FTC Compliance - What You Didn’t Know About Online Endorsements

FTC 101 The Federal Trade Commission aims to prevent business practices that are anticompetitive, deceptive or unfair to consumers and its regulations affect businesses trading in every industry. One of its most sweeping regulations is Section 5 of the Federal Trade Act, which addresses appropriate commercial speech to help put an end to deceptive advertising. The FTC has evolved its rules under the act to apply to the ever-evolving world of online advertising. What many companies, review sites, bloggers, and celebrities don’t realize is that if they share content with commercial messages that convey personal enjoyment of a product/service with followers and get compensated for it, their actions are considered endorsements. These endorsements require clear disclosures of the relationship with the product/service provider. To provide guidance on complying with these rules, The FTC released the Guides Concerning the Use of Endorsements and Testimonials in Advertising to serve as a framework for complying with the relevant FTC regulations. Here is an overview of some expectations: Endorsements apply to social media and new technology as it evolves. For Twitter, with a 140 character count limit, the use of hashtags #ad #paidad can be sufficient. Disclosures for videos are not sufficient in the video descriptions or only at the beginning of the video. Disclosures must be displayed throughout the video for all to see at any point they tune in. Social media contests that require entrants to tweet or share for a chance to win must incorporate disclosures as part of the contest share messaging and contest terms. Free products given to customers for online reviews (positive or negative) are considered endorsements. This should be mentioned on review pages. Consequences of Non-Compliance While these guides are not considered formal regulations, the FTC has warned that it will be leading investigations and taking immediate action for practices that fall outside of the guidelines in a way that violates the rules in the Federal Trade Act. Penalties for non-compliance can range from a written warning letter to a fine of $11,000 per incident. In other cases, these fines have been much higher; as in the case of Legacy Learning Systems, a popular provider of guitar-lesson DVDs, charged with $250,000 for advertising products through paid online affiliate marketers, and having them falsely pose as objective customers. Machinima also settled similar charges with the FTC for paying YouTube video creators up to $30,000 for their video reviews without disclosing so.

Ever since social media first came into our lives with the emergence of platforms like MySpace in the early 2000s, it has shown no signs of slowing down. Today, over 30% of the world’s population utilizes some type of online community. In the U.S, that number amounts to 73%. Facebook itself has more active users than China’s entire population of 1.40 billion! While social media offers the benefits of extended reach, flexibility and freedom as a means of communication, financial services firms can find themselves at serious risk if they fail to archive social media content like other business communications.

"In 2003, California resident Vee Vinhnee filed for bankruptcy in U.S. Bankruptcy Court. He owed American Express more than $40,000 on his credit cards. American Express (Amex) sued Vinhnee to recover the balances owed on the cards. In Vinhnee vs. American Express Travel Related Services Company Inc., Vinhnee won his case without a lawyer and without appearing in court" .

Three smart tips to prevent social media scandal Social media scandal. It’s a dreaded thought for any communications manager. And it seems that more cases of social media missteps are published every week. Most recently, there was a public outcry against the Latah County Sheriff’s Office, which published a flippant Facebook post about a young man, wanted for several crimes, who subsequently committed suicide. It was a sad story which again raised questions about organizations using social media to communicate with the public. Do the benefits outweigh the risks?

Why Your Records Retention Policy Should Include Social Media The social networking explosion of the past few years has taken many organizations somewhat by surprise. As Facebook and Twitter began to grow exponentially, most companies and agencies still looked askance at such platforms, dismissed them as juvenile, and (in some cases) even banned them from the workplace. Until now. When it became apparent that social media was utilized by all ages and demographics, organizations began to see the benefits in connecting socially with their clients, customers, or citizens. Social media has become a platform for customer service, crowd-sourcing, advertising, promoting, and beyond. So it is no surprise that around 60% of companies are using social media in some way. Numerous articles and discussions have centered around best practices for utilizing these tools to gain the greatest market advantage, present the ideal company image, reach the largest audience, and so forth. But many organizations have failed to recognize the legal ramifications of this new communications medium, especially where records retention regulations are concerned. Without a policy for preserving social media activity properly, companies could find themselves out of compliance or unprepared for records requests.