CHAPTER 4

Legal and Regulatory Issues: Clear and Conspicuous Disclosures

Singer and songwriter Rihanna tweeted “Listening to ANTI” to her more than 55 million fans. Included with the tweet was a photo of Rhianna wearing Dolce and Gabanna gold jewel-encrusted headphones. The image was retweeted over 175,000 times and received over 284,000 likes. The headphones, which retailed for $9,000, sold out within 24 hours (Wouk 2016).

Engaging celebrities in sharing positive word of mouth (WOM) with their legions of fans is a popular strategy offline and now online. Marketers are knocking on the virtual doors of A, B, C, and even D-list celebrities to solicit their help with spreading positive WOM with their legions of fans on social media. One can only imagine the jubilation in Dolce and Gabanna’s marketing department after the success of Rhianna’s tweet.

Celebrity support for a brand can be priceless. It can not only increase brand exposure, but it may also increase sales. However, their support is not always free. In fact, celebrity endorsement often comes with a hefty price tag. Celebrities understand the potential influence they have over fans and they expect to be handsomely compensated. The cost of employing a celebrity to share positive social WOM (sWOM) varies based on their social status and their number of followers. Some celebrities charge as little as $1,000 a tweet, but big names demand and receive more. A tweet from NBA player LeBron James costs $140,000 (Rovell 2015). If you can afford that, then you may want to consider model and pseudo-Kardashian, Kendall Jenner, who commands $125,000—$300,000 for a single social post (Avila 2015). But what are small to medium-size businesses with limited marketing budgets to do? How can they spread positive sWOM? The answer lies, at least in part, in their ability to harness the influence of everyday social media users.

Unfortunately, companies face a fine line between encouraging consumers to share positive sWOM and incentivizing them to do so. And, if that line is crossed, you may find yourself in some legal hot water. In this chapter, we will examine the Federal Trade Commission’s (FTC’s) Endorsement Guidelines and what they mean for marketers who want to embrace and encourage sWOM.

Social Influencer Examples

The best way to begin our discussion on legal and regulatory issues is to offer some examples, each of which highlights a different way in which everyday consumers and social influencers can help spread positive information about brands:

Despite the appeal of these sWOM strategies, each of them suffers from a similar legal problem. To the average social media user, these social media messages (tweets, pins, posts) may appear organic—independent evaluations or support for a product or brand. However, these messages were not created and posted independently. Each of these was a planned marketing promotion, in which the brand or appointed agency incentivized social influencers to engage in sWOM. In other words, a material connection existed between the consumer and the company, and this relationship was not disclosed to the public. In orchestrating and sharing these posts on social media, the brand and the participating social media users failed to adhere to FTC’s Endorsement Guidelines. Under Act 5 of FTC’s Endorsement Guidelines, these social messages are misleading and potentially deceptive. Such practices can lead to enforcement action by the FTC and substantial fines. So, how does the FTC determine whether an act is deceptive?

Deception on Social Media

An analysis of deception first begins with determining whether a representation, omission, or practice is likely to mislead the consumer. Most deception involves written or oral misrepresentations, or omissions of material information, such as failure to disclose a material connection between an endorser and a brand. The FTC need not determine that consumers are misled to conclude that an act or practice is deceptive (Burkhalter, Wood, and Tryce 2014). The key is “likely to mislead”. The second element is that the representation, omission, or practice must be likely to mislead reasonable consumers under the circumstances. The FTC will evaluate the entire advertisement or transaction, to decide how a reasonable consumer is likely to respond (Dingle 1983). The FTC holds that “reasonable consumers may be less skeptical of personal opinion (i.e., endorsements) than of advertising claims” (Petty and Andrews 2008, 12). Nonetheless, “reasonable consumer” is difficult to define and often leads to protracted litigation (Burkhalter, Wood, and Tryce 2014). The third element is materiality. A representation, omission, or practice must be a material one for deception to occur (F.T.C v. Transnet Wireless Corp 2007). A material representation, omission, or practice is the one that is likely to impact a consumer’s decision making related to a product (Burkhalter, Wood, and Tryce 2014).

