The FTC has reviewed numerous social media advertising cases in recent years.
The following are select examples of recent social media advertising cases:
- Creaxion Corporation: in November 2018, the FTC settled with public relations firm Creaxion Corporation and publisher Inside Publications over a failure to disclose material connections in social media posts in a campaign to support FIT Organic Mosquito Repellent, created by Creaxion’s client, HealthPro brands. Creaxion partnered with Inside Publications to run a campaign utilising social media posts from athlete endorsers, but the posts did not disclose the endorsers’ connections to the brand. The settlement requires the companies to have endorsers sign written statements regarding their responsibility to disclose material connections, monitor endorsers’ compliance, and terminate an endorser for non-compliance if, after an opportunity to cure, the issue has not been remedied.
- CSGO Lotto: in September 2017, the FTC settled its first-ever complaint against individual social media influencers. The complaint was against two social media influencers who co-owned CSGO Lotto, an online service enabling customers to gamble using custom ‘skins’ from the online, multi-player game Counter-Strike as virtual currency. The settlement relates to charges that the influencers, Trevor ‘TmarTn’ Martin and Thomas ‘Syndicate’ Cassell, deceptively endorsed CSGO Lotto without disclosing their ownership interests in the company and paid other influencers to promote CSGO Lotto on social media without requiring any sponsorship disclosures. The order settling the FTC’s charges prohibits Martin and Cassell from misrepresenting that any endorser is an independent user or ordinary consumer and requires clear and conspicuous disclosures of any unexpected material connections with endorsers (FTC v CSGO Lotto, Trevor Martin, and Thomas Cassell, Decision and Order, No. 162 3184 (29 November 2017));
- Letters to Influencers: in April 2017, the FTC sent over 90 letters to prominent social media influencers advising them to clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media. Later in September, the FTC followed up on these letters by issuing sterner warning letters to a group of 21 of the social media influencers previously contacted. The warning letters explained why specific social media posts may not comply with the guides and included requests that the recipients respond to the FTC. The letters included specific concerns about various influencer practices including:
- consumers viewing Instagram posts on mobile devices typically see only the first three lines of a longer post unless they click ‘more,’ which many may not do. When making endorsements on Instagram, influencers should disclose any material connection above the ‘more’ button;
- a disclosure among multiple tags, hashtags or links is unlikely to be conspicuous as readers may just skip over them, especially when they appear at the end of a long post. Influencers should either put the material connection disclosure at the beginning of the post, or avoid multiple tags, hashtags or links if the material connection disclosure is placed at the end of the post; and
- a disclosure like ‘#sp’, ‘Thanks [Brand]’, or ‘#partner’ in an Instagram post is not sufficiently clear. The influencer should use ‘#ad’ or ‘#sponsored’, or craft an alternative disclosure that makes the material connection sufficiently clear;
- Lord & Taylor: in 2016, the FTC alleged that Lord & Taylor deceived consumers by paying for native advertisements, including an article published online by the fashion magazine Nylon, a Nylon Instagram post, and other incentivised social media posts by fashion influencers, without disclosing that the posts were actually paid promotions for the company’s 2015 Design Lab collection. Among other charges, the FTC alleged that Lord & Taylor gave the influencers a free paisley dress and paid them between US$1,000 and US$4,000 each to post a photo of themselves wearing it on Instagram or another social media site. Lord & Taylor pre-approved each proposed post, and the influencers were obliged by contract to tag ‘@lordandtaylor’ as part of the posts and to use the hashtag ‘#DesignLab’ in the caption of the photos. According to the FTC, Lord & Taylor failed to require the influencers to disclose that they received the dresses for free or were paid by Lord & Taylor for their posts (consent order);
- Warner Brothers: in 2016, the FTC settled its lawsuit against Warner Bros Home Entertainment Inc, which included allegations that Warner Bros falsely represented that positive gameplay videos of its game Shadow of Mordor posted by YouTube influencers reflected the independent opinions of impartial gamers and failed to adequately disclose the influencers’ material connection to the company. In exchange for posting pre-approved videos designed to promote Warner Bros’ game, the YouTube influencers received free access to the game and up to thousands of dollars in cash. The influencers were instructed to promote the game in a positive way and to place sponsorship information in the description box below the video, where it was not immediately visible. In many cases, the influencers did not disclose that Warner Bros had paid them to promote the game. The videos generated more than 5.5 million views on YouTube. The final order requires Warner Bros to clearly disclose material connections to influencers or endorsers. It also specifies the measures Warner Bros must take to educate and monitor what influencers do on the company’s behalf, including, under certain circumstances, withholding payment or terminating influencers or ad agencies that do not comply with requirements (In the matter of Warner Bros Home Entertainment Inc (2016) (decision and order));
- Machinima: Machinima, the operator of a popular YouTube network, settled FTC allegations that it paid influential gaming bloggers to create videos touting the new Xbox One without requirement for them to disclose that they were paid for their favourable reviews. The FTC also alleged that Machinima later recruited and paid more people to upload positive video reviews without requiring a disclosure (FTC v Machinima (2015) (consent order));
- AmeriFreight: AmeriFreight, an automobile shipment broker, settled FTC allegations that it promoted customer website reviews without disclosing that the authors of such reviews were paid by the company (FTC v AmeriFreight (2015) (consent order));
- Deutsch LA: ad agency Deutsch LA settled FTC allegations that agency employees promoted its client Sony’s products on Twitter without disclosing that they were agency employees (FTC v Sony and Deutsch LA (2014) (consent order));
