can be added to the list of companies dodging liability for a violation of the Guides. In this case, Nordstrom provided $50 gift cards to the “influencers” who attended a special preview event for the store opening of Nordstrom Rack Boise. However, the retailer neglected to tell the “TweetUp” attendees to disclose they received a gift when they wrote about the event.
“Depending on the circumstances, an advertiser’s provision of a gift to social media influencers for attending an event could constitute a material connection that is not reasonably expected by readers and followers of the social media influencers who write about the event,” Mary K. Engle, the FTC’s Associate Director for Advertising Practices, wrote in a letter to Nordstrom.
But after investigating the incident, the agency declined to take action based on “a number of factors,” the FTC said, including “the limited nature of the event at issue [and] the fact that several social media influencers who posted content about the preview did disclose that Nordstrom had provided them with gifts.”
In addition, Nordstrom revised its social media policy to address the agency’s concerns, Engle wrote. “The FTC staff expects that Nordstrom will take reasonable steps to monitor social media influencers’ compliance with the obligation to disclose gifts they receive,” she added.
To read the FTC’s letter, click here.
Why it matters: Although the aforementioned blogger campaigns did not result in enforcement actions against the companies, the FTC’s investigations into these “influence programs” should serve as reminder for companies engaging in social media to establish a relevant policy that comports with the Guides, particularly the provision requiring endorsers, bloggers, or other “influencers” to disclose any incentives they receive. As noted by the FTC in its letter to Nordstrom, companies should also monitor compliance on the part of bloggers.