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The Federal Trade Commission ("FTC") has once again vowed to crack down on undisclosed sponsored posts following widespread inaction in the past. According to WWD, “The FTC will soon begin holding media companies accountable for deceptive practices.” In particular, the trade publication cited Mary Engel, head of the FTC’s Advertising Practices Division, as stating: “If they are creating the sponsored content, then yes, we will begin looking at them.”In furtherance of the FTC's new interest in enforcing its guidelines in connection with undisclosed online content and social media posts, Engel stated, “The Lord & Taylor case gave notice to the fashion industry, which maybe wasn’t paying too much attention before. It’s important to everyone to understand their legal obligations.” You may recall that Lord & Taylor came under fire with the FTC last year after the retailer enlisted (and paid) Nylon magazine and 50 influencers to promote its Design Lab collection without ensuring that they disclosed that the content at issue was, in fact, sponsored.
The Federal Trade Commission
For the uninitiated, the FTC is the government agency that that is tasked with promoting consumer protection, and eliminating and preventing anticompetitive business practices. In this role, the FTC issues guidelines (which are legally binding) that govern “Endorsements and Testimonials in Advertising,” among other things. According to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, both advertisers and endorsers must disclose material connections (think: payments or free products in exchange for representation of the brand) that they share.
As we have told you in the past, posting endorsements – that have come about as a result of a connection between the endorser and the underlying brand – without proper disclosure are violations of the Federal Trade Commission Act. The same is true for the posting of sponsored content (regardless of the medium). In particular, the FTC has held that in order to avoid violating the FTC Act by way of misleading or deceptive social media or native posts, promoting parties should use "clear and conspicuous" disclosures (think: “#Ad”, “Ad:”, or “Sponsored”) to indicate that a post or link within a post includes compensated content.
Hardly a novel requirement, the FTC has long required advertisers and endorsers to disclose their material connections so consumers can be made aware. Thus, when an influencers and/or celebrity has been paid to endorse a product or service and they fail to disclose that fact, both the advertiser and endorser may be liable. The most novel aspect of all of this is social media. Yet, the FTC has adapted to development of social media advertising. In March 2013, the FTC updated its “DotCom Disclosures” Guidelines, in which it emphasized that consumer protection laws apply to both traditional media and social media.
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