Podcast - The FTC's Regulation of Social Media Advertising

Good day and welcome to our podcast, Clearly Conspicuous. Again, our goal in these podcasts is to make you succeed in this very aggressive and progressive governmental environment, make you aware of what's going on with the federal and state consumer protection agencies and give you practical tips for success. As always, it's a privilege to be with you today. Today's topic is the regulation of social media, advertising and the law, according to the FTC. Coming straight from the horse's mouth. My law partner Da’Morus Cohen and I interviewed Michael Ostheimer, a senior attorney in the FTC's Division of Advertising Practices who specializes in social media advertising and governmental law enforcement investigations. He covered quite the number of topics. I'd like to cover a few highlights. So let's look at 16 specific items.

16 Social Media Regulations Highlights According to the FTC

One, Michael told us that the FTC received 30 comments and staff is reviewing them, making recommendations to the commission and then considering staff recommendation. The issues include changing the definition of endorsements to include fake reviews, addressing virtual influencers and clarifying additional definitions of clear and conspicuous.

Two, he also talked about review gating, where brands encourage positive reviews with results and sending positive reviewers in one direction and negative reviewers in another way. The harm is accepting money from manufacturers in exchange for higher ranking.

Three, the FTC has sent notices of penalty offenses to more than 700 companies concerning the triggering of potential civil penalties for the potential use of fake reviews and other misleading endorsements. The FTC may notify companies if certain acts or practices are deceptive or unfair, and then bring enforcement actions against those companies who receive notices [that] they're on notice.

Number four, Michael plainly warned, don't provide fake and false reviews. While companies are not responsible for all fake reviews, liability can result if they do anything to incentivize fake or false reviews. Furthermore, companies should not bias or distort reviews.

Five, companies may view any harm to the consumer as speculative. As in most cases with deceptive reviews, there's often no allegation that the product or service did not perform as represented. However, Michael said that the FTC believes that even if no allegation that the product or service is problematic, fake or inflated reviews harm results, warranting governmental action.

Six, the FTC has taken an aggressive and vigorous enforcement approach in the endorsement and testimonial space. There is a line between an actor speaking independently and a sponsored advertising message. It is the FTC's position that a platform holder should actively monitor the particular users of that platform.

Seven, as we discussed in an earlier podcast, the FTC has revised its health products compliance guidance. The FTC has seen an uptick in enforcement within the health products space, especially in light of the COVID-19 pandemic.

Eight, when it comes to the rules for channels like Twitter, Facebook, Instagram, YouTube, Tik Tok and live stream to disclose content, consumers should not have to click on more to see material terms. And if endorsements through a live stream, there should be disclosures throughout.

Nine, with respect to sweepstakes, viewers should know that a post means entering the sweepstakes. It should be clear to identify X, Y, Z sweepstakes where X, Y, Z is the brand name.

Ten, in terms of new developments in social media technology or marketing practices, the FTC is concerned about artificial intelligence as well as fraud in whatever form, deepfake and other synthetic media, which poses a major risk around fraud. And finally, dark patterns.

Eleven, the FTC recently launched the new Office of Technology with the goal to keep pace with technological challenges in the digital marketplace. It will directly assist in the enforcement investigations or actions and will assist in research and policy development.

Twelve, we talked about dark posting or dark patterns, and Michael said that to comply with the FTC, companies should make sure that interfaces do not create false beliefs, do not bury fees or terms in dense documents or places that's unlikely to see before purchasing.

Thirteen, claims with quote "Made in the USA," close quote, is of high interest with the FTC right now.

Fourteen, the FTC brought an action against The Bountiful Company and obtained the judgment of $600,000. It involved review hijacking where the company had higher product ratings and reviews and higher average ratings. In that action, the company repurposed reviews for one product to appear for a very different, unrelated product.

Fifteen, Michael identified the factors that lead the FTC to commence investigations, and here's the list he provided: consumer complaints, complaints from competitors, information from former employees, information from advocates, press articles, congressional inquiries that generated sweeps and finally, something that simply catches their attention.

And finally, sixteen, the FTC expects to increase its cooperation and involvement with the state attorneys general. Michael specifically noted that given the loss in the Supreme Court in the AMG case, to get disgorgement to get lost through 13(b) coordination with the attorneys general assist in getting monetary remedies.

Key Takeaways

Well, I know that's a lot to digest. So here are the key takeaways. One, social media advertising is regulated. Again, all forms of social media advertising and marketing is regulated by the FTC. Two, advertising marketing practices is the key aspect of the FTC's work. So please stay tuned to further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and have a meaningful day. Thank you.