In 2015, the Federal Trade Commission released new guidelines that directly affect many marketers and advertisers, especially those that engage in affiliate marketing.
The previous time the FTC published guidelines related to endorsements and reviews was in March 2013, when the FTC released its updated .Com Disclosures.
In May 2015, the FTC updated its Endorsement Guides, covering issues such as making disclosures in close proximity to affiliate links, buying Likes, and providing incentives in return for tweets; it also required disclosures in consumer reviews.
Furthermore, the FTC issued a public letter to one prominent brand, demonstrating the importance of robust compliance programs for advertisers that desire to use endorsements in their marketing.
Disclosure of Potential Commissions Near Affiliate Links
Many affiliate marketers create content relating to products that appear on blogs or consumer review sites, with affiliate links to retailers embedded in the content. The new version of the FTC's Endorsement Guides clarifies that affiliate marketers must disclose their relationship with the retailer in a "clear and conspicuous" manner, so that consumers can decide how much weight to give the product review or endorsement.
Reviews can be multiple paragraphs long, containing multiple affiliate links, so the FTC has clarified that in many situations the affiliate marketer need only disclose the relationship once. As an example, the FTC suggests language such as "I get commissions for purchases made through links in this post." However, if the affiliate link is separated from the review on the page, the FTC recommends multiple disclosures.
The FTC also clarified that merely using the words "affiliate link" in the link text will not be an adequate disclosure, nor will the use of the words "buy now" in the link text.
Buying Likes, Providing Incentives for Tweets
The FTC now states explicitly that marketers who buy Facebook Likes could face an FTC enforcement action. If the Likes are from nonexistent people or from people who have no experience with the product, it is now clear that buying Likes violates the FTC guidelines.
If a marketer runs a promotion whereby consumers are compensated in some manner for publishing tweets, then the advertiser must require that the consumer disclose the promotional nature of the tweets. The FTC provides some examples of ways to make disclosures on Twitter, such as using the words "Sponsored," "Promotion," or "Ad."
Though many have already viewed FTC guidelines as prohibiting "astroturfing" (masking the sponsor of a message to make it appear as though it originates from grassroots participants), the new FTC guidelines reiterate that marketers, or employees of retailers and manufacturers, may not create consumer reviews without disclosing their connection to the retailer.
This guidance obviously prohibits fake reviews, but it also prohibits reviews by retailers and manufacturers, or by their employees who actually used the product, unless the connection to the retailer or manufacturer is disclosed in the reviews.
Avoiding Penalties If You Violate FTC Rules
The above rules are in flux and can be subjective, especially in determining whether notice by a marketer is "clear and conspicuous" under FTC rules. However, marketers can protect themselves against the risk of penalties or an FTC enforcement action in the event the marketer does violate FTC rules in the area of endorsements.
Last year, the FTC investigated the Microsoft Corporation and its advertising agency, Starcom Mediavest Group (SMG).
SMG's marketing agents had paid significant amounts of money to video bloggers to produce and upload Xbox One game play videos as part of the launch of Xbox One. The videos appeared to be independently produced by the video bloggers, when in fact the bloggers were being paid by SMG's agents. Importantly, SMG's agents did not require that the video bloggers disclose in the videos that they were being compensated for producing and uploading the videos, and most of the bloggers in fact made no disclosure at all about getting paid.
In an August 26, 2015 letter to Microsoft, the FTC stated that despite the clear violations of FTC guidelines, the FTC was not going to pursue any enforcement action against Microsoft and SMG, for the following reasons:
- Despite the violations, both companies had policies and procedures in place to prevent such lapses.
- Microsoft had a robust compliance program in place at the time of the violation, including guidelines for compliance with the FTC's Endorsement Guides.
- Microsoft, prior to the violation, provided relevant training to employees, vendors, and SMG personnel.
- Since the violation, both Microsoft and SMG adopted additional safeguards regarding sponsored endorsements, including requiring their employees to monitor blogger campaigns conducted by subcontractors.
- Both Microsoft and SMG, after they learned that SMG's agents had paid the bloggers, took swift action to require that the bloggers insert disclosures into the videos.
Considering how the FTC dealt with Microsoft's violations of the endorsement guidelines, it is best that advertisers that want to use endorsements implement a robust compliance program and take quick action to remedy any violations that are detected.
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