If you have never heard of FTC’s Endorsement Guidelines and were unaware that such requirements exist, do not panic (yet), you are not alone. In 2014, it was reported that 40 percent of all marketers and nearly 60 percent of the content creators surveyed had little or no awareness of FTC Endorsement Guidelines (Quittner 2014). B2B marketers appear to be even more in the dark. In 2015, more than half of the B2B marketers surveyed in North America reported having used sponsored social, yet as little as 8 percent of them were aware of and understood the FTC’s Endorsement Guidelines (eMarketer 2015). So, who is the FTC, what is the extent of their power, and what are the guidelines that you need to follow?

The FTC

The FTC is a bipartisan federal agency with the broad responsibility of promoting competition while protecting consumers from acts and practices that may cause them harm. One practice that the FTC monitors is deceptive advertising (Federal Trade Commission 2016a). Here, the FTC’s duty is to enforce truth-in-advertising laws—federal laws that say advertising “must be truthful, not misleading, and when appropriate, backed by scientific research” (Federal Trade Commission 2016b). In addition to enforcing these laws, the FTC also educates businesses on how to comply with the law. Educational resources are typically in the form of published guides. One of the guides published by the FTC specifically addresses the use of testimonials and endorsements in advertising. Before we go any further, we should note that the FTC uses the terms “endorsement” and “testimonials” interchangeably for the purpose of enforcing the FTC Act (Federal Trade Commission 2008). The FTC literature that references social media also utilizes the term “advocate” when referring to individuals who deliver endorsements through social media. To keep things simple from this point forward, we will use the term “endorsement” when referring to the act of voicing approval for a brand and “endorser” when referring to those social media users (consumers, social influencers, and celebrities) who are responsible for these social media posts.

The FTC’s Guide to Testimonial and Endorsements was first published in 1975. The purpose of this guide was to ensure that advertising messages were clear and truthful. The growing use of social media for endorsements forced the FTC to revisit these guidelines, and in 2009, a substantially revised version of the guides was published. The need for revision was based on the fact that, on social media, it is difficult to determine whether a relationship exists between the individual posting the message and the brand they have mentioned. In traditional advertising (i.e., television, radio, print), the consumer can readily identify an endorsement message and the endorser’s association with a particular brand. For example, when British actress Keira Knightley appears in a TV commercial or magazine advertisement for Chanel perfume, we understand that she is being paid to appear in these advertising messages. However, when this endorsement appears on social media, it is difficult for consumers to determine if the posting is consumer-generated earned media. In other words, it is difficult to tell if the message was posted by the endorser, independent of the brand, or if the endorser posted it in consideration for some form of payment. The endorsement confusion on social media can be attributed to an individual’s personal account being used to send the message. When an endorsement is shared from a personal account, the typical consumer may not be aware that a relationship, referred to by the FTC as a “material connection,” exists between the marketer and the person who posted the online message—the endorser.

When to Disclose—Material Connection

The key to determining if and when disclosure is required is the presence or absence of a material connection.

“Material connections may be defined as any connection between an advocate [endorser] and a marketer that could affect the credibility consumers give to that advocate’s statements. Important examples of ‘material connections’ may include; (i) consideration (benefits or incentives such as monetary compensation, loaner products, free products or services, in-kind gifts, special access privileges, affiliate commissions, discounts, gift cards, sweepstakes entries or non-monetary incentives) provided by a marketer to an advocate, or (ii) a relationship between a marketer and an advocate (such as an employment relationship) (WOMMA 2012).”

