In a closing letter posted on March 12th, the Federal Trade Commission (“FTC”) closed an investigation of Nordstrom Inc.'s advertising practices arising out of the FTC’s probe of an April 10, 2012, “TweetUp” event, which was organized to promote a Nordstrom Rack’s store opening in Boise, Idaho. Nordstrom provided gifts, including a $50 Nordstrom Rack gift card, to social media influencers to attend the event. The event raised concerns because Nordstrom failed to tell attendees that when they posted or wrote about the event, they should disclose they had received gifts for attending.

The FTC addressed the disclosure requirements facing paid endorsers in social media when it updated in 2009 its Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. pt. 255, by including examples involving bloggers. As required by the Guide, any “material connection” between advertisers and endorsers must be disclosed when the relationship “is not otherwise apparent from the context of the communication that contains the endorsement.” Earlier in March, the FTC provided companies with further guidance on how these materials disclosures can be made in social media like Twitter in its newly revised .com Disclosures: How to Make Effective Disclosures in Digital Advertising. For more details about this guidance document, see our recent client alert: The Size of Your Ad Doesn’t Matter: The FTC Provides Updated Guidance to Online and Mobile Advertisers in its Revised .com Disclosures Guidance Document.

In declining to bring a formal enforcement action against Nordstrom, the closing letter said that although Nordstrom did not inform the attendees at TweetUp to disclose the gifts, many of the social media influencers shared that fact with their readers. That disclosure, along with “the limited nature of the event at issue” and Nordstrom's update to its social media policies to address the FTC's concerns, led to the FTC to decline to pursue an enforcement action.

If your company does not already have a social media policy designed to comply with the FTC Endorsement & Testimonial Guides, it may be time for an update to address the requirement for your company’s agencies and influencers to disclose materials connections between them and your brands. Also, please beware that over the course of this year the National Labor Relations Board (“NLRB”) has issued a series of warnings that various provisions commonly found in social media policies are unlawful to the extent they limit employee’s ability to organize or engage in “concerted activity,” and have brought several enforcement actions. See detailed discussion in our prior client alert on the subject (“Employers Need to Review and Revise Social Media, Blogging and Privacy Policies after NLRB General Counsel Report”). If you haven’t updated your social media policy in light of the requirements of the FTC Endorsement & Testimonial Guides or the NLRB’s position, it is quite likely your company could have trouble with the FTC or NLRB. We have been actively working with companies to reexamine their social media policies in light of these issues.