FTC Updates Advertising Guides and Increases Scrutiny

On June 29th, the Federal Trade Commission (FTC) released updated rules to combat deceptive advertisements and endorsements. Along with new endorsement guidelines and answers to FAQs, these new rules mark a potential new era of FTC enforcement for advertisers who participate in online marketing.

There have been huge shifts in the social media advertising landscape since the FTC last updated their endorsement guidelines in 2009. Instagram came online in 2010, the infamous Fyre Festival orange square was posted in 2016, and Twitter has completely overhauled its verification system in the past year. In other words, consumers and advertisers were due for an update on what counts as deceptive advertising online.

Under the new rules, sponsored content still requires disclosure. Where there is a material relationship between an advertiser and an endorser, that relationship must be disclosed. The disclosure should be clear and conspicuous, and advertisers who fail to make such disclosures may face investigations and fines from the FTC.

The new rules provide further guidance regarding the disclosure of material relationships between sponsors and social media influencers. The scope and reach of the rules has greatly expanded.

Some additions to be aware of are:

Brand" is now Included in the Definition of Product." Advertisements may have to include a disclosure when an influencer is paid to promote a particular brand, not just a specific product or event.

Advertisers May be Liable for False Statements by Their Endorsers. An advertiser is now subject to liability for misleading and false statements made through endorsements or for failure to disclose a material relationship. Advertiser liability may exist even where an endorser is not liable. The updated guides state that advertisers should:

1. Provide guidance to their endorsers on the need to ensure that their statements are not misleading and to disclose unexpected material relationships;

1. Monitor their endorsers' compliance; and

1. Take action sufficient to remedy noncompliance and prevent future noncompliance. While not a safe harbor, good faith and effective guidance, monitoring, and remedial action should reduce the incidence of claims of noncompliance, and reduce the likelihood that an advertiser will face an FTC enforcement action.

Clear and Conspicuous Disclosure Defined. The new FTC rules add a definition of what a clear and conspicuous" disclosure would entail. It now means that a disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers. They further explain that the disclosure should be in the same form as the endorsement itself. For example, if an endorsement is made over audio, then that disclosure should also be made over audio.

Fake Positive Reviews are Considered Endorsements. Under the new rules, a fake positive review that is posted online is considered an endorsement and therefore subject to the disclosure rules.

It's a good time to review your company's social media policy and contact your communications attorney for any help in complying with the FTC's updated rules.

Stay tuned for additional social media compliance pitfalls for broadcasters