As previously blogged about here, the FTC actively continues its assault on paid-for rankings, ratings and review websites.

The FTC’s Endorsement Guides provide that if there is a “material connection” between an endorser and an advertiser – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection should be “clearly and conspicuously” disclosed, unless it is already clear from the context of the communication.  A material connection could be, without limitation, a business or family relationship, monetary payment, or the gift of a free product.

Importantly, the Endorsement Guides apply to both marketers and endorsers.

What are an advertiser’s responsibilities for what others say in social media?

To begin with, advertisers must have reasonable programs in place to train and monitor members of their network.  The scope of the program depends on the risk that deceptive practices by network participants could cause consumer harm – either physical injury or financial loss.

For example, a network devoted to the sale of health products may require more supervision than a network promoting, say, a new fashion line.

Here are some elements every program should include:

  1. Given an advertiser’s responsibility for substantiating objective product claims, explain to members of your network what they can (and cannot) say about the products – for example, a list of the health claims they can make for your products, along with instructions not to go beyond those claims;
  2. Instruct members of the network on their responsibilities for disclosing their connections to you;
  3. Periodically search for what your people are saying; and
  4. Follow up if you find questionable practices.

According to the Federal Trade Commission, it is unrealistic to expect advertisers to be aware of every single statement made by a member of its network.  However, it is up to an advertiser to make a reasonable effort to know what participants in the network are saying.

Generally speaking, it is less likely that the activity of a rogue blogger would be the basis of a law enforcement action if an advertiser has a reasonable training, monitoring and compliance program in place.

What about intermediaries?

According to the FTC, intermediaries should tell participants in their network that if they endorse products they have received through their programs, they should make material connections clear.  Programs should be implemented to train and monitor endorsers and influencers.  Check periodically whether members are making appropriate disclosures, and to deal with anyone who is not complying.

What about affiliate or network marketing?

Affiliate marketers must disclose relationships to brands (and others that perform services for or on behalf of brands) clearly and conspicuously so that consumers can decide how much weight to give the endorsement.

In some instances – like when an affiliate link is embedded on a product review – a single disclosure may be adequate.  According to the FTC, when the review has a clear and conspicuous disclosure of the relationship and the reader can see both the review containing that disclosure and the link at the same time, readers have the information they need.

However, if the product review containing the disclosure and the link are separated, consumers  may not make the connection.

Where should the disclosure be placed?

The guiding principle is that it has to be clear, conspicuous and prominent.

The closer it is to the recommendation, the better.

Placing disclosures in obscure places – for example, buried on an ABOUT US or GENERAL INFO page, behind a poorly labeled hyperlink or in a “terms of service” agreement – is unacceptable to the FTC.  As is placing it below a review or below a link to the online retailer so that readers would have to keep scrolling after they finish reading.

Consumers should be able to notice the disclosure easily.  They should not have to hunt for it.

Is “affiliate link” by itself an adequate disclosure?

The FTC states that consumers might not understand that “affiliate link” means that the person placing the link is getting paid for purchases through the link.

What about employee endorsements?

According to the FTC, if your company allows employees to use social media to talk about its products, you should make sure that your relationship is disclosed to people who read your online postings about your company or its products.

An employment relationship would likely be considered a “material connection” that must be disclosed, in the eyes of the FTC, because it is something that a reasonable consumer would want to know before relying on someone else’s endorsement.

What if your company policy says that employees shouldn’t post positive reviews online about our products without clearly disclosing their relationship to the company, but you have a large number of employees?

According to the FTC, it would not necessarily be reasonable to expect you to monitor every social media posting by all of your employees.  However, you should establish a formal program to remind employees periodically of your policy, especially if the company encourages employees to share their opinions about your products.  Also, if you learn that an employee has posted a review on the company’s website or a social media site without adequately disclosing his or her relationship to the company, you should remind them of your company policy and ask them to remove that review or adequately disclose that they’re an employee.

What about employees of an ad agency or public relations firm?

An ad agency (or any company for that matter) should not ask employees to say anything that is not true.  No one should endorse a product they have not used or say things they do not believe about a product, and an employer certainly should not encourage employees to engage in such conduct.

Moreover, employees of an ad agency or public relations firm have a connection to the advertiser and/or network, which should be disclosed in all social media posts.  Agencies asking their employees to spread the word must instruct those employees about their responsibilities to disclose their relationship to the product they are endorsing.

What about ads featuring endorsements from consumers that achieved the best results?

This issue is often one of the most overlooked digital advertising landmines.

Testimonials claiming specific results usually will be interpreted to mean that the endorser’s experience reflects what others can also expect.

Statements like “Results not typical” or “Individual results may vary” will not change that interpretation.

That leaves marketers with two choices:

  1. Have adequate proof to back up the claim that the results shown in the ad are typical, or
  2. Clearly and conspicuously disclose the generally expected performance in the circumstances shown in the ad.

For example, an ad in which someone says, “I lost 50 pounds in 6 months with WeightAway.”  If consumers cannot generally expect to get those results, the ad should say how much weight consumers can expect to lose in similar circumstances – for example, “Most women who use WeightAway for six months lose at least 15 pounds.”

What if you cannot figure out what the “generally expected results” are?

Using ads that feature endorsements from people who achieved exceptional, or even above average, results, are risky unless vetted by an experienced FTC lawyer.  An example is an endorser who says she lost 20 pounds in two months using the advertised product.  If the marketer does not possess pre-dissemination proof that the endorser’s experience represents what people will generally achieve using the product as described in the ad, then an ad featuring that endorser must make clear to the audience what the generally expected results are.  Of the marketer is unable to do so, the endorsement should not be utilized.

Richard B. Newman is an FTC attorney Internet marketing attorney focusing on federal agency litigation at Hinch Newman LLP.  Follow FTC defense attorney on National Law Review or on Twitter @ FTC Defense Lawyer.

Informational purposes only. Not legal advice. Attorney advertising.