The following may help improve your understanding of what constitutes a material connection:

Imagine that you follow a non-celebrity fashion blogger. In one blog post (e.g., tweet, status update, or blog entry), your favorite blogger writes a positive review of a particular item of clothing. You, the reader, may feel inclined to take this blogger’s opinion into consideration when deciding to purchase the item. What if you were told that she was paid to discuss and endorse the item, would this alter how you view her recommendation? This incidence occurred with the Lord & Taylor example presented early in this chapter. The department store paid 50 bloggers between $1,000 and $4,000 to promote a particular paisley print dress. Bloggers posted a photograph of themselves wearing the dress on Instagram and other social media sites. These posts reached 11.4 million individual Instagram users over two days and amassed 328,000 brand engagements (Federal Trade Commission 2016c). The dress quickly sold out. A material connection existed between the marketer and the endorser in the form of monetary compensation (Beck 2015a).

In the Cole Hahn example, Pinterest users were asked to repin Cole Hahn images for a chance to win a $1,000 shopping spree. The material connection was in the form of consideration—entry to a sweepstake.

In both of these examples, the social media users who were responsible for sharing sWOM failed to disclose their connection with the band they were endorsing. The FTC asserts that consumers have the right to know who is behind these sponsored messages, particularly if they could influence their purchase decisions (WOMMA 2014). According to the FTC, regardless of the type of message (e.g., visual or text), each of these sWOM messages was misleading and potentially deceptive.

When a Disclosure Is Not Required

There are a few scenarios when a material connection does not exist, and therefore, disclosure is not required. The first is when a consumer mentions a product that he or she paid for himself or herself. If the consumer posts about an item he or she purchased and is not being compensated for that post, then a material connection, as defined by the FTC does not exist (Federal Trade Commission 2013a). In our Chewbacca example (Chapter 2), Star Wars fan Candace Payne independently posted the video. There was no relationship between Payne and the marketer. Nor was there was any consideration offered to post the video. Therefore, there was no material connection and no need for disclosure (Federal Trade Commission 2013a). However, (and there is always a however) after posting the original video Payne received, free of charge from Kohl’s department store, a large selection of Star Wars merchandise, and $2,500 in Kohl’s gift cards (Griner 2016). If Kohl’s gave Payne these items with the understanding that she would share, discuss, or promote them on social media, a material connection would, at that point, exist between Payne and Kohls. She would then need to disclose her connection with the store in any future posts.

Another instance when it is not necessary to disclose is when the posting is made from the brand’s official account, as was the case with the Sour Patch Kids promotion. Logan Paul, the teenager, recruited for the campaign was a well-known social media influencer among teenagers. A material connection exists because Paul was financially compensated for his participation in the promotion. But, because Paul posted some of his Snapchat videos from the official Sour Patch Kids account, it is not necessary for him to disclose his material connection. Paul did, however, also post from his personal account. It is necessary to disclose the connection on the posts from his personal account. The FTC contends that one cannot assume that consumers would have seen his posts on the official account and would have been aware of the fact that he was a paid endorser (Federal Trade Commission 2015).

Another common scenario is when a company gives out free samples of a product to consumers one of whom decides to write a favorable review or comment on social media. Once again a material connection does not exist because the company gave these samples free of charge to many consumers, without any expectation of a favorable endorsement. The focus of the FTC’s Guides is when the company pays or gives something of value to a consumer in return for a favorable mention on social media (Federal Trade Commission 2013a).

Who Is Responsible?

The FTC Guidelines themselves do not have the force of law. However, any practice that is deemed to be inconsistent with or in violation of the guides may result in law enforcement actions. The FTC can and does conduct investigations and has the power to bring cases involving such endorsements under Section 5 of the FTC Act (Unfair or Deceptive Acts or Practices) (Federal Trade Commission 2015). This raises the question, “In the instance of a violation of the FTC Act, who exactly is responsible, the company or the endorser?” If law enforcement is required, the primary focus will be on advertisers, their ad agencies, and public relations company involved. However, the account holder or endorser could also be he held accountable (Federal Trade Commission 2013a). For that reason, both brand marketers and endorsers need to be aware of these guidelines. Brand marketers should monitor all posts made by endorsers to ensure that each contains a clear and conspicuous disclosure. To date, the cases investigated by the FTC have not resulted in fines. Instead, a series of conditions were imposed on each company. Common conditions include the development of an internal compliance system, submission of regular reports to the FTC to demonstrate compliance—a process to educate social influencers on the guidelines—and a requirement to cut off payments to those social influencers who fail to comply. These conditions can and have been imposed on some companies for as much as 20 years (Coffee 2016; Roberts 2016).

