FTC Guidance: Our Business Does Not Include Marketing, but if Yours Does, Pay Attention
So let’s say I’m a brand manager at a well-known products company or an entrepreneur launching the latest cool new product – Air-ial Spikes – the latest in footware. The ultimate question: how far can I go before I get a call from the FTC?
As with many legal questions, the answer – it depends. What are some marketing activities we might try? And what should be avoided?
Product Placement. I call up television shows, movie producers, Netflix, Hulu and all sorts of other distributors to get my product out there – the hotter the show or movie, the better. Tons of companies who will help you do this, for a fee of course.
FTC answer (p. 8) – No problem for the FTC, but FCC might want you to make a statement in the credits.
FTC answer (p. 8) – It depends. Most people know Wendy and the women on The Real are not sports types, but they are recognized trendsetters, so be careful. If you try to send them the shoes to give to their audience members, they need to disclose you are sponsoring it. You might also want to review “Celebrity Endorsements” below.
Celebrity Endorsements. Let’s say your shoes are so great that several well-known, fashion-forward celebrities want to endorse your product. Congratulations! Fame and fortune are yours – or not.
Celebrities like free stuff, as we all do. But just because you give it to them for free, does not mean you are off the hook for disclosure. Also, just because some people do not recognize their celebrity does not mean they are off the hook – online personalities like bloggers, Instagram moguls and YouTube sensations all count too!
FTC answer (p. 3, 4, etc): “What if all I get from a company is a $1-off coupon, an entry in a sweepstakes or a contest, or a product that is only worth a few dollars? Does that still have to be disclosed?” If we are talking about cool new footwear, they probably are not cheap (especially when they first launch). But even if they were, the guidance suggests, if you are going to give your product to someone who will influence people in any way, the endorser should disclose.
***IMPORTANT NOTE to all endorsers, celebrities, social media stars, bloggers and anyone else endorsing a product, including friends and family***
The new guidance suggests YOU, yes YOU, may also be liable for statements you make while endorsing a product. DO help out with endorsements when you can, but also DO clarify legally what claims can be proved and attached to your endorsement. (For lawyer-types, see the FTC regulations, §255.3 and §255.5)
Social media is no exception. The FTC does not care that Twitter only allows 140 characters.
FTC answer (p. 12):
- The words “Sponsored” and “Promotion” use only 9 characters.
- “Paid ad” only uses 7 characters.
- Starting a tweet with “Ad:” or “#ad” – which takes only 3 characters – would likely be effective.
Celebrities who know footwear Endorsements. Basketball players and other athletes for this product might have additional considerations to be cautious of – “expert opinions”.
FTC answer (regulations and changes defined since 2009): “For purposes of this part, an expert is an individual, group, or institution possessing, as a result of experience, study, or training, knowledge of a particular subject, which knowledge is superior to what ordinary individuals generally acquire.”
Example 5: A television advertisement for a particular brand of golf balls shows a prominent and well-recognized professional golfer practicing numerous drives off the tee. This would be an endorsement by the golfer even though she makes no verbal statement in the advertisement.
If you have the same celebrity types using social media, consider the same regulations as for other celebrity endorsements AND FTC answer for experts outside typical advertisements.
Slight exception – Endorser pays full price for your product (aka Marketing Gold)
If you can get celebrities and influencers to pay for your product and endorse it, either you have the most amazing luck imaginable or you found all the other ways to influence them and it stuck. Congratulations! Pretend it was something you did and ask for a raise.
FTC answer (p. 3 and 4): If they buy the shoes, wear them out and talk about them, you are off the hook. Same goes for bloggers and other influencers.
Events. Put on a concert series with a bunch of independent musicians whose careers you can channel to new viewers before, during and after the show – with a small budget and no copyright infringement of American Express (they have WAY more lawyers than products companies, no matter how big you are). But let’s say you do it and you advertise the heck of the event and it goes viral – online and in person!
FTC answer: You are a marketing genius! Events sponsored by your company or your product would probably have your company and product name everywhere – that’s the point of doing events. The website would have the information as well (prominently displayed, of course). If you had all the band members wearing your sneakers, though, they need to disclose that – free is still a form of payment. You will also definitely want to check local zoning and attendance rules at your venue – local law enforcement can be just as scary as the feds when it comes to noise and lots of people.
(Also, while individuals at the FTC might be impressed with the event, they might even attend, but that would more reflect a personal choice, not them as FTC employees or in any way endorsing your event, so do not expect any communication from any one directly telling you “You are a marketing genius”.)
Affiliates. When links are created for a person to benefit from someone buying your footwear, the link is not enough. Nor is “buy now” with a link to your site.
FTC answer (p. 18) Make sure an affiliate mentions the connection with your company as often as possible. When you have someone blogging for you, just mentioning it in one blog post is not enough, if they create a second blog post later and it mentions your product again. Same for affiliates.
Additional note for entrepreneurs with a new, cool product. You may not be able to afford any of the above marketing with your first set of sneaks. But, even free product giveaways need disclosure.
If you are launching a cool, new energy drink and sampling it to a bunch of people
FTC Answer: No problem.
If you are launching a cool, new footwear product and sampling it to a few, key people
FTC Answer: In general, a problem, unless they disclose.
What about friends and employees of the organization?
FTC Answer: Still a problem, if they don’t disclose.
Product launches are hard (otherwise everyone would do them). Get creative on your methods, not on the law. Breaking creativity rules get you accolades and a raise, breaking the law now gets you angry letters and consequences from Federal agents.
Don’t believe it could happen to you? Check out the actions since the guidance went out (see more)
***Additional “Truth in Advertising” note to the FTC***
The FTC’s Endorsement Guides is a bit of an advertised misnomer. There are six regulations and one PDF guide with website – the links to “guides” actually links from search or from the originating page: https://www.ftc.gov/news-events/media-resources/truth-advertising/advertisement-endorsements
All of the referenced links in the “Business Education” section points to:
The information provided certainly covers a number of examples and details, but there is only one, not many. And as guidance tells us, avoid overselling.
Additional guidance on 2010 updates: