The FTC Is Skeptical When Celebrities Are Paid to Like Your Product The Federal Trade Commission has launched investigations into a number of big-name brands it says have bent the rules governing paid celebrity endorsements.
By Matthew Wilson Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Any casual user of new (digital) media can attest to the growing popularity of the medium among advertisers. Solicitations promoting goods and services now pepper the newsfeeds of Facebook, Instagram and Twitter. Paid advertisements introduce most YouTube videos. Ads even sneak their way into the most private and seemingly closed platforms, such as Pinterest.
Among the many advertising techniques employed in the social media space, the user endorsement reigns supreme. Through celebrity testimonials, user reviews and product placements, advertisers are able to directly, and oftentimes seamlessly, reach a broad and sophisticated audience without much effort or expenditure.
Related: 10 Ways to Get a Celebrity to Use Your Product
Federal Trade Commission attention.
This proliferation of social media advertising, coupled with the likelihood for consumer confusion, has piqued the interest of regulators at the Federal Trade Commission (FTC). In 2009, the FTC sounded the initial alarm in conjunction with the release of the revised "Guides Concerning the Use of Endorsements and Testimonials." The publication was designed to provide guidance concerning the use of consumer, expert and celebrity endorsements in both traditional and new media forms of advertising.
In recent years, the FTC has continued to ramp up its enforcement against persons and companies that run afoul of the legal mandates concerning the use of endorsements disseminated via new media -- with recent actions against Warner Brothers, Machinima, Inc. and Lord & Taylor in 2016 highlighting the trend. As such, before wading into these waters, it is imperative that advertisers be aware of the activities that may trigger FTC attention. They include:
- Posting a "selfie" depicting the use of a product or attendance at an event or other location
- Publication of a blogger's review of a product or service
- An audio-video testimonial describing a product or service
- A published review or comment relating to a product or service
Related: How to Win Celebrity Endorsements. (Hint: It's Not About the Money.)
Disclosure, disclosure, disclosure.
According to FTC, if a celebrity, or any other person, is paid or otherwise enticed to promote (e.g., discuss, review, wear, depict, share or compliment) a product or service, then the relationship must be disclosed in the advertisement. Nonmonetary enticements such as the provision of free products or services may also require disclosure depending on the circumstances. The basic test articulated by FTC is "if a consumer knew an endorser was compensated or incentivized in any way, would that materially affect the weight or credibility of the endorsement?"
Of course, depending on the medium utilized, logistical limitations inherent in platforms such as Twitter, Instagram and Snapchat may make such requirements, at best, undesirable, and at worst, impossible. Limitations aside, the FTC's insistence upon proper disclosure remains, and advertisers are advised to avoid media that preclude such disclosure.
The primary goal of disclosure is to ensure that the endorsement is honest and accurate, and simultaneously prevent consumer deception or confusion. As such, disclaimers must effectively communicate the relationship between an advertiser and the spokesperson, which must include the existence of any quid pro quo between the parties. As a matter of course, any failure to communicate that relationship will be deemed misleading and subject the parties to liability under the FTC Act, in addition to various state consumer protection laws. (FTC busts endorsement myths.)
Related: Athletes' 'Flops' Bruise Their Brands
Who's responsible?
While the burden to disclose is primarily placed upon the advertiser, both the advertiser and endorser/spokesperson -- along with any third party intermediaries -- may be liable for failure to complywith the legal rules. With such risks in mind, all parties should be careful to consider and monitor how their goods and services are being promoted and the methods employed to do so.
We all know that Mikey likes his cereal, but was he paid to say so? This is the essential question from the consumer's perspective. As we continue to encounter new media with increasing frequency, whether through traditional channels or the mini-computers that we carry in our pockets, the lines separating sponsored advertising from news and editorial content will continue to blur. Understanding the FTC's intention to monitor such interactions and play referee, it remains imperative that the players know the rules.