The FTC’s Endorsement Guidelines for Clear and Conspicuous Disclosures

The FTC’s 2009 Guide to Endorsements and Testimonials focuses primarily on when to make disclosures (material connections). In 2013, the FTC released the .Com Disclosures report with updated guidance that now included how to make effective disclosures (WOMMA 2014). Both documents help businesses and endorsers avoid deceptive acts and advocate for clear and conspicuous disclosures. Whereas there is no set formula for creating a clear and conspicuous disclosure, the .Com Disclosures report does provide some guiding principles for marketers to ensure that disclosures are communicated effectively (see Figure 4.1). In evaluating whether a particular disclosure is clear and conspicuous, the FTC offers the following considerations:

Figure 4.1 Guidelines for clear and conspicuous disclosures

Placement and proximity: A disclosure is deemed to be more effective if it is placed as close as possible to the claim it qualifies. For example, if the endorsement is in the form of a tweet or status update on Facebook, the disclosure can be placed at the beginning or the end of the message. Pop-ups, which are blocked on many, but not all (e.g., blogs), social platforms should be avoided. If the endorsement appears on a blog or personal website, it should be placed on the same page and as close as possible to the claim. If the disclosure is lengthy or the consumer has to scroll down to read it, then the consumer should be alerted via text or through visual cues (e.g., “see below for important information about this post/message”). Hyperlinks disclosures should be avoided for two reasons. First, a hyperlink is likely to take a consumer away from the claim, and therefore, disregards the requirement for proximity. Second, the consumer is often not informed why it is important for him or her to click on the link. Hyperlinking a single word (e.g., “disclaimer” or “details”) or phrase (e.g., “terms and conditions” or “more information”) within the text may not be effective. These approaches may not alert the consumer to the nature of the information and its significance. As a result, motivation to and the likelihood of clicking on the link and being exposed to the disclosure is reduced. However, on space-constrained platforms, where it is necessary but impossible to include a lengthy disclosure, a hyperlinked disclosure may be used. The hyperlinked disclosure needs to be clearly labeled, using an easy-to-understand language and be sufficiently prominent, so that that it is obvious, unavoidable, and conveys the importance of the information to which it leads (e.g., “Brand Relationship Statement”) (Federal Trade Commission 2013b). Asterisks (*) or other symbols by themselves may not be effective.

Prominence: Each disclosure should be prominently displayed. That is, it should be noticeable to the consumer. The disclosure should be in a font size at least as large as the message. If the platform permits it, the disclosure can be presented in a contrasting color to make the disclosure more noticeable. The disclosure should not be buried in any lengthy text where it may go unnoticed. See Figure 4.2 for an example of disclosures buried in text.

Figure 4.2 Twitter disclosure 1

Distracting factors: If the message contains distracting factors such as graphics, sound, text, and so on the consumer may not notice the disclosure. Therefore, extreme care should be used when adding these features to the message. Avoid all distracting factors.

Repetition: Repetition makes it more likely that a consumer will notice and understand a disclosure. Repetition is particularly important if there are multiple entry points to a website, blog, or video. Consumers must be exposed to the entire disclosure not just a portion of it. It is insufficient to endorse a product multiple times, but only be exposed to a disclosure once. If a consumer is going to be exposed to repeated claims or endorsements, then the disclosure too should be repeated.

