Earlier this summer, the Federal Trade Commission released its updated "Guides Concerning the Use of Endorsements and Testimonials in Advertising" as well as an updated version of its FAQs about the Guides, "FTC's Endorsement Guides: What People Are Asking." Then, a day later, the FTC announced that it is proposing a new "Trade Regulation Rule on the Use of Consumer Reviews and Testimonials."
There's a lot to digest here and we're doing a series of blog posts to help you dig into all of this new information. First, we posted about the FTC's proposed trade regulation rule, which you can read about here. In this post, we're looking at the new FAQs.
Although the Endorsement Guides set forth the FTC's primary guidance on the use of endorsements, for many years, the FTC has also had a set of FAQs, FTC's Endorsement Guides: What People Are Asking, which interprets the Guides and goes deeper into certain topics. And unlike the Guides, which are only updated about every decade, the FTC revises the FAQs from time-to-time, when there are hot topics that it wants to address.
The updated FAQs were heavily revised -- and they are well worth a read. But until you've gotten a chance to wade through the more than 100 questions and answers, here's a summary of some of the most interesting changes.
How Long Should Influencers Continue to Include Disclosures?
If an influencer receives free products from a brand, or otherwise has a material connection to a brand, then the influencer is required, of course, to disclose that connection when posting about that brand (when that connection isn't obvious or reasonably expected). If the influencer chooses to continue to post about the brand after the relationship ends (or long after the free product was received), however, how long should the influencer keep including a material connection disclosure?
In response to an FAQ about how long an influencer should disclose that the influencer received a $60 video game for free, the FTC indicated that, for a low value product like that, a year was probably sufficient, where the influencer was continuing to live stream about the game because the influencer truly liked the game. The FTC seemed to suggest, however, that if the influencer had gotten something more valuable -- such as a free $50,000 car -- that a disclosure would be required for the entire time that the influencer owned the car.
The FTC also indicated that if a consumer gets a product for free (presumably, a low value product), and then buys the product again with the consumer's own money, any later posts about the product probably wouldn't require a disclosure -- unless the consumer has an ongoing relationship with the brand.
This is important guidance to take into account when giving away free products. While the value of the free product has some impact on the analysis, it's clear that the FTC believes that, in many cases, once you've given someone something for free, the obligation to include a material connection disclosure can continue for quite a long time. Consider, then, not only what you're telling people when you give them free products (or when you're entering into agreements with influencers), but how long you're actively monitoring them.
When are Disclosures Required?
The FAQs addressed some specific questions about when a disclosure of material connection is required. The biggest news here, I think, is that the FTC said that if an influencer posts a photo of herself on Instagram wearing a dress, but doesn't say anything about the brand or tag the brand, then no disclosure is probably required. The FTC explained that, "no disclosure is required because no representation is being made about the clothes in this context."
The FTC also said that no disclosure is required when an influencer promotes the influencer's own brand through social media, so long as that connection is obvious. The FTC cautioned, however, that "If it's not clear or sometimes not clear that it's the influencer's brand, that fact should be disclosed."
What about a situation when you're opening a new restaurant and you invite friends or family for a free meal, so that you can get their feedback on the food and the service? If they decide to post in social media about the restaurant, is a disclosure required? Not surprisingly, the FTC said -- in guidance that's been rewritten but is similar to what it has said before -- that if you ask guests to post, then they'll need to disclose that they got their meal for free. It's important to note here that the FTC also says that, if you don't ask them to post, even in a situation where you're not giving them the free meal in the hopes that they do post, they should still include a disclosure.
What about if the influencer receives a very low value gift? Is a disclosure required then? While a disclosure is only required if there's a material connection, of course, in response to an FAQ on this topic, the FTC wasn't willing to set a bright line for when a disclosure is not necessary. The FTC explained, "There is no easy answer to that question and there is no threshold amount that would apply in all situations."
Importantly, then, even if a free gift is of low value or was truly given without any hope or expectation that you'd get something in return, a disclosure may still be required. While I'm not sure that the FTC is right about that, it's certainly the position the FTC is taking. So, be warned.
Where Should Disclosures be Placed?
When thinking about where online disclosures should go, it's not enough today to just consider whether they are "clear and conspicuous." The FTC wants online disclosures to be "unavoidable." In the FAQs, the FTC provided some further guidance about how to accomplish this in social media.
The FTC said that it didn't think that, on TikTok, a disclosure that appears in the video's text description would be sufficient. The FTC explained that, "When content creators want viewers to read something, they superimpose much larger text over their videos." Interestingly, the FTC also indicated that, if a photo on Instagram conveys an endorsement without users having to read the description, influencers might even need to superimpose a disclosure on photographs there as well, if a "significant minority" of people aren't reading the description.
But, back to social media videos, if you put the disclosure over the video (and not just in the description), is that enough? Not really. For videos, the FTC is explained that -- "if the representation is made through both visual and audible means" -- it is really hoping for a disclosure that's both in the audio and the video.
While the FTC may be answering some new, specific questions here, the FTC is really conveying the same guidance that it has communicated in the past, which is, you should not assume that a consumer will read an entire social media post. In other words, the FTC is saying that you've got to make sure your disclosures are effective, even if a consumer just glances at the photo or the video, but doesn't read the text below it.
What Should the Disclosures Say?
