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March 2017

Advertising in social media

The rapid development of social media has created new digital channels that give advertisers the unprecedented ability to directly, and instantly, market their products to consumers at low cost. While the simplicity of advertising in social media may suggest that advertising laws are not applicable to this medium, the Federal Trade Commission (FTC) provides guidance on how to ensure advertisements in social media are not deceptive and misleading.

Claims and disclosures

Two basic principles of advertising law apply to all types of advertising in any media:

1.     Advertisers must have a reasonable basis to substantiate claims made; and

2.     If disclosure is required to prevent an ad from being misleading, such disclosure must appear in a clear and conspicuous manner.

To comply with the above obligations when advertising in social media, it is recommended that companies evaluate their ads in social media the same way they evaluate ads placed on television, websites or other mediums. Advertisers must ensure they have a reasonable basis to support all objective claims made.

If disclosure of relevant information is required, this must be done in a way that consumers can see and understand. The FTC and other regulators have previously disapproved of the practice of including disclosures in footnotes or other places that are remote from the claim the disclosures are intended to modify. Some flexibility is, however, afforded — the law does not mandate a font size, color or specific placement. Nevertheless, disclosure is still required even in the shortest form of social media. On twitter, for example, include #ad in a tweet or “Ad:” at the beginning of your tweet.

The FTC has provided detailed guidelines to determine adequate disclosure. The basic level of disclosure should ensure that it appears:

·  Close to the claim it modifies

· In a location where people are likely to see it

· Easy to read in terms of font size  and color

Identifying advertisements and endorsements

According to the FTC, a statement made by a consumer in social media will be treated as an endorsement if, viewed objectively, it appears that the relationship between the advertiser and the speaker is of a type that the speaker’s statement can be understood to be sponsored by the advertiser. The FTC encourages advertisers to ask whether speakers are acting independently or on the advertiser’s behalf in their statements about a product or service. If acting independently, the statement will not be an endorsement subject to the endorsement guides. If, however, the speaker is acting on behalf of the advertiser, the statement will be an endorsement subject to the endorsement guides.

The FTC has stated that the relevant facts in this determination vary and cannot be fully set out, but include:

· Whether the speaker is compensated by the advertiser

·  Whether the product or service in question was provided for free by the advertiser

· The terms of any agreement

· The length of the relationship

· The previous receipt of products or services from the same or similar advertisers, or the likelihood of future receipt of products or services

· The value of the items or services received.

Whether a statement is subject to the endorsement guidelines often must be determined on a case-by-case basis. However, the greater the connection is between a company and the speaker, the more likely it is that the endorsement guidelines apply.

Disclosure of material connections

Influencers can include celebrities, athletes and other high-profile individuals and entities. They are trusted by their audience as experts on certain topics, and it is therefore important for them to draw a distinction between a personal recommendation and a sponsored recommendation. Influencers who are posting must clearly and conspicuously state their relationship with the brand. The golden rule for influencers is: when in doubt, disclose.

The interpretation of a material connection may be broader than expected. For example, even though giving a blogger a free, low-value sample may not trigger the disclosure requirement, giving the blogger a few of those samples can trigger it. The FTC states that although the endorser has primary responsibility for disclosing the connection, advertisers should implement procedures to:

· Ensure that endorsers make the disclosures

· Make certain that employee postings that mention company products on social media include disclosure of the employment relationship

· Monitor to ensure that endorsers and employees make the appropriate disclosures

· Ensure that the disclosure is clear and conspicuous

· Avoid encouraging endorsements that use features – such as “likes,” “pins” or “shares” – that don’t allow for clear and conspicuous disclosures if the absence of that disclosure would be misleading

· Take appropriate steps if an endorser does not make the disclosure.

Overall, successful businesses and advertisers should embrace and maintain transparent sponsorship of content in social media platforms. Transparency in all content is critical to maintaining your readers’ and followers’ trust.

Aaron Pierce represents clients in connection with a wide range of corporate, financing and entrepreneurial transactions. Mr. Pierce advises clients on issues in connection with company formation, general contract matters, corporate governance, employment matters, applications for tax-exempt status, private offerings and compliance with securities regulations. Mr. Pierce also represents dozens of clients in the hospitality industry, including bars, clubs, restaurants and hotels, and is highly experienced in State Liquor Authority application and compliance issues and actions.

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