Multimedia: In the case where the endorser uses audio claims (e.g., in a video, or podcast), then the disclosure should also be offered in an audio format. Video and text disclaimers should be displayed for a sufficient duration for consumers to notice, read, and understand them.

Language: The disclaimer should be simple, straightforward, presented in a clear language and syntax. Endorsers need to avoid the use of legalese or technical jargon.

Commonly Used Method of Disclosure

The requirement for understandable language seems relatively simple and straightforward—you need to communicate your material connection in layman’s terms. This may be as simple as stating verbally or in text “I received XXXXX for this post,” “This post was paid for by XYZ,” or “Paid for by XYZ.” This language may be appropriate for platforms that do not have message length constraints (e.g., blogs, YouTube), but they are problematic on sites that limit the length or duration of each message. For example, a Vine video is six seconds (6.5 seconds to be exact) in length. A tweet has a 140-character restriction—including punctuation and spacing. If an endorser was to include a disclosure such as, “Paid for by XYZ,” this consumes 15 to 18 characters depending on punctuation, leaving 122–125 characters for the endorsement. This may or may not be enough room. Therefore, marketers need to be creative in crafting succinct endorsed messages.

The FTC offers some strategies to overcome this problem. The FTC suggests that in space-constrained messages disclosing a material connect may be achieved by using abbreviations such as “Ad” for advertisement, and “Paid” for a paid message or post. This is a common strategy on Twitter. See Figure 4.2 for an example of a tweet created to promote the Snickers candy bar. Notice that the inclusion of the “ad,” but also consider the placement of the disclosure. Is there a possibility that this could go unnoticed?

The FTC acknowledges that short-form disclosures may not be adequate for all readers, as some may not understand the meaning of these abbreviations (Federal Trade Commission 2013b). An academic study of 167 Twitter users confirmed that consumers do, in fact, have difficulty understanding the intended meaning of popular disclosures. In this study, researchers examined three commonly used short-form disclosures: Ad (short for advertisement), Spon (short for sponsorship), and Samp (short for sample), and two long-form disclosures—Paid and Endorser. The findings of the study revealed that of the three short-form disclosures “Ad” was the easiest for consumers to understand. For the long-form disclosures, “Endorser” was the most effective at communicating a material connection between the individual posting the tweet and the brand mentioned in the message. The researchers concluded that full words (e.g., “sponsored”) are preferable to abbreviations (e.g., “spon”). In the case of long-form disclosures, such as “Paid,” the researchers recommend changing this to “Paid Ad” (Burkhalter, Wood, and Tryce 2014). “Contest” and “Sweepstakes” are other commonly used disclosures when an endorser posts a message in return for entry into a draw. One of these would have been an appropriate method of disclosure for the Cole Haan Wandering Sole Pinterest posts.

In addition to using abbreviations, the inclusion of hashtags to attempt to draw the consumers’ attention to the fact that the word (e.g., Ad) is not part of the actual message is another common strategy. For example, it is not uncommon to see #Ad or #Sponsored included in a social post. See Figure 4.3 for an example. In this instance, the endorser has used #ad. But once again, do you think that this may go unnoticed?

Whereas this may be effective on some social media platforms, there are other platforms where hashtags are used in abundance, making it easy for the disclosure to get lost in the post. In such instances, the disclosure may not meet the FTC’s guideline of being prominent. A good example of this is Instagram, where due to the liberal 2,200 character limit hashtags are used extensively. How quickly can you spot the disclosure in Figure 4.4?

