FTC Tightens Disclosure Regulations In Social Media Contests

The Federal Trade Commission (FTC) recently updated its Endorsement Guide section in an effort that appears to be sending tougher signals to dealerships who hold contests on social media with promotional tie-ins.

Last month, the FTC updated the “What People Are Asking” page in its Endorsement Guide for the first time since 2010. The FTC’s basic message that material relationships between brand and endorser on social media must be “clearly and conspicuously” disclosed remains the same. However, the agency is now getting more specific with detailed guidance about social media issues that weren’t on the FTC’s radar as recently as five years ago.

Allison Fitzpatrick, an attorney in the advertising, marketing and promotions practice group at Manhattan-based law firm Davis & Gilbert, says that the FTC’s specificity makes it likely that the agency will crack down in the coming months. Fitzpatrick explains that she’s been advising her clients for over a year that the FTC is starting to pay increased attention to social media marketing activity.

In 2014, the agency sent a letter to Cole Haan warning that a contest it sponsored on Pinterest was potentially deceptive. The issue was about the requirement for users to pin photos from the footwear and accessory brand’s website for a chance to win a $1,000 shopping spree. Due to the fact that those Pinterest posts were incentivized, the FTC said that they needed to include a disclosure. At that time, the agency didn’t take enforcement action, at least partly because it hadn’t yet publicly offered guidance about that particular scenario.

However, with the new FAQs, that’s no longer the case.

“Now they are saying, ‘We have given guidance. You are all on notice,'” Fitzpatrick told Marketing Land. “So you are not going to get a warning letter. You are going to get an action.”

The FTC’s heightened awareness is important to note for the many dealerships that run social media contests, to ensure that they are aware of how to prevent any legal issues from arising.

The new FAQs address some of the grayer areas of the regulations. It’s clear that a disclosure is required when a contest entry is accompanied by an endorsement on social media. The responsibility falls on the contest sponsor to make sure that people who enter the contest make the disclosure. While using a hashtag such as “contest” or “sweepstakes” should be sufficient, using something along the lines of “#Brand_ABC_Rocks” or just “#sweeps” is not because neither is obvious enough. If contest rules don’t require disclosure, Fitzpatrick explains that brands could be exposed to FTC scrutiny.

According to the FTC, if a dealership is offering a $1 coupon or a product that is only worth a few dollars in exchange for a tweet, perhaps a disclosure would not be necessary. The key point is whether the gift would affect the “weight or credibility” of an endorsement. However, it can be very difficult to gauge where to set the bar, so the safest choice is to always disclose.

“I still don’t think I’ve seen any press releases about it,” said Fitzpatrick. “It’s interesting because people like myself, some of our clients, a lot of industry members have been waiting for the guidance for five years and to announce it on a Friday afternoon in the summer is not enough.”

Although Fitzpatrick says that the FTC could do more to publicize the guidelines, the agency has put together a clear roadmap to help marketers avoid any problems with the regulators. It could prove to be very valuable for dealerships to read the published guidelines to ensure clarity and to effectively avoid encountering any legal issues.