The #AD Viewpoint: Navigating the FTC’s Approval Guides, Part II

March 17, 2023

The first article in this series explained the requirements of the FTC’s current endorsement guidelines that athletes must have “clear and conspicuous” disclosures to endorse a product or promote a business.

But what if an athlete doesn’t disclose their relationship in their online ads? And what is the company’s responsibility to disclose relationships in its own commercial advertising?

This second article presents several scenarios exploring the disclosure requirements and detailing important considerations for companies as they approach the negotiation and implementation of the approval agreement.

The characters and incidents in this article are all fictitious. No identification with any real person (living or deceased), social media accounts, sites, brands, companies, products or services is intended or should be inferred.

Scenario 1: You business owner signed an endorsement deal with a student-athlete. They post on their social media account about your products, at the times you asked them to, but never say that you are sending them the products in exchange for their promotion. Their product reviews are their honest opinions, but they are incentivized to post about them because of the endorsement deal. Who is responsible for non-disclosure?

both of you the business and the student-athlete are responsible for this lack of disclosure of the brand relationship. The athlete must disclose the relationship in connection with each publication. However, you should have procedures in place to monitor compliance with each post. Also, the reputation of your business and its products is at risk with every post. Despite the FTC’s requirements, potential consumer backlash is reason enough to ensure your endorsements comply.

Scenario 2: You outsource your company’s marketing to a third-party company, which signs an agreement with an athlete to have the athlete endorse your products. If the athlete does not make the disclosures, who is responsible?

Even if you outsource your company’s marketing activities to a third-party marketing firm, you are responsible for knowing whether or not your athlete is making the appropriate disclosures. You are also responsible for informing the contractors of the guides. There may be obligations in your contract with the marketing company that can further protect you from liability or share the costs of non-compliance. Other than that, your business and your products are the topics of these posts you remain responsible for them to protect your brand.

Scenario 3: You pay an athlete to talk about your product on a specific social media site, but they frequently discuss it on all of their social media platforms. Is disclosure required on other platforms?

The Guidelines state that if you pay an athlete to talk about your product on one social media site, but they also talk about it on another, disclosure may still be required. Even if it seems obvious that you and the athlete have a brand relationship, given their compliant disclosures on one site, disclosing the relationship on other sites is always the safest option because viewers may not overlap . Remember, under the FTC Act and Approval Guidelines, an action or practice is deceptive if it misleads a “significant minority” of consumers, and the FTC evaluates what a “reasonable consumer” would think, not what you or the athlete Therefore, even if you and/or your athlete believe that your relationship with the brand is obvious because of the clearly established relationship on one site, users on another site may not be aware of that relationship and therefore misled by the athlete’s posts. Similarly, even if the athlete clearly discloses the material connection in the initial publication, doing so is not sufficient to stop disclosing the relationship in future publications. You should not assume that the association is known; therefore, it is best to divulge it continuously.

Scenario 4: You and the paid athlete want to post together on a social media site, such as Instagram. So, is disclosure necessary?

The FTC is concerned about misleading advertising. Endorsements made on behalf of a company without disclosing a relationship have the potential to mislead consumers. If the company co-posts with an athlete, the brand relationship may be transparent to viewers due to the nature of the co-post. For best practice, the Guidelines recommend disclosure so that there is no doubt about the athlete’s promotion. In fact, Instagram has made it easy for users to post through a “paid partnership” subhead. Instagram also has its own internal and applicable account politicsas well as his own suggestions of best practices for disclosurewhich imitate the requirements of the Guides.

Scenario 5: You pay a student-athlete to promote your products, and you find out that they haven’t used the products in the ads.

The FTC requires that promotions and endorsements reflect the honest opinion of the endorsers. In other words, if a student-athlete says your product is “the best he’s ever used” but has never actually used it, his endorsement violates the Guidelines. Also, if your student-athlete says the product is “his favorite,” but has never used competing products, that endorsement also violates the Guidelines. However, a student-athlete may use terms that attribute quality to the products, for example, “I love this product” or “this product is amazing,” as long as he has used the product.

Scenario 6: You want to pay an athlete to appear in photos promoting your products, but you only intend to upload those photos to your business account posts. You have paid the athlete, but have not given the athlete permission to use the photographs for any reason. So, is disclosure necessary?

The photograph can suggest the athlete’s endorsement (or positive opinion) of your product, even when there is no statement from the athlete. You should still be transparent with viewers about the material connection to the post. Additionally, if the student-athlete reposts the photographs to their own channel, disclosure is required in accordance with the social media policy.

It is important to remember that companies (not individual endorsers) are usually the parties that face liability for non-compliance with the Act and the Endorsement Guidelines. For example, a recent settlement between the FTC, iHeartMedia and Google held iHeart and Google liable for radio recommendations played on iHeart stations on a Google phone that the phone’s endorsers had never used. In this case, there was no penalty for the individual endorsers themselves, but for repeat offenders, the FTC sometimes takes action against individuals for violating the Guidelines.

For help developing endorsement agreements that set clear expectations for compliance with the FTC Act and endorsement guidelines, contact our NIL practice group.

© 2023 Ward and Smith, PA For more information on the issues described above, please contact Lilian L. Faulconer or Erica BE Rogers.

This article is not intended to provide, and should not be relied upon as, legal advice in any particular circumstance or fact situation. No action should be taken based on the information contained in this article without obtaining the advice of an attorney.

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