Figure 4.3 Twitter disclosure 2

Figure 4.4 Instagram disclosure

Even in the Twitter example offered in Figures 4.2 and 4.3, it could be argued that the disclosure is not prominent and may be overlooked. For platforms where there is a strong likelihood that consumers will miss the disclosure, and may not be able to understand, it may be appropriate to create a disclosure using full words, place the disclosure at the beginning of the message, and to use an additional strategy to draw attention to it (e.g., all capital letters or asterisks). See Figures 4.5 and 4.6 for examples. In Figure 4.5, the endorser has posted the disclosure in all caps surrounded in parenthesis. The disclosure is longer, making it easier to understand. Its placement at the beginning of the message helps to draw attention to it. In Figure 4.6, we see a similar approach, except for this time, instead of parentheses, attention is drawn to by the addition of asterisks.

Figure 4.5 Twitter disclosure in caps with parentheses

Figure 4.6 Facebook disclosure in caps with asterisks

Figure 4.7 Disclosure as part of the message

Another strategy is to rewrite the message, so that the disclosure is included as part of the endorsement copy (Figure 4.7).

Industry Regulations

In addition to the FTC Guidelines for Clear and Conspicuous Disclosures, businesses need to follow guidelines that apply to their industry and profession. There are many highly regulated industries and professions for which there are specific guidelines regarding the use of social media in general and the online endorsements specifically. These include, but are not limited to, the banking and finance, medical, pharmaceutical, and health-care industries (Lagu et al. 2008). In one study, researchers analyzed the content of blogs written by health care professionals. Their findings revealed that 11 percent contained endorsements of specific health care products. Not one of these postings contained a disclosure (Lagu et al. 2008). See the Appendix of this book for a links to various industry regulations.

Employees on Social Media

So far, we have offered examples of celebrities, everyday consumers, and social influencers to endorse brands on social media. You may be wondering, what about employees? If a business encourages employees to talk about the company or individual brands on social media, do they need to include a disclosure? The answer to this depends on if they are using the official brand account or their personal account. If employees are discussing the company on the company’s official account, they do not need to disclose. However, if they are discussing the company on their personal account, they do need to disclose their connection. There is a material connection between the employee and the company, and not all of the people who see the post from the personal account may be aware of that connection. Even if an employee is answering a question on social media, he or she must disclose his or her connection with the brand (Federal Trade Commission 2013a).

Another commonly asked question is, “What if my employee has his or her place of occupation listed in the bio of his or her Twitter or the About section of Facebook. Is it still necessary to disclose?” To answer this, simply ask yourself, “Do I know the names of the employers for all of my Facebook friends and Twitter followers?” (Answer: You don’t). Therefore, disclosing a material connection in the biographical section of any social media account is an insufficient method of disclosure.Think about what it would take to read an employment disclosure found in a bio. A consumer would have to click on the endorser’s name, which, through a hyperlink, will take him or her to the endorser’s home page where the bio or about sections are located. Most consumers will not take this extra step. As such, the employee endorser should disclose his or her material connection in each post (Federal Trade Commission 2013a). An alternative strategy is to have the employee create a separate account for work purposes with the name of the brand incorporated in the account name or handle. For example, “@DaveFromDell.” In the case of LinkedIn, the name of the employer appears alongside the endorser’s name. However, this does not guarantee that the consumer will read this information, as it may not meet the guidelines for prominence, placement, and proximity. Also, many employees list the parent company name on LinkedIn. The reader may not be familiar with the parent company, and therefore may not realize that a relationship exists between the endorser and the brand (Federal Trade Commission 2013a). For example, not many people know Sun Capital Partners, Inc is the owner of Boston Markets (restaurant), Hannah Anderson (apparel), and Flamingo Horticulture (consumer goods). The method of the disclosure can vary depending on the social media platform on which it appears (e.g., “Disclosure: I work for XYZ,” XYZ employee), but it needs to meet the requirements for clear and conspicuous disclosures (Castillo 2014).

Meeting the FTC Guidelines

All businesses should have a social media policy that includes a section on sWOM activities and that mandates a disclosure policy for employees and endorsers that comply with the FTC guidelines. However, having a policy is one thing, understanding and being able to apply it is something completely different. To help ensure FTC compliance, training should be provided to both employees and endorsers. It is a brand’s responsibility to educate and train employees and endorsers. Refresher training may be required periodically to keep abreast with any changes to the FTC Guides.

