By Heather Dunn

This post originally appeared in the American Marketing Association’s Marketing News Journal

This past year, the FTC issued an extensive Q&A ​on its endorsement guides, which the FTC uses to evaluate whether an endorsement or testimonial is deceptive. Importantly, it is very clear that any “material connections” between endorsers and a brand must be disclosed, and these connections can arise in unexpected places, including social media. Companies also need to be on the lookout for inadvertent “material connections” they can create with bloggers, contest entrants, brand ambassadors and others, and be sure that those connections are clearly and conspicuously disclosed.

It is important for marketers and advertisers to know that endorser disclosures are the advertiser’s responsibility, which means that companies must provide appropriate training and monitoring to their endorsers. Per the Q&A, “If law enforcement becomes necessary, our focus usually will be on advertisers or their ad agencies and public relations firms.” The FTC’s track record backs this up.

For example, a retail company sponsored a contest on Pinterest in which entrants could pin an image featuring the company’s products and a hashtag of the contest name, which served as an entry into the contest. The winner would receive a shopping spree. In a warning letter, the FTC charged that this violated Section 5 of the FTC Act for failure to disclose a material connection between the company and the contest entrants, that “connection” being the fact that Pinterest users were adding pins of the company’s products, thereby endorsing them because they were trying to win a shopping spree. According to the FTC, the company did not instruct contestants to disclose that they pinned products as part of a contest, and the contest name hashtag wasn’t enough to communicate that disclosure.

In another recent action, the FTC challenged an advertising agency, Deutsch LA, because its employees were encouraged to participate in an ad campaign by posting comments about Deutsch LA’s client’s new product on Twitter. The employees then posted positive tweets about the products without disclosing their connection to the ad agency or its client. The FTC alleged that the tweets were misleading because they were not actual consumer views, and because they failed to disclose that they were posted by employees of the advertising agency.

There were similar circumstances when the FTC charged that Machinima, an online entertainment network, violated Section 5 of the FTC Act because its hired “influencers” did not disclose that they were being paid for their endorsement of a video game. Machinima paid influencers to post YouTube videos endorsing the Microsoft’s Xbox One video game system and several games as part of a campaign managed by Microsoft’s advertising agency. The influencers did not disclose their connection to Machinima in their video posts, and Machinima did not require them to do so. The FTC alleged that this resulted in seemingly objective opinions about the games that required clear disclosure of the influencers’ material connections.

In yet another example, AmeriFreight, an automobile shipment broker, agreed to settle FTC charges alleging that the company failed to disclose its policy of providing online reviewers with discounts and incentives for writing reviews. AmeriFreight offered a $50 discount to its customers who agreed to review the services, and administered a “Best Monthly Review” promotion where online reviewers were automatically entered to win a $100 “Best Monthly Review” award. The FTC asserted that the $50 discount and the contest entry created a material connection, even though AmeriFreight did not require positive reviews.

Here are five tips for identifying and managing your “material connection” disclosure requirements:

1. Know what constitutes an endorsement. Endorsements do not require explicit wording by the endorser stating that they approve of or use your product. Simply posting a video or photo of a product or using a product on social media is often sufficient to communicate approval. If it conveys that the poster likes and approves of the product, it is an endorsement. Endorsements can appear in all communication channels for your brand, including social media, live communications, online, print, television and radio.

2. Take stock. Catalog how your company may be creating material connections, which includes the following: paying money to a celebrity or blogger to promote your brand; providing free products or discounts to bloggers; offering entries into a sweepstakes or contest in exchange for posting photographs or statements about your brand; paying a salary to your employees who post great things about your brand on social media; or offering an incentive program to marketing affiliates.

3. Create an endorsement policy. Companies must have reasonable programs in place to train and monitor members of their network. The policy should be customized for your business. A good endorsement policy will inform endorsers of their responsibility to disclose their connection to you; provide them with examples of acceptable disclosures; and explain what they may and may not say about the objective qualities or performance of your products. (Objective claims by the company or its endorsers must be substantiated by the company.)

4. Make obvious disclosures. The FTC requires that disclosures be clear and conspicuous. This means that they should be located right near the endorsement, in a font that is easy to read, and in a shade that stands out against the background. For formats such as blogs and online discussion comments, statements like, “Company X sent me this product to try” or “Sponsored by Company X” could be appropriate. For social media posts with limited space for disclosures, you and your endorsers should use terms such as “ad,” “sponsored” or “sweepstakes” (as applicable) at the start of the post. Hyperlinks to disclosures are not sufficient.

5. Monitor your endorsers. Make sure that you’re searching for what people are saying and posting about your products. Be sure that endorsers are making adequate material connection disclosures, and that they are not misrepresenting your products. If you find questionable practices, communicate with the endorser to remedy the situation.

– See more at: https://www.ama.org/publications/MarketingNews/Pages/five-best-practices-in-advertising-law.aspx#sthash.bdfVBQ5i.dpuf