Federal Trade Commission Endorsement Guidelines - Why They Matter
Every single person is a consumer. We buy food, personal care products, clothing, furnishings, and much more. Marketing sways a consumer’s purchasing practice, whether consciously or not. As a result, claims and statements made in marketing is regulated, since without any regulation, companies would be able to make grand and even patently false claims about a product- which might entice consumers to purchase that product.
The Federal Trade Commission (“FTC”) is an independent agency that promotes consumer protection while promoting competition. It protects consumers by “stopping unfair, deceptive or fraudulent practices in the marketplace.” The FTC also established and publishes guidelines to be used and followed by those making claims in advertising. The FTC has the ability to investigate, initiated enforcement actions, and fine companies or individuals who fail to comply.
One particular guideline established by the FTC, the Endorsement Guidelines (you can find the entire guide here), “reflect the basic truth-in-advertising principle that endorsements must be honest and not misleading. An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer couldn’t legally make.” This guideline is particularly useful in the social media context.
Think about an influencer you follow who has posted a product on his or her page along with a caption raving and what that product did and why you need to run out and purchase it. Your first thought? Need that. But would it change your mind, or make you stop and think before purchasing, if you knew the company had paid that influencer to say those things? It might… and for that reason, consumers should know whether a paid-for-post on instagram or other social media outlets is just that - an advertisement.
The FTC Endorsement Guidelines state the following:
An endorsement must be the endorser’s honest opinion (though you can imagine times when an influencer will promote product they wouldn’t actually use themselves);
A clear disclosure of the material connections between the brand and the endorser (#Ad or #Sponsored are perfect examples); and
That the disclosure is placed where people can see it (at the end of a long instagram caption where you must click “see more" might right afoul.
Dior, in anticipation of its relaunch of the “Saddle Bag,” engaged 100 influencers to post photos of them wearing the bag. Some influencers included #SuppliedByDior in their caption or #Ad, while others did not.
If you want a great example of a company that doesn’t seem to pay any mind to the FTC Endorsement Guidelines, look no further than Revolve. An online marketplace known for its millennial-heavy influencer backing & dozens of private labels, Revolve decided to forego traditional channels of marketing and look to influencers. Revolve also began flying influencers around the world while hosting extravagant parties & dinners for the guests, all of whom donned clothing sold on Revolve.com. These influencers, though lucky to join the party, were no doubt paid and even gifted clothing from Revolve, a credit averaging $2,000 says a source who has traveled with Revolve. Although #RevolveAroundTheWorld is seen in almost every post, #Ad or #Sponsored or #ProvidedByRevolve is not, leaving Revolve and its marketing campaigns curiously non-FTC compliant.
But Revolve realizes that noncompliance. In fact, in the wake of its Initial Public Offering (“IPO”), Revolve acknowledges its lack of FTC compliance in its S-1 filing by stating “Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties” under its “Risk Factors.”
Some influencers & companies fear including #Ad for lack of engagement from followers or judgment for “selling out” and not being real… but transparency is a trend affecting all areas of fashion and I for one appreciate influencers who are honest with their paid advertising on social media. I’m sure the FTC is as well.
What do you think? Do you hate seeing #Ad all over social media or do you appreciate the honesty?