Podcast: Insights from Our Interview with FTC Senior Lawyer Michael Ostheimer

Anthony DiResta: Hello, this is Tony DiResta, a partner in Holland & Knight, and I'm privileged to co-chair the firm's Consumer Protection team and I'm a former director at the Federal Trade Commission.

Da'Morus Cohen: Good morning, I'm Da'Morus Cohen. I'm a partner at Holland & Knight here in the Miami office, and I'm also a member of the firm's Consumer Protection team, along with Tony. I focus my practice primarily on all aspects of advertising, marketing, promotional compliance, and both the social media and digital media spaces.

Anthony DiResta: Today, we're launching a series called Clearly Conspicuous that's designed to give you practical and up-to-date information about consumer protection issues you need to know about, as well as what's going on with governmental regulators and law enforcers. Our series will feature various members of the firm's Consumer Protection team, who will cover a broad range of topics in the consumer protection space, and we hope you find it valuable.

Da'Morus Cohen: As Tony said, we'll be covering a number of topics in the consumer protection space, and today we want to tell you about an interview we recently held with Michael Ostheimer, a senior lawyer at the FTC who is one of the key players in regulating and enforcing the laws concerning social media advertising and marketing. Mr. Ostheimer's interview is one of many that we'll feature as part of our team's initiative to bring what we call "Conversations that Matter" to the forefront. In that interview, we discussed a number of rules, regulations and guidance that apply to social media advertising and the role of the FTC in regulating and enforcing those rules and regulations.

Anthony DiResta: Indeed, Michael covered a broad range of practical topics and developments that impact what you and your companies are doing on social media. These topics included trends in social media, the role of disclosures, disclaimers, the use of blogs, celebrities and influencers, the revisions to the FTC guides on testimonials on endorsements, employee posts, reviews of products and services, FTC law enforcement actions, warning letters and other initiatives by the government, and social media policies and procedures. Obviously, a lot of ground was covered, and what we wanted to do in the next few minutes is to give you a couple of the key takeaways and practical tips that you need to know about.

Social Media Policies and Disclosures

Da'Morus Cohen: As Tony mentioned, we covered a lot of ground and a lot of material during our interview with Michael Ostheimer, and so for our key takeaways, I'll cover social media policies and disclosures and Tony will conclude with FTC law and enforcement actions. So, to jump in, social media policies, a big topic that we've chatted about a number of times over the past few years in previous interviews that we did with Michael Ostheimer. At the forefront, social media policies are a must. Every business that engages in social media advertising or that has a social media footprint, whether it be through itself or its employees, must have a formal social media policy. These policies should be implemented with management oversight and must be effective. The policies should be communicated to third party vendors as well as employees. The FTC also expects marketers to train employees on proper social media use. This obligation may extend beyond employees to third party agents, depending on the underlying relationship with that third party agent or the marketer. Finally, some form of monitoring is expected to ensure compliance with the market or social media policies and the FTC regulations and guidance.

And from that we segue into social media disclosures. Disclosures are required no matter the social media platform that's being used. This includes well-known, high-profile platforms such as Facebook, Instagram, Tik Tok, as well as YouTube and Twitter. This list is clearly not exhaustive. The rule is simple: If your company is advertising and disclosures would otherwise be required, include disclosures in your social media posts. Visual disclosures and audible disclosures may be required. This requirement may not only be limited to videos. Disclosures should be prominent and appear first. For instance, on Instagram, disclosures should appear in the first two to three sentences of the caption to be truly conspicuous and should not appear within a "More" link, which should appear above. Should gifts or other items be disclosed? This is a question that's routinely asked. Absolutely. It is critical for companies to disclose the material connection between any influencer or speaker and the brand, so [that] consumers know that this is an incentive that underlines the promotion. A free sample provides a material connection, as does an invitation to a party. Tony, you take it over from here.

The rule is simple: If your company is advertising and disclosures would otherwise be required, include disclosures in your social media posts.

