Podcast - The FTC's Focus on Social Media Advertising Policies

Good day and welcome to another podcast of Clearly Conspicuous. As we’ve noticed in the previous sessions, our goal in these podcasts is to make you succeed in this current regulatory and governmental environment that’s very aggressive and very progressive, to make you aware of what’s going on with the federal and state consumer protection agencies, and to give you a practical tips for success. As always, it’s a privilege to be with you today. Today, we talk about social media advertising. And yes, it is regulated for every industry. So the topic is "2023 Social Media Advertising Landscape: An Update from a Senior FTC Official."

The Social Media Ecosystem

Let's start with the social media ecosystem. It's more than just the traditional platforms of Facebook and Twitter that we think about on a daily basis. It's a complex ecosystem. It involves the metaverse, blogs, posts by employees, celebrities, brand ambassadors, influencers, disclosures and disclaimers, sweepstakes and contests. So importantly, once again, these issues touch upon every industry sector in the U.S. economy, whether it's financial services, healthcare, technology, transportation, media. From the FTC's perspective, social media advertising is not substantively different from traditional advertising, such as found in television and radio. In fact, the FTC believes that social media advertising is subject to the very same rules and standards as traditional advertising. The FTC's focus is on the integrity of the communications from the marketer to the consumer, whether the communications are accurate, transparent and non-deceptive. What I just said is at the heart of consumer protection analysis. So in other words, brands, companies, individuals must tell the truth, not exaggerate any claims and be transparent through disclosures and disclaimers.

The FTC's Regulations on Social Media Advertising

So let's start from the beginning. To enforce FTC regulations and educate marketers and the consumer public, the FTC has launched several initiatives concerning social media advertising, which include filing law enforcement actions which are seeking both injunctive and monetary relief, including those regarding negative options and auto renewals. The FTC issues warning letters to marketers, including product manufacturers and influencers, especially right now, those regarding health claims, "Made in the U.S." claims and COVID-19 claims. The FTC issues updated guidance for marketers specifically focused on social media advertising and marketing, including revisions to the guides on testimonials and endorsements, and the publication of disclosures 101 specifically targeted to influencers themselves. The FTC conducts workshops and webinars, disseminates educational materials for consumers. So you can see there's a lot going on in the FTC world to educate and empower us on social media advertising. So let's now look at the legal issues and social media advertising. From the FTC perspective, the key issues of interest relate to social media, advertising and marketing are the following: correctly advertising social media posts as advertising and marketing, including appropriate, clear and conspicuous disclosures in those advertising and marketing materials that not only identify a social media post as an advertisement, but also include disclosures relating to any material connections, including from employees of the company or the brand, and ensuring that beyond sufficient disclosures, social media, advertising and marketing generally complies with the FTC regulations, including the guides on endorsements and testimonials.

Companies Must Maintain and Communicate Effective Social Media Policies

So now let's talk about social media policies. I have to start right from the beginning. Social media policies are a must. Every single business that engages in social media advertising must have a formal social media policy. That's a given from the FTC. Those policies should be implemented with management oversight and must be effective. The policy 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 upon the underlying relationship between the third party agent and the marketer. Finally, some form of monitoring is expected to ensure compliance with the marketers social media policy and the FTC regulations and guidance. A core element in the regulation of social media advertising is the FTC's endorsement guides. In terms of a proposed revision to the guides, the FTC has now received over 30 comments regarding the proposed revisions, which are currently under review by the staff. The staff will make a recommendation to the commissioners, who will then consider those recommendations and finally issue the revised guides. These proposed revisions attempt to clarify that the guides cover fake reviews and that the advertisers should not distort or misrepresent what consumers think of their products by procuring, suppressing, boosting, organizing or editing consumer reviews. Moreover, the revisions clarify that the guides cover tags and social media posts and expand the definition of endorsers to incorporate virtual influencers such as computer-generated fictional characters.

Disclosures Are Required for Social Media Advertising

Now let's focus on social media disclosures. Disclosures are required no matter the social media platform. This list is clearly and not exhaustive. The rule is simple: If your company is advertising and disclosures would otherwise be required, include them. Include disclosures. Visual disclosures and audible disclosures may be required. This requirement may not be limited, though, to only videos. Disclosures should also be prominent and appear first, for instance, on Instagram. Disclosures should appear in the first two or three sentences of the caption to be truly conspicuous, and they should not appear within a "more" link but should appear above. This also goes for advertising in the metaverse. The FTC is highly concerned and focused on artificial intelligence, deepfakes and other synthetic media that posed major risks around fraudulent practices and dark patterns. Should gifts and other items be disclosed? Absolutely. It is critical for companies to disclose the material connection between the influencer speaker and the brand company so that the consumers know when there is incentive that underlines the promotion. A free sample provides such a material connection, as does an invitation to a party. The FTC is not fooling around with social media advertising, and it's on the agency's front burner. For example, the FTC said in mid-October of 2021, the FTC sent notice of penalty offenses, which are letters to more than 700 of the country's largest companies, including retailers, advertisers and consumer product companies, taking an alternative approach to civil penalties following the Supreme Court ruling in AMG Capital Management. The notices described endorsement and testimonial practices that the FTC has found to be unfair or deceptive, contain a clear reminder that the FTC may seek civil penalties from companies utilizing advertising practices previously found to violate the FTC and warned that the recipient brands that engage in deceptive denounce their conduct could be subject to civil penalties up to over $5,000 per violation. While the notices state that the FTC did not intend to single out the recipient or suggest that the recipient engaged in unfair or deceptive conduct, each company, and companies who did not receive the notice, should review their current endorsement, testimonial and advertising review policies, procedures and practices to ensure compliance.

Considerations When Using Influencers, Both Real and Virtual

Now let's take a look at the world of influencers. As with traditional media a disclosure of a material connection is required for influencer posts. Those disclosures must be, again, clear and conspicuous. The hashtag ad may be sufficient if the consumer understands that the communication is an advertisement. There are instances when the hashtag should include capital letters, if the capitalization would make the hashtag easier to read. Relying solely on a "see more" link is likely to be insufficient as consumers routinely ignore or fail to click on such links. Also, if endorsements run throughout a live stream, for example, the FTC expects disclosures to be placed throughout the entirety of the livestream. While the FTC's focus remains on brands themselves and not individual influencers, brands should give guidance to their influencers on what they should and should not say in terms of making material connection disclosures and in terms of not making deceptive claims. Brands should train and monitor influencers on the brand's policies and ensure compliance with those policies through pre-review or post-review of influencer posts. This goes for brands large and small, regardless of the size. Each brand is held to a strict scrutiny standard to be transparent and to tell the truth. In fact, the FTC released its Disclosure 101 guide in November of 2019, specifically aimed at providing a user friendly summation of the guides on testimonials and endorsements to influencers themselves. Finally, virtual influencers pose their own host of issues, but any company using a virtual influencer to push a product should ensure that sufficient disclosures or information is available for the consuming public to know. One, the communications are advertisements, and two, the influencer is virtual or artificial intelligence and not a real person. And three, the virtual influencer does not have the ability to try or test out a product, even the product being advertised.

Conclusion

OK, so let’s exhale. We’ve covered a lot in this session, and there's a lot to digest. Here's the key takeaway. Social media advertising is, practically speaking, regulated. The FTC's guidance, enforcement actions and alerts warrant very, very, very close attention. I wish you continued success and a meaningful day. Thank you.