Presented by the Canadian Bar Association’s (CBA) National Competition Law Section and

the Professional Development Committee of the CBA

Présentée par la Section nationale du droit de la concurrence de l’Association du Barreau canadien (ABC)

et le Comité du développement professionnel de l’ABC

MATERIALS / MATÉRIAUX

2012 Competition Law Fall Conference

Conférence annuelle d'automne 2012 en droit de la concurrence

Social Media in Marketing: Risk Implications

Richard L. Cleland FTC Division of Advertising Practices

Bureau of Consumer Protection

September 20 - 21, 2012 | 20 et 21 septembre, 2012 Hilton Lac-Leamy | Gatineau, Québec

Social Media in Marketing: Risk Implications

Presented by

Richard L. Cleland

FTC Division of Advertising Practices Bureau of Consumer Protection

Definition

Distinguish social media marketing from social media platforms.

Consumer to consumer communication. (How do you get consumers to pay attention?)

Does not need to have an online component.

Sponsored Tweet

Social Media Platform

Prohibition against deceptive and misleading advertising applies to social media marketing.

Advertisers can’t make claims using third parties that they couldn’t legally make themselves.

Consumers have the right to know when they are being advertised to.

Basic Principles

Defining the Issues

SMM usually involves an endorsement of a product or brand

SMM may involve product claims

Endorsements

An endorsement must reflect the honest opinions, findings, beliefs, or experience of the endorser.

An endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser.

Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers.

Endorsers also may be liable for false or misleading statements made in the course of their endorsements.

Material Connections Between Advertisers & Endorsers

When an advertiser and an endorser have a relationship that the audience wouldn’t reasonably expect (a “material connection”), relationship should be disclosed.

It’s deceptive because consumers may interpret the representation differently if they knew of the relationship.

Examples of such connections include: Seller is compensating endorser; Endorser is employee or business associate of seller; Endorser is related to seller; Endorser gets free products.

Financial Ties -- Context Matters

Financial tie between seller and endorser should be disclosed, unless the tie is clear from the context.

If audience reading product review article or visiting product review website/blog understands that the reviewer didn’t buy the products he’s reviewing, disclosure isn’t needed to avoid deception.

Celebrity Endorsers

In conventional ads, it’s not necessary for an ad to disclose that a celebrity is being paid, because in that context payment would be understood

Outside of conventional ads (on talk shows, social networking

sites): the relationship with the advertiser should be disclosed when a celebrity talks up a product because payment isn’t obvious in that context

When Is Marketer Liable for Endorser’s Statement?

If endorser makes false or unsubstantiated claims for product, advertiser is potentially liable. To limit potential liability: Advertiser should ensure its endorsers receive guidance/training re

need to ensure statements are truthful/substantiated; Advertiser should monitor sponsored bloggers/brand ambassadors

and take steps to halt continued publication of deceptive claims when discovered.

Application of Endorsement Guides to Bloggers and Consumer Endorsers

Companies using bloggers or consumer endorsers as part of their

campaigns must have policies in place to monitor whether disclosures are being made.

Adequacy of the Disclosure

FTC is revising its guidelines on Internet and online disclosures.

Workshop held May 30, 2012.

Likely issue revised guidance later this year.

Three Scenarios

No space restrictions

Limited space

No space

I was sent some Hallmark encouragement cards to check out and they are terrific!

Limited Space: Example 1

Example 2

Example 3

Example 4

Example 5

What if there is no space?

The issue is whether it is appropriate to use incentivized endorsements when there is no opportunity for disclosure?

Who should be responsible – the advertiser or the platform?

ENFORCEMENT: Ann Taylor LOFT

“EXCLUSIVE BLOGGER PREVIEW”

THE INVITATION: “Bloggers who attend will receive a special gift, and those who post coverage from the event will be entered in a mystery gift card drawing where you can win up to $500 at LOFT!”

THE FINE PRINT: “Please note all bloggers must post coverage from our event to their blog within 24 hours in order to be eligible. . . . Gift card amounts will vary from $10 to $500.”

Ann Taylor LOFT

Ann Taylor LOFT invited bloggers to preview its Summer 2010 collection. Invitation stated that bloggers would be eligible for gift card valued between $10 and $500 and instructed bloggers to send their review blog to Ann Taylor, after which they would learn the value of the gift card.

FTC investigated Ann Taylor but closed without formal action: • Before being contacted by FTC, Ann Taylor instituted policy going forward

to notify bloggers of need to disclose gift cards; • First-time event, and only a few bloggers took up offer.

Hyundai Motor America

Investigation focused on gift certificates given to bloggers to encourage them to link to Hyundai videos or to comment on upcoming Super Bowl ads.

“An advertiser’s provision of a gift to a blogger for posting specific content promoting

the advertiser’s products or services is likely to constitute a material connection that would not be reasonably expected by readers of the blog.”

Hyundai closing letter

Hyundai did not know in advance about use of these incentives

A relatively small number of bloggers received the gift certificates

Some did disclose

Hyundai

“[T]he actions with which we are most concerned here were taken not by Hyundai employees, but by an individual who was working for a media firm hired to conduct the blogging campaign. Although advertisers are legally responsible for the actions of those working directly or indirectly for them, the actions at issue here were contrary both to Hyundai’s established social media policy, which calls for bloggers to disclose their receipt of compensation, and to the policies of the media firm in question. Moreover, upon learning of the misconduct, the media firm promptly took action to address it.”

ENFORCEMENT: FTC V. Reverb

iTunes App Reviews: “Amazing new game” “ONE of the BEST” “[Game developer] hits another home run with [game being reviewed]” “Really Cool Game” “GREAT, family-friendly board game app” “One of the best apps just got better” and “[Developer of gaming application being reviewed] does it again!”

Reverb Communications, Inc.

PR firm hired by video game developers to publicize their game apps.

Reverb had its employees post positive reviews about the games on the online iTunes store.

FTC charged this was deceptive b/c it misrepresented that the reviewers were ordinary customers, and b/c it failed to disclose the financial relationship b/t the reviewers and the game developers.

Case resolved via consent order.

U.S. v. Spokeo, Inc. Fair Credit Reporting Act case addressing the collection of online info — including data

from social networking sites — when used in the context of employment screening. Complaint charged that Spokeo employees posted glowing recommendations of the

company’s services on news and technology websites without disclosing their true identity.

Complaint charged that Spokeo directed its employees to write the comments. Spokeo managers then edited what they wrote and had the staffers post the endorsements using account names provided by Spokeo.

Legacy Learning Systems Company promoted guitar lesson courses via an online “review ad”

affiliate program Affiliates received substantial commissions on the sale of each

product resulting from referrals Complaint: Company represented that endorsements were made by

independent reviewers or ordinary consumers and failed to disclose affiliate relationship.

$250,000 monetary relief

Resources

Dot Com Disclosures: Information About Online Disclosures

http://business.ftc.gov/documents/bus41-dot-com-disclosures-information-about-online-advertising

Guides Concerning the Use of Endorsements and Testimonials in Advertising

http://www.ftc.gov/os/2009/10/091005revisedendorsementguides.pdf

The Revised Endorsement Guides: What People Are Asking (FAQs)

http://business.ftc.gov/documents/bus71-ftcs-revised-endorsement-guideswhat-people-are-asking