FTC Law and Enforcement Actions

Anthony DiResta: Thanks Da'Morus. With respect to law enforcement, I get this question quite a bit in terms of what does the FTC look to, what's the criteria, what triggers the sending of a subpoena or an access letter. And there are several factors that lead the FTC or any governmental agency to commence an investigation. The factors include consumer complaints -- they could come from the Better Business Bureau or state attorney general or right from the Consumer Sentinel itself at the FTC; actual monitoring by the FTC staff -- and they're very active, surfing the Web on a daily basis to look for actors or companies or targets they want to focus on. They're looking for a high number of reviews by the companies to see how active the company is and its social media engagement. There's whistleblowers, there's competitors. There's news stories. I've seen several investigations being triggered by the actual media interest in a particular situation or that's targeting a particular company. There's congressional inquiries. There's actual sweeps of industry practices by the Federal Trade Commission, or if they see certain conduct that's really problematic or characters or stakeholders that are being, shall we say, acting improperly, that the government feels they need to make a fix. There's referrals from consumer groups, and there's referrals from the NAD, the National Advertising Division of the Better Business Bureau. Importantly, the FTC does have their substantive priorities. So whether it's health, safety, financial security, or other pressing policy or consumer issues, and whether egregious conduct is in play, they're going to look at the method of communication from the company to the consumer: how is this information being disseminated and whether it's deceptive or unfair. And so they're also going to be concerned about emerging industries and emerging technologies as well, as companies become more and more sophisticated with these emerging technologies.

Whether it's health, safety, financial security, or other pressing policy or consumer issues, and whether egregious conduct is in play, they're going to look at the method of communication from the company to the consumer: how is this information being disseminated and whether it's deceptive or unfair.

So I also want to emphasize a very, very important point, because I think many companies believe they have a very effective compliance management system. They have policies and procedures, they're in writing, you know, so they think they're all buttoned up. But there's two other factors the FTC looks at in terms of the integrity and the evaluation of a compliance management system. Not only does it have to be in writing, it has to be well implemented. By that, what kind of training do you do for your employees or your third party vendors, and, if some of these agents fall off the reservation, what kind of disciplining takes place? Again, that goes in the implementation bucket. But you can have, according to the FTC's mindset, very solid policies and procedures that are implemented. But are they effective? Are they seeing the problems occurring over and over and over again? So the FTC is going to ask the question, what kind of monitoring, what kind of auditing are you doing to be sure that these policies and procedures as implemented are being effective? So be sure you take your policy and procedure analysis to those three steps that are very, very important.

There's two other factors the FTC looks at in terms of the integrity and the evaluation of a compliance management system. Not only does it have to be in writing, it has to be well implemented.

And finally, I want to get to relief in terms of what does the FTC do when they bring in companies and law enforcement action? Two forms of relief are injunctive relief, which are changes to the organizations, the policies and the procedures, the way the business is conducting itself, but also with respect to monetary relief. And Michael stressed in our interview with him that they are going to be looking at monetary relief in all advertising cases moving forward. So brands are really subject to these monetary penalties. And it's important to note in probably this upcoming administration that brands -- major brands -- are going to be held to a higher standard because they're trusted by consumers. And finally, I'm going to make the point that the FTC works actively with other law enforcement partners to monitor social media advertising. The FTC does not work in an echo chamber. They have memorandum of understanding, for example, with the Food and Drug Administration. They engage in sweeps with their partners in the states, with state attorneys general. And they're certainly working closely right now with the Consumer Financial Protection Bureau, the CFPB. I'll note that the nominee for the director of the CFPB, Mr. [Rohit] Chopra, is currently a commissioner at the FTC, so there's a lot of familiarity between goings on at the CFPB and the FTC.

So in conclusion, if you have any questions, please feel free to email or call Da'Morus and me. We look forward to more having more sessions with you and becoming a more effective partner with you as you engage in your social media advertising.

Da'Morus Cohen: Thank you, Tony. That was a great summary. And with that, everyone, we wish you success in your marketing efforts, and we look forward to providing useful and practical information that will enhance your success. Have a great day.