As part of the endorser recruitment process, you should inform all potential endorsers that they are required to disclose their connection with the company in each and every post. You may even want to go as far as specifying the methods of the disclosure that you would like them to use. To ensure compliance, you can inform endorsers that the incentive is contingent upon the disclosure being included. You also need to systematically monitor posts to ensure compliance. There should be scheduled review times and consequences for noncompliance.

When outsourcing this activity to an advertising agency, public relations company, or any third party, you should confirm that they will be following and enforcing the FTC Guidelines. Ask for regular reports to verify compliance. Outsourcing your promotional activity to an outside agency will not absolve you of your responsibility to abide by the FTC Act. More on this in Chapter 5.

Commonly Asked Questions

Admittedly, understanding and adhering to the FTC Guidelines is easier said than done. Also, social media continually presents new problems and situations that test our understanding of these important rules. To help ease you into FTC compliance, following are the answers to some additional commonly asked questions.

Material Connection and Compensation

Q: “Is there a monetary threshold for disclosing a relationship? What if we (the business, e.g., a coffee shop) are only offering a ‘token of appreciation’ for an online recommendation or endorsement, such as a free cup of coffee?”

A: When it comes to material connections, there is no monetary threshold. The key is whether the likelihood that the “token of appreciation” will affect the weight and credibility of the endorsement. One might argue that a cup of coffee is not such a sufficient weight to influence a consumer, but a month’s supply of free coffee may be viewed differently (Beck 2015c). It is both easier and in everyone’s best interest to adopt a consistent practice and habit of disclosing on each platform, regardless of the actual or perceived value of the incentive.

Q: “For a material connection to exist, does there have to a monetary value attached to the incentive? For example, what if I move a customer to the top of a waiting list, invite him or her to a product launch event, seat him or her at a better table in my restaurant?”

A: There does not need to be a financial arrangement for a material connection to exist. In this case, the incentive is a special access privilege. The FTC states that if the customer is offered privileges in return for social media mentions, then yes, there is a material connection, and it should be disclosed (Federal Trade Commission 2013a).

Q: “If I offer my customers a discount on a future purchase, or offer to enter them into a draw to win a prize, do they need to disclose?”

A: The customer is still being incentivized to post, and therefore a material connection exists, and a disclosure should be included. Similar to“tokens of appreciation,” the value of this incentive will determine the importance of the disclosure. The greater the incentive, the greater the importance of the disclosure, and the more likely a business and endorser will come under scrutiny for failing to disclose. For instance, a significant discount or entry into a draw to win a substantial item is more likely to be questioned than one where the discount or prize is very small (Federal Trade Commission 2013a). The challenge here lies the interpretation of “significant” and “substantial.”

Endorsers

Q: “I have a well-known spokesperson (noncelebrity) who endorses my product in print ads. Does he or she now need to start disclosing when he or she endorses us through his or her Twitter and Facebook accounts?”

A: The answer to this depends on whether his or her social media followers are aware that he or she already endorses your product. If there is a chance that his or her followers are unaware, then yes, he or she would need to disclose his or her connection in each of his or her posts (Beck 2015c).

Q: “What if the person who endorses my product is a well-known celebrity and has appeared in some traditional advertisements (TV, print, and so on)? If he or she starts mentioning us on social media, does he or she need to disclose?”

A: If the celebrity is a known endorser of your product, then it may not be necessary to disclose the connection when posting on social media. However, if a significant number of the people who follow his or her social media accounts do not know that he or she is an endorser, then he or she will need to disclose (Federal Trade Commission 2013a). Take for example, a celebrity who is a spokesperson for a regional business appearing only in regional TV and print advertisements. Knowledge of his or her affiliation with the business may be geographically confined to areas where these advertisements air. His or her social media followers may be more geographically disbursed.

