Social Media Regulation: Advertising, Marketing and the FTC

Holland & Knight hosted Michael Ostheimer, a senior attorney for the Federal Trade Commission (FTC), for a webinar presentation on Oct. 17, 2019. Mr. Ostheimer has been with the FTC for nearly three decades, currently serving as a senior staff attorney with the FTC's Division of Advertising Practices.

During the interview, Holland & Knight attorneys Anthony DiResta and Da'Morus Cohen asked Mr. Ostheimer dozens of questions covering a broad range of topics concerning social media advertising and marketing practices, including:

• trends in social media advertising
• what regulations govern social media advertising
• the role of disclosures and disclaimers
• the use of blogs, celebrities and influencers in social media advertising
• employee posts on social media
• law enforcement actions, warning letters and other initiatives by the FTC concerning inappropriate social media advertising
• policies and procedures for compliance with the regulations
• liability – and who is responsible

Importantly, these compliance issues touch upon every industry sector in the U.S. economy, including financial services, healthcare and life sciences, retail, technology, hospitality and tourism, transportation, education, media, technology and telecommunications.

For all of those who could not attend the live webinar, it is recommended to view the webcast, as it includes best practice tips and "inside information" that can help companies enhance their regulatory compliance programs and minimize their risks associated with social media advertising and marketing.

Key Takeaways

1.  From the FTC's regulatory and legal perspective, social media advertising is not substantively different from traditional advertising, such as television and radio. The FTC's focus is on the integrity of the communications from the marketer to the consumer – whether the communications are accurate, transparent and nondeceptive.

2.  To enforce FTC regulations and educate both marketers and the consuming 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
• issuing warning letters to marketers, including product manufacturers and influencers
• issuing updated guidance for marketers, specifically focused on social media advertising and marketing
• conducting workshops and webinars
• disseminating educational materials for consumers

3.  From the FTC's perspective, the key issues of interest relating to social media advertising and marketing are:

• correctly identifying 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
• ensuring that beyond sufficient disclosures, social media advertising and marketing generally complies with the FTC's regulations, including the Guides on Endorsement and Testimonials

4.  Social media policies are a must. Every business that engages in social media advertising must have a formal social media policy. Those 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 between a third-party agent and the marketer. Finally, some form of monitoring is expected to ensure compliance with the marketer's social media policy and the FTC's regulations and guidance.

5.  Social Media Disclosures: Disclosures are required no matter the social media platform – this includes high-profile platforms such as Facebook and Instagram 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. Visual disclosures and audible disclosures may be required – this requirement may not be limited to only videos. Disclosures should also 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.

6.  Should gifts and other free items be disclosed? Absolutely. It is critical for companies to disclose the "material connection" between the influencer or speaker and the brand/company. A free sample provides such a material connection, as does an invitation to a party.

7.  The World of Influencers. As with traditional media, a disclosure of material connections is required for influencer posts. Those disclosures must be "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. 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: 1) the communications are advertisements; 2) the influencer is virtual or artificial intelligence and not a real person; and 3) the virtual influencer does not have the ability to try or test out a product – even the product being advertised.

8.  Consumer reviews are essential but come with their own set of obligations. It is important for marketers to understand what's required when a brand induces consumers to leave reviews, including material disclosures and giving consumers the ability to leave accurate, truthful and non-deceptive reviews. Also, there is the question of whether brands are required to perform some diligence to determine that a review is from a consumer who actually purchased the products (e.g., verified purchaser reviews). While this point is subject to debate, there remains an obligation on brands to cure any reviews that are not accurate, truthful and non-deceptive. This includes removing fake reviews (if possible, depending on the platform).

9.  As with consumer review, employee reviews are also subject to regulation and must comply with the general notion that they are accurate, truthful and non-deceptive. In addition, it may not be adequate to merely state "staff review" before an employee's review. A more fulsome disclosure is likely required. Failure to do so may subject the company to liability. Specifically relating to social media posting, hashtags such as #employee and #myemployer may be sufficient under certain circumstances. But brands are reminded that certain "trendy" marketing campaigns using employees may be disfavored by the FTC if a consumer is unable to immediately ascertain that the marketing communications are being delivered by an employee of the brand.

10.  Brands cannot censor less than favorable reviews. That is the law: See the Consumer Review Fairness Act.

11.  Brands must carefully manage their promotional devices in social media, such as sweepstakes and contests. Promotional devices are useful tools to engage consumers and trigger clicks. But brands are reminded that information disseminated relating to the promotional device must be accurate, truthful and non-deceptive. In addition, state law also provides various requirements for promotional devices, including registration depending on the approximate value of the prize to be awarded or the frequency with which a brand is conducting such promotional devices. In addition, best practices dictate the preparation of official rules and other documents to inform consumers of the material terms of the promotional device, including method of entry, promotional period and applicable limitations. Lastly, social media platforms have their own unique requirements relating to using their platforms to promote promotional devices, including very specific disclosures.

12.  The FTC is very concerned about native advertising. See the FTC's Enforcement Policy Statement on Deceptively Formatted Advertisements.

13.  When does the FTC enforce? There are several factors that lead the FTC to commence an investigation, including consumer complaints, monitoring by FTC staff, a high number of reviews, claims that are not likely to be substantiated and referrals from non-regulatory bodies such as the National Advertising Division (NAD).

14.  The FTC works with other law enforcement partners to monitor social media advertising and enforce compliance, such as state attorneys general and other federal agencies, such as the Consumer Financial Protection Bureau.

We Can Help

Holland & Knight's Consumer Protection Defense and Compliance Team includes a robust social media practice, with experienced attorneys that are recognized thought leaders in the field. From representing dozens of companies and individuals in federal and state investigations concerning advertising and marketing to compliance counseling and transactional contract matters involving celebrities, the firm's practice includes regulatory, compliance, litigation, investigation and transactional work in the social media space.

For more information or questions about the specific impact that social media advertising and marketing regulations can have on you or your company, contact the authors.  

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.