FTC Endorsement Guidelines: Managing the Legal Risks Presented By Social Media

Daniel T. Rockey Bullivant Houser Bailey PC

San Francisco

Dan.rockey@bullivant.com

The Rise of Social Media and its Use in Marketing

• Social media (Blogs, Twitter, Message Boards, You Tube, etc.) as a marketing tool

• PayPerPost, Izea• Blurring the line between what is advertising and

what is simply expression of opinion

FTC: Background

• FTC Act gives the FTC broad power to regulate "unfair or deceptive acts or practices in or affecting commerce”

• Power to impose civil penalties, fines, obtain injunctions

FTC Guidelines Concerning Use of Endorsements and Testimonials in Advertising

• FTC issues Guidelines (16 CFR Part 255 et seq.) in October 2009; effect. December 1, 2009

• Covering “any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser”

FTC Guidelines Concerning Use of Endorsements and Testimonials in Advertising

• In general, prohibits false or unsubstantiated claims• Requires disclosure of “material connections”– A connection “that might materially affect the weight or

credibility of the endorsement”

• “Practices inconsistent with these Guides may result in corrective action taken by the Commission”

FTC Endorsement Guidelines: Examples

• Must disclose when connection is “not reasonably expected by the audience”

Example:• Physician appears in ad for anti-snoring device

• Paid for appearance: no disclosure required• Paid per unit of sales: disclosure required

FTC Endorsement Guidelines: Examples

Example:• Sports figure touts laser eye center in magazine ad

• No disclosure required• Same sports figure touts laser eye center in

interview, on Twitter• Must disclose relationship

FTC Endorsement Guidelines: Social Media

Example: • Cosmetics company uses social marketing service (e.g.,

PayPerPost or Izea) to identify blogger to try out new lotion

• Blogger touts lotion in blog, claims it cured her eczema

FTC: • Company is liable for false, unsubstantiated claims made

by blogger • Blogger is liable for unsubstantiated claims, failure to

disclose relationship

FTC Endorsement Guidelines: Social Media

Example: • College student writes popular blog on video games,

systems• System maker provides free machine to blogger, who touts

machine on blog

FTC: • Company is liable for false, unsubstantiated claims made

by blogger • Blogger is liable for unsubstantiated claims, failure to

disclose freebie

FTC Endorsement Guidelines: Social Media

Example: • Employee of company that makes MP3 players posts

comment on message board devoted to MP3’s, devices

FTC: • Employee must disclose employment relationship• Company liable for statements of employee, failure to

disclose?

FTC Endorsement Guidelines: Protecting Yourself and Your Company

• Companies must carefully manage new media marketing efforts

• Advise ad partners, endorsers of obligation to disclose and make record of disclosures

• Actively monitor statements by endorsers and take prompt corrective action

• Monitor employees’ use of social media• Implement and enforce company-wide policy re use of

social media by employees