FTC Endorsement Guidelines: Managing the Legal Risks Presented By Social Media

1. FTC Endorsement Guidelines: Managing the Legal Risks Presented By Social Media Daniel T. Rockey Bullivant Houser Bailey PC San Francisco Dan.rockey@bullivant.com

2. The Rise of Social Media and its Use in Marketing • Social media (Blogs, Twitter, Message Boards, You Tube, etc.) as a marketing tool • PayPerPost, Izea • Blurring the line between what is advertising and what is simply expression of opinion

3. FTC: Background • FTC Act gives the FTC broad power to regulate "unfair or deceptive acts or practices in or affecting commerce” • Power to impose civil penalties, fines, obtain injunctions

4. FTC Guidelines Concerning Use of Endorsements and Testimonials in Advertising • FTC issues Guidelines (16 CFR Part 255 et seq.) in October 2009; effect. December 1, 2009 • Covering “any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser”

5. FTC Guidelines Concerning Use of Endorsements and Testimonials in Advertising • In general, prohibits false or unsubstantiated claims • Requires disclosure of “material connections” • A connection “that might materially affect the weight or credibility of the endorsement” • “Practices inconsistent with these Guides may result in corrective action taken by the Commission”

6. FTC Endorsement Guidelines: Examples • Must disclose when connection is “not reasonably expected by the audience” Example: • Physician appears in ad for anti-snoring device • Paid for appearance: no disclosure required • Paid per unit of sales: disclosure required

7. FTC Endorsement Guidelines: Examples Example: • Sports figure touts laser eye center in magazine ad • No disclosure required • Same sports figure touts laser eye center in interview, on Twitter • Must disclose relationship

8. FTC Endorsement Guidelines: Social Media Example: • Cosmetics company uses social marketing service (e.g., PayPerPost or Izea) to identify blogger to try out new lotion • Blogger touts lotion in blog, claims it cured her eczema FTC: • Companyis liable for false, unsubstantiated claims made by blogger • Blogger is liable for unsubstantiated claims, failure to disclose relationship

9. FTC Endorsement Guidelines: Social Media Example: • College student writes popular blog on video games, systems • System maker provides free machine to blogger, who touts machine on blog FTC: • Company is liable for false, unsubstantiated claims made by blogger • Blogger is liable for unsubstantiated claims, failure to disclose freebie

10. FTC Endorsement Guidelines: Social Media Example: • Employee of company that makes MP3 players posts comment on message board devoted to MP3’s, devices FTC: • Employee must disclose employment relationship • Company liable for statements of employee, failure to disclose?

11. FTC Endorsement Guidelines: Protecting Yourself and Your Company • Companies must carefully manage new media marketing efforts • Advise ad partners, endorsers of obligation to disclose and make record of disclosures • Actively monitor statements by endorsers and take prompt corrective action • Monitor employees’ use of social media • Implement and enforce company-wide policy re use of social media by employees