Why Youre Hearing this from Us

Gary KibelPMA General CounselPartner, Davis & Gilbert LLPgkibel@dglaw.com @GaryKibel

Rachel HonowayPMA BOD President 2016 - 2017CEO at FMTCrachel@fmtc.co @FMTC_co

Affiliate Nexus TaxAd BlockingInfluencersNative AdvertisingPrivacyTodays Topics

What Is Nexus?Nexus = connectionStates are attempting to create a nexus for taxesReal estateOperating a businessEmployeesResident-specific solicitationAffiliates or Click-through nexus

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How Does Nexus Affect Affiliate Marketing?Merchants/Advertisers have dropped affiliates in states with Click-Through Nexus lawsOnly the click has the connection consumer is not necessarily in stateTracking technologyAdditional tax filing burdenAffiliates are specifically targeted while other platforms arent

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Who Has Click-Through Nexus?ArkansasCaliforniaConnecticutGeorgiaIllinoisKansasLouisianaMaineMichiganMinnesotaMissouri

NevadaNew JerseyNew YorkNorth CarolinaOklahoma PennsylvaniaRhode IslandTennesseeVermontWashington

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Where else is is / has it been on the table?AlabamaColorado*IndianaMassachusetts South CarolinaSouth DakotaUtahWisconsinWyoming

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Whats Being Done About It?Federal LegislationColorado provisionsGrassroots effortsPMA

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Its Not Just the Government Consumers want a say in Advertising as well.8

The Rise of Ad-BlockingPC SoftwareBrowser-specific extensionsPlatform-specific extensionsMobile apps

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Its More than Limiting DistributionBlocking ads from displayingDisabling trackingProtecting privacy

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The PMAs Special Council Study2015 - 2016Members from top networks, publishers and advertisersDetermine concerns from all types of industry participantsStudy processes ad-blockers useDetermine best approach for optimizing distribution and tracking to avoid further alienating these consumers11

FindingsOne major source for whitelisting/blacklistingList of ad-serving domains and directoriesList of tracking domains and directoriesModerated forum for updates and discrepancies

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The Approach to MitigationAcceptRespectReportMaintain

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Resources

The curated lists and moderated forums referenced in this piece can be found at EasyList - https://easylist.to/

for the Curious

Best Practices for Advertisers & AgenciesAccept that not all consumers want to participate in advertising.Do not attempt to circumventWork with a compliant affiliate network or tracking solution provider ShareASaleImpact RadiusLinkConnectorRakuten LinksharePepperJamAffiliate WindowTune

INFLUENCERS & SOCIAL MEDIA DISCLOSURES

Federal Trade Commission Act Section 5Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.Deception = Misrepresentations or omissions likely to mislead consumers acting reasonably under the circumstancesUnfairness = causes or is likely to cause substantial consumer injury, not reasonably avoided by the consumer, and not outweighed by countervailing benefits to consumers or competition

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18Endorsements / TestimonialsEndorsement / Testimonial = Any advertising message which message consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser Must be honest and not deceptiveDisclosure of material connections:When there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed

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FTC Revisions to Endorsements and Testimonials in Advertising (Guides) (October 2009)Big Q whether, when viewed objectively, is the relationship between the marketer and the speaker such that the statements are considered sponsoredMarketers can be liable for a bloggers misleading or unsubstantiated claimsFTC encourages companies to have social media participation policies. Existence of such policies considered by FTC in any enforcement action

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FTCs Revised Endorsement GuidesA blogger/word-of-mouth marketer has a duty to disclose any material connections with an advertiser (e.g., payments or free products that the consumer would not expect)Celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows, blogs or in social media Employees who promote their employers products or services in social media should clearly and conspicuously disclose their employment relationship

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21FTC FAQs 2015 Clicking Like Some platforms like Facebooks like buttons dont allow you to make a disclosure. Advertisers shouldnt encourage endorsements using features that dont allow for clear and conspicuous disclosures. However, we dont know at this time how much stock social network users put into likes when deciding to patronize a business, so the failure to disclose that the people giving likes received an incentive might not be a problem. An advertiser buying fake likes is very different they are clearly deceptive.

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22How to Make A Disclosure in Social MediaHow should a disclosure be made?There is no special language but goal is to effectively communicate your relationship with the marketer Acceptable:Company X gave me this product to try ...I work for Company X, so ...Not acceptable:Button that says DISCLOSURE or LEGALABOUT US or GENERAL INFO

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How to Make A Disclosure in Social Media with A HashtagSuggested:#paid ad#paid#ad (at the beginning of the post)#sponsored (but not just #spon)#contest or #sweepstakes (but not just #sweeps)But the FTC now seeks longer disclosures:Making the word contest or sweepstakes part of the hashtag should be enough. However, the word sweeps probably isnt, because it is likely that many people would not understand what that means23

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Hot Topics in: Advertising, Social Media and Consumer Privacy Law24 Hot Topics in Social Media and Mobile Marketing Law24 Social Media and Privacy Law24

#SPONSORED

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How To Manage The Legal And PR Risks In Social Media25

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FTC FAQs Contest hashtags Its likely that many readers would not understand such a hashtag to mean that those posts were made as part of a contest or that the people doing the posting had received something of value (in this case, a chance to win the contest prize). Making the word contest or sweepstakes part of the hashtag should be enough. However, the word sweeps probably isnt, because it is likely that many people would not understand what that means.27

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FTC vs. Cole Haan (March 2014)#WanderingsoleContest - $1,000FTC We believe that participants' pins featuring Cole Haan products were endorsements of the Cole Haan products, and the fact that the pins were incentivized by the opportunity to win a $1000 shopping spree would not reasonably be expected by consumers who saw the pins

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Sweepstakes and Contest Disclosures

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FTC Machinima (September 2015)Machinima paid a wide array of influencers to produce and upload endorsement videos of Xbox One to YouTubeThe FTC charged Machinima with engaging in deceptive advertising for failing to have the influencers disclose that they were being paid for their seemingly objective opinionsFTC when people see a product touted online, they have a right to know whether theyre looking at an authentic opinion or a paid marketing pitch. Thats true whether the endorsement appears in a video or any other media.

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FTC Lord & Taylor (March 2016)Retailer hired influencers to post photos of themselves wearing its Design Lab paisley dress Influencers required to include @lordandtaylor and #DesignLab in posts FTC charged that influencers did not disclose they were compensated to post photo Result: 20-year consent order with extensive disclosure, monitoring and reporting obligations on retailer

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FTC ACTION LORD & TAYLOR32Recent Updates to the FTCs Regulatory Guidance

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FTC Enforcement Warner Brothers (July 2016) Warner Bros. hired an advertising agency, Plaid Social Labs, to coordinate a YouTube Influencer Campaign for its video game Shadow of MordorPlaid Social Labs hired individuals who had earned reputations as video game enthusiasts on YouTube to post positive videos promoting the game in exchange for free access to a pre-release version of the game and cash paymentsWarner Bros. required that Plaid instruct the game enthusiasts to place in the description box: (1) information about the game and (2) an FTC disclaimer disclosing that the post was sponsored

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Twitter Examples50 Cent (Curtis Jackson) Tweeted (Jan. 2011) HNHI is the stock symbol for TVG. there (sic) launching 15 different products. they are no joke get in nowCurtis Jackson owns 7.5 million shares & warrants for 22.5 million more (My) own HNHI stock thoughts on it are my opinion. Talk to (a) financial advisor about it. HNHI is the right investment for me it may or may not be right for (you)! Do ur (sic) homework

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RIGHT OF PUBLICITY RISKS

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Rights of Privacy / PublicityThe right of publicity is the right of every person to control the commercial exploitation of their identityViolations: A persons right of publicity is violated by an unauthorized commercial exploitation of that persons identityPursuant to state lawLimitations: Commercial vs. Editorial38

Rights of Privacy / PublicityPost Mortem RightsAllows claims by heirs and estatesTennessee - As long as continuously usedCalifornia - 70 years after death39

RIGHT OF PUBLICITY

Michael Jordan vs. Jewel Food Stores

Ad in 2009 Sports IllustratedJordan sues for $10mmLost, appealed, trialAug. 2015 Jury trial = $8.9mm in damagesNov. 2015 Settled

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Hot Topics in: Advertising, Social Media and Consumer Privacy Law44

Heigl v. Duane Reade, Inc.Katherine Heigl sued Duane Reed for violation of her right of publicity and for false association / endorsementLawsuit sought $6 million in damages After tons of press, parties reached a private settlement beneficial to both parties45

Social Media and Native Advertising Rules of the Road46

Did They Join the Online Conversation?

Disclosures and Right of Publicity

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Sofia Vergara vs. Venus Concept (Jan-2016)Sofia Vergara used Venus Concepts Legacy skin tightening massage treatment in August 2014She posted a selfie to WhoSayAlso appeared in EXTRA regarding using the productVenus Concept has used the selfie in its advertising and at trade showsShe is suing for $15,000,000

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Hot Topics in: Advertising, Social Media and Consumer Privacy Law49

NATIVEADVERTISING

Blurred Lines No More:Native Advertising in 201651https://www.youtube.com/watch?v=IVfslRsNXUc

Gilbert, please add :51

Law Applicable to Native Advertising: FTCFTC advisory opinion, 1968: A newspaper article reviewing several restaurants had been paid for by the advertisers but did not disclose that it was advertisingThe column uses the format and has the general appearance of a news feature and/or article for public information which purports to give an independent, impartial, and unbiased viewNewspaper needed to clearly and conspicuously disclose that this was an advertisement52

Examples of Native AdvertisingSponsored StoriesPromoted TweetsBranded playlists on SpotifyHuffington Post brand newsroomYahoo Stream adsBuzzFeed53

This is an example of How Slate shows sponsored content:Color is differentLabeled as sponsored contentIn sync with the editorial content on the site55

FTC Enforcement Policy and Business Guidance (December 2015)FTC has issued specific formatting and disclosure advice on the heels of NAD decisions:Disclosures should be placed in front of or above a native advertising headline and/or be accompanied by visual cues such as shading or bordersAdvertisement or sponsored advertising content should be used instead of ambiguous terms such as promoted or more from the webPresented by Advertiser may not be sufficient if the advertiser created or influenced the content as opposed to simply funding itEchoing the eSalon case, disclosures must be made when content is shared or re-posted56

Making Disclosures Based on the FTC GuidanceIn general, disclosures should beIn clear and unambiguous language (logos alone are not sufficient)As close as possible to the native ads to which they relateIn a font and color thats easy to readIn a shade that stands out against the backgroundFor video ads, on the screen long enough to be noticed, read, and understoodConsumers must be aware content is sponsored before making the decision to view it57

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Due diligence on influencersHave policies and an approach in placeContracts / TermsEducate your influencers on your policiesMonitor, monitor and more monitoringFinal Tips58

QUESTIONS?

Gary KibelPMA General CounselPartner, Davis & Gilbert LLPgkibel@dglaw.com @GaryKibel

Rachel HonowayPMA BOD President 2016 2017CEO at FMTCrachel@fmtc.co @FMTC_co