There are two basic principles of advertising law that apply to all types of advertising in any form of media. So, I don’t want you to think that today we are talking about only paid forms of media. In fact, we are talking about any impression that someone can get from claims that you are making across all platforms. 

Two basic principles  of advertising law apply to all types of advertising in any media:

  1. Advertisers must have a reasonable basis to substantiate the claims they make in their ads.
  2. If an advertiser needs to disclose information to prevent an ad from being misleading, these disclosures must appear in a clear and conspicuous manner.

Principle #1

Let’s dive right into talking more about basic principles, number one, advertisers must have a reasonable basis to support all of the claims in their ads. This requirement applies not only to express claims. That is what an ad actually says, but it also applies to implied claims that a reasonable consumer may infer from your ad, even if the advertiser did not intend to convey those claims. 

Therefore, an ad can be accurate but also misleading all at the same time if it conveys a claim that the advertiser cannot support. 

We are going to step into the shoes of the customer who may not know anything about your brand or offering other than what’s in the ad itself. And then we are going to look at and consider while we’re standing in the shoes of your customer, how they are likely to interpret the ad. At the end of the day, this is the point of all advertising. I really do believe that a confused consumer doesn’t buy. And if you got them to buy because they were confused about what they were going to get, it’s only going to cause problems for you later on. And this is very similar to the episode that we talked about, about unhappy customers. And I want to prevent the time that it takes to deal with an unhappy customer from putting an offering out in a way that it’s actually leaving the consumer with the wrong impression. But I feel like it’s important to also take a moment to note that it’s not only your representations of your brand but also the representations made by those that endorse your brand. So let’s dive into how you can identify an endorsement in your own business to make sure that you are in full compliance. 

Identifying Endorsements

According to the FTC, a statement made by consumers and social media will be treated as an endorsement subject to these guidelines. If, when viewed objectively, it appears that there is a relationship between the advertiser and the speaker is one that can be understood from the Speaker’s statements to be sponsored by the advertiser. So you’re probably wondering what sponsored means. The FTC encourages advertisers to ask whether speakers are acting independently. 

On the advertiser’s behalf in their statements about the product or service. That’s the question that we need to be asking ourselves, is this speaker acting independently or are they acting on the advertiser that’s you on your behalf or otherwise put under the influence? The FTC expressly states that not all social media endorsements are subject to the endorsement guidelines, which is great. So if the speaker is acting independently, the statements will not be subject to the endorsement guidelines. However, if the speaker is acting on behalf of the advertiser, the FTC considers these statements to be sponsored. And the endorsement is therefore subject to the endorsement guidelines. The relevant facts that are going to help decide whether or not the endorsement is sponsored can vary, but generally, they’re going to include one of the following, whether the speaker is compensated by the advertiser or an agent of the advertiser, whether the product or service in question was provided for free by the advertiser. I am speaking to you if you’ve ever done gifting and we have a wonderful episode on gifting, the episode will be Episode 42, The Truce of Products Gifting with Lorena Garcia. She is the co-founder of Mojca. So we will talk more about that in Episode 42. 

Terms of Any Agreement

If there is an agreement between the speaker and the advertiser, that is going to be something that the FTC is going to be concerned with, the length of the relationship and the previous receipt of products or services from same or similar advertisers or the likelihood of future receipt of products or services. 

The value of the items or services received at the end of the day, of course, this question must be determined on a case by case basis. However, the greater the connection between the company and the speaker, the more likely the company will have to comply with the endorsement guidelines. And notice what I said there. 

The company will have to comply with the endorsement guidelines. At the end of the day, you as the business owner will be held responsible for making sure that anyone that is speaking on behalf of your company is doing so in a way that complies with these basic principles of advertising. The endorsement guidelines state that even though the advertiser may not have any control over a specific statement made in new forms of consumer-generated media, this statement may still be treated as an endorsement under the endorsement guidelines. If the statement is deemed sponsored by the advertiser, most campaigns and social media inherently involve giving some level of control over an advertiser’s message. Therefore, advertisers should assume additional advertising risks when engaging in social media campaigns that involve sponsored endorsers. While the FTC acknowledges that the advertiser may have no control over the statements made by an endorser. The FTC still believes liability may be appropriate on a general basis. That by engaging in social media, it is foreseeable that an endorser may make a false claim that the advertiser has an assumed risk and any potential liability that accompanies this risk. 