The FTC has given lots of guidance over time about the specific types of language that advertisers should use to effectively communicate that an influencer has a material connection to a brand. In the most recent FAQs, the FTC got pretty granular about the the types of hashtags that it didn't like.
What about #paidforbyXYZ? The FTC said this hashtag "might work," but they are worried that when you run the words all together, they're difficult to read. The FTC likes "paid for by XYZ" better. (Remember, if consumers can't be expected to read a whole social media post, they certainly can't be expected to insert spaces between words.)
How about #endorsement? The FTC said "no" to that one, saying that it doesn't make clear that the endorsement was based on some sort of payment or other incentive.
Does #gifted work then? Unfortunately, "no," according to the FTC, since it doesn't explain who gave the consumer the gift. The FTC likes "Gifted by XYZ" -- but, again, watch out for running all of the words together in one hashtag. That's why #freeproduct doesn't work as well, since it doesn't tell people that the consumer got the product from a specific advertiser.
What about #comped or #hosted? Isn't it clear, there, that this means that you got the tickets or other free stuff from the brand. Nope. It's not sufficiently clear, according to the FTC. They really want consumers to be explicit about who they got the stuff from.
If a user is posting in social media in order to enter a sweepstakes, is #sweepstakes a good enough disclosure. No again. The FTC says that, in that situation, people may not understand that the post was incentivized. The FTC wants the brand to be identified as well, such as #XYZ_Sweepstakes.
What's the takeaway here? At least according to the FTC, many of the hashtags that brands are currently using -- particularly ones that are a single word that doesn't communicate a clear connection to a brand -- are not clear enough. #bewarned. Actually, #be_warned. No, actually, #FTC_says_be_warned.
Are Disclosures Required When Publishers Accept Advertising?
In response to an FAQ about how a restaurant review website should deal with accepting advertising from the restaurants that it reviews, the FTC said that no special disclosure is required on the ads, so long as they are "clearly ads." The FTC cautioned, however, that the placement of the advertising shouldn't positively impact the editorial content of the review.
So, no big news there -- except for the fact that the FTC is reminding advertisers that "the advertising shouldn't positively impact the editorial content of the review." In other words, if you're a publisher, you'd better make sure to really separate your editorial and sales teams.
Do the FTC's Recommended Disclosures Work for Children and Teens?
The FTC cautioned that children and teens can react differently from adults to advertising and that a "disclosure that works with adults might not work with younger individuals." This suggests that -- when promoting to a younger audience -- the FTC is going to look closely at your disclosures to see whether they will be effective for that audience.
With the release of the new Endorsement Guides, the FTC is making it very clear that it's got concerns about the use of endorsers and influencers in advertising directed to younger audiences. The FTC is just not convinced that they understand what's going on. So, if you're talking to kids and teens, you'll want to make sure that your disclosures are specifically designed be effective for that audience.
How Much Monitoring of Influencers is Required?
If influencers are posting on a brand's behalf, the FTC says that the brand should regularly monitor the influencer, to make sure that the influencer is complying with the law. How much monitoring is required? The FTC isn't willing to give specific guidance here (such as weekly or monthly), saying there is no one-size-fits-all standard. Instead, the FTC indicated, "If regular monitoring is too much for you, you should probably switch to pre-approval of posts." (Yes, that sounds snarky to me too.)
But what about Instagram Stories or posts on Snapchat? How can brands be expected to monitor those, since they're short-lived? The FTC said that, for ephemeral posts, since there's no practical way to monitor them in real-time, brands should pre-approve them before they are posted.
The FTC expects advertisers to monitor their influencers' posts. And monitor them regularly. And, if it's not possible to monitor them -- because they disappear after a short time -- then the FTC expects you pre-approve them. Does this guidance suggest then, that if a post has been pre-approved, it's not necessary to monitor it to make sure it has been posted correctly?
What's the FTC's New Guidance on Soliciting and Using Consumer Reviews?
In the last few years, the FTC has given a lot of new guidance about how to solicit and use consumer reviews -- and the FAQs provide dig into this issue a bit as well.
While there's nothing wrong with soliciting consumer reviews, the FTC cautioned about soliciting them in a manner that is intended to generate results that don't fairly reflect what people think about your products. In response to an FAQ about whether advertisers can solicit reviews just from specific regions where they have the highest customer satisfaction, the FTC explained that this was not appropriate, since "asking for reviews from customers who you think are more likely to be happy with your product would be misleading if its substantially skews the favorability of the reviews."
In response to a question about whether it's acceptable to delay posting negative reviews in order to give your team time to respond to them, the FTC indicated that it's fine to delay posting them for a reasonable period of time, so long as you delay posting all reviews (including positive reviews) for that time period. The FTC cautioned, however, about trying to change customers' minds about posting the reviews at all, saying that this "would likely give a biased and misleading picture of what customers think about your products and services." The FTC indicated that it would be okay, however, if you responded to customers' concerns and then they posted an update to the review (so long as the original review remains).
The FTC also gave some guidance about how to organize customer reviews on your website, saying that it's deceptive to organize the reviews where all of your best reviews are listed first -- even if users have the option to re-sort the reviews because "many consumers may not realize that the default sort is by star rating."
What's the big takeaway here? You'd better check how your site organizes consumer reviews. If they're not organized chronologically, you may have some quick work to do.
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