Remember, just because some consumers may be aware of the connection between the endorser and the brand does not mean that all consumers are (Federal Trade Commission 2015). An act is considered deceptive if it leads “a significant minority” (Federal Trade Commission 2015).

Disclosure Format

Q: “I cannot fit a message and disclosure in a Tweet, what do I do?”

A: If there is not enough room, then you should rewrite your message, so that you can include a disclosure. Character limits are not a valid excuse for excluding a disclosure (Beck 2015c). Furthermore, disclosures must be present on all messages, regardless of the device (e.g., computer, tablet, cell phone) used by the intended audience (WOMMA 2014).

Q: “What if the social media posts are posted in another language. What language should the disclosure be in?”

A: The disclosure is to be presented in the same language as the endorsement (Federal Trade Commission 2013a).

Q: “What are some of the phrases we can use to disclose a material connection?”

A: The type and length of the phrase will vary depending on the platform. In Figure 4.8, we suggest some methods of disclosure. This list is by no means exhaustive. Disclosures can be presented in all capital letters, contrasting colors, or accompanied by symbols (e.g., #, ***) to draw attention to them.

Q: “What is the best way to disclose in a video?”

A: It is advisable to have the disclosure at the beginning of the video. The disclosure can be communicated verbally and appear on the screen in text. It is important that the text disclosure is visible long enough for the viewer to read it in its entirety. When posting videos to platforms such as YouTube, care should be taken to ensure that the disclosure is not obstructed by advertisements. For long videos or even live streams, where viewers can enter and exit a video at any time, it is necessary to include multiple disclosures throughout the video or stream (Federal Trade Commission 2013a).

Figure 4.8 Sample methods of disclosure

Q: “Do product reviews that appear on my company website or websites such as Yelp need to include disclosures?”

A: That depends on whether or not there is a material connection between the consumer posting the review and the brand he or she is referencing. If the reviewer received a benefit or incentive for writing the review, then yes, a disclosure is necessary. If no benefit or incentive was offered then, no material connection exists and the reviewer does not need to disclose (Federal Trade Commission 2013a).

Q: “When an endorser posts on the brand’s official account, does he or she need to disclose?”

A: If the post only appears on the official brand account, then the answer is no. However, if he or she is also posting from his or her personal account, then yes, he or she needs to disclose. Alternatively, he or she can create a separate social media account for these posts where the brand name is incorporated in the account name or handle. For example “@ JoeFromPepsi.”

Q: “Does an endorser need to disclose details of his or her compensation?”

A: No, endorsers do not need to confirm the specifics of their compensation. They just need to disclose that they have a connection with the brand. They can simply say that they were paid or received a gift for their posting.

Q: “Do all types of social media posts promoting a brand need include a disclosure? What if the post is a photo or a video without any text, do these need a disclosure?”

A: Positive sentiment and endorsement for a product can be communicated in many ways, including through a simple photograph. Take, for example, the case of Jason Peterson. Peterson, an advertising executive, was reportedly given a first-class ticket to Iceland and $15,000 in cash in return for sharing four images of Dom Perignon with his 300,000+ Instagram followers. In another example, freelance photographer Alina Tsvor shared a photograph of her flight with Chicago Helicopter Experience with her 55,000+ Instagram followers in return for free helicopter rides for her and her friends. In both of these cases, the advocates relied on images to communicate their endorsement. Disclosures should have been included (Mann 2014).

Q: “Do I need to hire a lawyer to write these disclosures?”

A: If your disclosure is written in clear, easy-to-understand language and avoids legalese and technical jargon, then you do not need a lawyer (Federal Trade Commission 2013a).

The importance of complying with the FTC and industry guidelines for sWOM cannot be understated. Your company needs to ensure that all employees and endorsers understand the importance of and appropriate method of disclosure. This information is often documented in your company’s social media policy. Our next chapter delves into how to create a social media policy.

References

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