- In the matter of ADT LLC, File No. 122 3121 (24 June 2014) (consent order): FTC charges alleged violations by ADT of section 5 of the FTC Act in connection with the company paying US$300,000 (giving US$4,000 worth of security products) to spokespeople hired to review, demonstrate and plug ADT’s Pulse Home Monitoring System on high-profile TV and radio shows, and across the internet in articles and blog posts, without disclosing that they were paid to do so. The FTC’s investigation also extended to Pitch Public Relations, LLC (the public relations firm), Village Green Network (the advertising network that published the blog posts), News Broadcast Network (the booking agency), and even one of the experts herself, Alison Rhodes-Jacobsen, when the FTC had not previously publicly addressed the obligations of an intermediary (ie, a party facilitating payments from a marketer to an endorser) for the failure of endorsers to disclose material connections with marketers;
- Cole Haan Inc, FTC File No. 142-3041 (20 March 2014) (closing letter): FTC investigation of Cole Haan’s alleged violation of the endorsement guides in connection to Cole Haan’s ‘Wandering Sole Pinterest Contest’, which instructed entrants to create Pinterest boards with images of Cole Haan shoes and pictures of their ‘favorite places to wander’ for a chance to win a US$1,000 shopping spree, but did not instruct contestants to label their pins and Pinterest boards to make clear they were pinning Cole Haan products in exchange for a contest entry;
- HP Inkology, FTC File No. 122-3087, (27 September 2012) (closing letter): FTC investigation into HP and its public relations firm for providing gifts to bloggers in exchange for posting content about HP Inkology, without adequately disclosing the material connection;
- In the matter of Hyundai Motor America, FTC File No. 112-3110 (16 November 2011) (closing letter): FTC investigation of Hyundai where bloggers were given gift certificates as an incentive to comment on or post links to the advertisements and were explicitly told not to disclose this information; and
- FTC v Reverb Communications Inc (August 2010) (proposed consent order): marketing and PR agency Reverb, hired by video game developers, settled charges that its employees posed as consumers and posted game reviews online without disclosing their affiliation with Reverb.
In 2008, the NAD reviewed a video clip disseminated by Cardo Systems, a manufacturer of wireless Bluetooth technology, as part of a viral marketing campaign on YouTube. The video depicted individuals using their mobile phones to pop popcorn kernels in close proximity. The NAD requested that the advertiser address concerns that the video clip communicated that mobile phones emit heat and radiation at a level that allows popcorn kernels to pop. Cardo argued that the video was made to create a ‘buzz’ and to depict something absurd. Cardo also questioned whether the popcorn video was ‘national advertising’ as the term is defined and used in the NAD’s Policies and Procedures. The NAD found that video clips placed by advertisers on video-sharing websites such as YouTube, when controlled or disseminated by the advertiser, may be considered national advertising, and that the absence of any mention of a company or product name does not remove a marketing or advertising message from the NAD’s jurisdiction or absolve an advertiser from the obligation to possess adequate substantiation for any objectively provable claims that are communicated to consumers (Cardo Systems, NAD case No. 4934 (14 November 2008)).
The NAD reviewed Nutrisystem Inc’s ‘Real Consumers. Real Success’ Pinterest board, featuring photos of ‘real’ Nutrisystem customers with weight-loss success stories. The customer’s name, weight loss and a link to the Nutrisystem website appeared below each photo. The NAD determined that such ‘pins’ showcased atypical results and thus required clear and conspicuous disclosures noting typical results consumers could expect to achieve (Nutrisystem Inc, NAD case No. 5479 (29 June 2012)).
The NAD reviewed advertising claims made by Coastal Contacts in a Facebook promotion offering ‘free’ products to consumers who ‘liked’ its Facebook page. It was the first time the NAD addressed ‘like-gating’ promotions, which require consumers to ‘like’ a company’s Facebook page in order to gain access to sweepstakes, a coupon code or savings noted in an advertisement. The NAD determined that material terms of an offer should be disclosed before a consumer is required to ‘like’ a page (1-800 Contacts, NAD case No. 5387 (25 October 2011)).
In the 2016 BodyArmor case, the NAD looked at the brand’s links on its social media pages to consumer blogs with unsubstantiated claims, such as that BodyArmor is all natural and that Gatorade was junk. The NAD made clear that when an advertiser reports or links to third-party content on its own social media pages, it is responsible for the truthfulness and accuracy of that content (BA Sports Nutrition (Body Armor SuperDrink), NAD case No. 6026 (November 2016)).
The NAD also brought two actions in connection with advertising for FitTea: one against the advertiser, FitTea, itself, and one against its endorser, Kourtney Kardashian. In the action against FitTea, the NAD was concerned about the re-publication of Instagram posts on its website by the advertiser’s paid endorsers because they did not include a disclosure of the material connection. FitTea agreed to include ‘#Ad’. The NAD was also concerned about the use of consumers’ product reviews on its website, although the reviews were collected appropriately, with no incentive, and were not edited before their publication on the advertiser site. The NAD was thus concerned that their placement next to paid product endorsements could confuse consumers. The NAD determined that it is important for consumers to distinguish between independent reviews and testimonials. It also reiterated its position that the use of product reviews on an advertiser’s website is not misleading if the advertiser can show that it collects them in a systematic way, posts them all and collects them from a representative sample of consumers who purchase the product. As to the Kardashians themselves, the NAD was concerned that they were not disclosing the fact that they were being paid to endorse the product (Fit Products (FitTea), NAD case No. 6042 (December 2016); Kardashian, Kourtney, et al. (FitTea), NAD case No. 6046 (January 2017)).
Back to top