March 17, 2023
The first article in this series explained the requirements under the FTC’s current Endorsement Guides that athletes must have “clear and conspicuous” disclosures in order to endorse a product or endorse a company.
But what happens when an athlete doesn’t disclose their relationship in their online advertising? And what is the company’s responsibility for disclosing relationships in its own business advertising?
This second article presents various scenarios that examine disclosure requirements and detail key considerations for companies when negotiating and enforcing endorsement deals.
The characters and incidents in this article are all fictional. No identification with any actual person (living or deceased), social media accounts, place, brand, company, product or service is intended or should be inferred.
Scenario 1: You – a business owner – have signed an endorsement deal with a physical education student. They post about your products on their social media account at the times you ask them to, but they never mention that you send them the products in exchange for their promotion. Their reviews of the products are their honest opinions, but they are encouraged to post about them because of the endorsement deal. Who is liable for non-disclosure?
Both you – the company – and the student-athlete are responsible for this failure to disclose the brand relationship. The athlete should disclose the relationship associated with each post. However, you should have procedures in place to monitor each item for compliance. In addition, the reputation of your company and its products is jeopardized with every post. Notwithstanding the requirements of the FTC, the potential backlash from consumers is reason enough to ensure your supporters are compliant.
Scenario 2: You outsource your company’s marketing to a third-party company that contracts an athlete to have the athlete endorse your products. If the athlete does not provide information, who is responsible?
Even if you outsource your company’s marketing activities to an outside marketing company, you are responsible for knowing whether or not your athlete is providing accurate information. You are also responsible for informing the contractual partners of the tours. Your contract with the marketing company may include obligations that can further protect you from liability or share costs of non-compliance. That being said, your business and products are the subjects of these posts – you remain responsible for protecting your brand.
Scenario 3: You pay an athlete to talk about your product on a specific social media page, but they often discuss it on all of their social media platforms. Is disclosure required on the other platforms?
The guidance notes that if you pay an athlete to talk about your product on one social media site, but they also talk about it on another, disclosure may still be required. Even though it may seem obvious that you and the athlete have a branded relationship, disclosing the relationship on the other sites is always the safest option as viewers may not overlap. Remember that under the FTC Act and Endorsement Guides, an act or practice is misleading if it misleads “a significant minority” of consumers, and the FTC evaluates what a “reasonable consumer” would think, not what you do or the athlete would think. Even if you and/or your Athlete believe that your brand relationship is evident from the clearly established relationship on one site, users on another site may not be aware of that relationship and therefore may be misled by the Athlete’s Submissions. Even if the Athlete clearly discloses the material connection in the first post, it is not sufficient to prevent disclosure of the relationship in future posts. You should not assume that the partnership is known; Therefore, it is best to disclose it continuously.
Scenario 4: You and the paid athlete want to post together on a social media site like Instagram. Is disclosure then required?
The FTC is concerned about misleading advertising. Recommendations made on behalf of a business without disclosing a relationship can mislead consumers. When the company co-posts with an athlete, the brand relationship can be transparent to viewers through the nature of the co-post. As a best practice, the Guides recommend disclosure so that there is no doubt as to the athlete’s promotion. In fact, Instagram made this easy by allowing users to post with a “paid partnership” sub-header. Instagram also has its own internal and enforceable disclosure policy and best practice suggestions that mimic the requirements of the guidelines.
Scenario 5: You pay a student athlete to promote your products and you find out that he has not used the products featured in the advertisement.
The FTC requires that promotions and endorsements reflect the honest opinions of supporters. In other words, if a student-athlete says your product is “the best they’ve used” when in fact they’ve never used it, their recommendation violates the guidelines. If your student-athlete says the product is “his favorite” but has never used any competitor’s product, that recommendation is also against the guidelines. However, a student-athlete may use terms that attribute quality to the goods, e.g. B. “I love this product” or “This product is amazing” as long as he has used the product.
Scenario 6: You want to pay an athlete to appear in photos promoting your products, but you intend to only upload those photos in posts on your business account. You paid the athlete, but you did not give the athlete permission to use the photos for any reason. Is disclosure then required?
The photo may suggest the athlete’s endorsement (or positive opinion) of your product, even if there is no athlete testimony. You should still be transparent to viewers about the material connection in the post. If the student-athlete reposts the photos on their own channel, disclosure under the Social Media Policy is also required.
It is important to remember that corporations (not individual endorsers) are usually the parties held liable for non-compliance with the law and endorsement guides. For example, a recent settlement between the FTC, iHeartMedia and Google placed iHeart and Google under liability for radio recommendations played on iHeart stations on a Google phone that the phone’s endorsers had never used. In this case, there was no penalty for the individual advocates themselves, but in the case of repeat offenders, the FTC sometimes takes individuals out of compliance with the guidelines.
Contact our NIL practice group for assistance in developing endorsement deals that set clear expectations for compliance with the FTC law and endorsement guides.
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© 2023 Ward and Smith, PA For additional information regarding the issues described above, please contact Lilian L. Faulconer or Erica BE Rogers.
This article is not intended to provide, and should not be relied upon, legal advice in any particular circumstance or factual situation. No action should be taken in reliance on the information contained in this article without obtaining the advice of an attorney.
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