What I would suggest is that you keep an inventory of who you have a relationship with and if you are encouraging them in any manner that you moderate their potential endorsements. Instead, by creating a stronger relationship with clear expectations, your business can actually retain rights to make sure you’re moderating how they might speak about your brand. We have an influencer agreement in the shop and my favorite thing about it is by far the last page where it lays out how even if just in gifting, they can comply with the endorsement guidelines in a bulleted format. 

Easy to see. And at the end of the day, it’s talking about honesty. It’s talking about not being misleading and creating a strong impression. 

Principle #2

That leads us perfectly into talking about our second and final basic principle of advertising, which was if an advertiser needs to disclose information to prevent an ad from being misleading, these disclosures must appear in a clear and conspicuous manner. 

So when we are evaluating these disclosures, the Federal Trade Commission, the FTC, and other regulators do not mandate a font size or a color, or a specific placement. However, a well-accepted standard is that an advertiser should generally make sure that disclosure appears close to the claim it modifies in a location where people are likely to see it and in font color and size that the disclosure is easy to read. Again, as we talked about in principle, number one, it was about stepping into the shoes of your customer and making sure they’re left with the right impression. You should be doing the same thing here. No one likes the tiny miniature font that nobody can read. 

Instead, we want transparency. We want brands that we can trust. So this principle aligns perfectly with that concept. In April of twenty seventeen, the FTC sent out more than 90 letters to companies and influencers, reminding recipients of their legal obligations under the endorsement guidelines. These letters stated that consumers need to know if there is a material connection between a company and an influencer who promotes or speaks on behalf. Of the company for their products or services, unless the connection is otherwise evident from context, the influencer is required to clearly and conspicuously disclose the connection. So just like we talked about when we talked about giveaways and including a hashtag giveaway to show why they were posting, it’s the same thing here for other sponsored content where the modifier, this disclosure of why they’re speaking on your behalf is made clear to the consumer. 

Four Noteworthy Aspects

Since I mentioned these 90 letters that went out back in twenty seventeen and trust me, they have only gotten more strict since then, there were four noteworthy aspects that I want to mention. 

  1. Previously, the FTC endorsement efforts had been primarily focused on companies, some of these letters, though, were sent to celebrities, athletes, and influencers. This signals broader enforcement and we have seen that. 
  2. The letters addressed some of the issues that are unique to Instagram consumers who view Instagram posts on mobile devices typically see only the first three lines of a longer post unless they click more when making endorsements on Instagram, influencers should generally disclose any material connection above the more button. 
  3. The letters also noted that when POWs include multiple tags, hashtags or Linc’s readers may just skip over them, especially when they appear at the end of a long post. For this reason, advertisers should always lead with important disclosures or make sure that they are otherwise standing out. And one of the best ways actually to do this is to actually do the branded content. I have this more fully described in our implementation guide for our influencer agreement. But essentially, you know, when we were getting really used to seeing the tag is across the top of a photo or across the top of a story that’s actually branded content. You can actually require your endorsers to request permission to tag your business in content in that way. And the best part is that you will always be notified when they tag you and you have the ability to repost. You also have the ability to see the analytics related to their story or their post if they do it in that way. So when you not only comply with the FTC guidelines, but you also get to see the analytics and see how that endorsement is driving and moving the needle in your business.
  4. Some of the letters addressed particular disclosures that the staff believed were not sufficiently clear. For example, some letters pointed out that consumers may not understand disclosures like “#spon” for sponsored or simply saying inside the caption or inside the video, hey, thinks so-and-so for sending this to me or immediately just you know, we’ve all seen the inboxes just opening and being amazed and being like, wow, this is great. 

With all of that said, we know that we are all spending time on these platforms and that we are trying to get people to speak on our business’s behalf, but we always want it to be done in an honest and clear fashion.