FTC takes a look at hidden endorsements

September 2016



The US Federal Trade Commission (FTC) is planning to regulate ‘hidden’ endorsements by celebrities who promote brands and products through selfies, blogs, Facebook and Instagram postings, and other social media platforms  – without ever revealing they are being paid. The Federal Trade Commission has also said that hashtags like #ad, #sp, #sponsored – common forms of disclosure – are not always enough. The FTC will be putting the onus on the advertisers to make sure they comply. Michael Ostheimer, a deputy in the FTC’s Ad Practices Division said: “We’ve been interested in deceptive endorsements for decades and this is a new way in which they are appearing,” adding “We believe consumers put stock in endorsements and we want to make sure they are not being deceived.”
The FTC had instigated a case against Warner Bros. Home Entertainment Inc., which was settled, over charges that it deceived customers by paying internet influencers such as PewDiePie (who has about 50 million followers on YouTube) to promote the video game Middle-Earth: Shadow of Mordor with positive reviews, without disclosing that they were paid and told how to promote it. In March the FTC issued a complaint against Lord & Taylor for paying fashion influencers to create posts about one of its dresses on Instagram, without disclosing that the retailer paid them and gave them the dresses for free. Any compensation, including free products, should be disclosed, the FTC says.
How the new rules on disclosure will apply is still being argued. When it comes to video, the FTC has called for disclosure to be said out loud or displayed on screen – but commentators have pointed out that social media is complex – on Snapchat, where there’s not an obvious place to put a hashtag, and the videos are only a few seconds – and some advertisers say influencer posts don’t deserve disclosure, because they are not the same thing as traditional advertising. Lauren Diamond Kushner, a partner at Kettle, a creative agency in New York, has worked on influencer campaigns with brands including Sunglass Hut. She said the Instagram stars and YouTubers often only work with the brands that they genuinely like and use. The FTC says the basic test is: If a consumer knew an endorser was compensated in any way, would that alter the view of the endorsement? In the overwhelming majority of cases, the FTC says yes.

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