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Direct Response Marketing

Legal Review: So You Want to Do Social Media?

1 Apr, 2012 By: Linda A. Goldstein Response

 Linda A. GoldsteinSocial media marketing offers unique opportunities for direct response marketers to reach consumers in a highly targeted way. Given how heavily DR marketers have relied upon consumer testimonials, opinions and reviews of their products, social media marketing is a natural expansion of DR marketing efforts.

As DR marketers begin the foray into social media, however, they need to be aware of the various legal and business risks that such marketing efforts present.

The key legal issue is compliance with the Federal Trade Commission’s (FTC) Endorsement and Testimonial Guidelines. While marketers are familiar with the Guidelines’ requirements relating to the use of testimonials in traditional DR, compliance also is essential to the legality of any social media marketing campaign

Under the Guidelines, social media marketing is considered “sponsored advertising” and subject to the same requirements as traditional advertising. Thus, even though marketers may have no control over the statements made by their social media agents, they can be liable if those agents fail to comply.

Any “material connection” between an endorser of a product and the advertiser must be disclosed. In the social media context, this basic requirement can be challenging, as social media agents like bloggers and product reviewers are often provided with free product or other “free gifts” as an inducement to try the product. The FTC has taken a very restrictive view of this “material connection” requirement and held, in at least two cases, that even the provision of a nominal “free” gift can be considered a material connection that must be disclosed by the blogger.

In a case involving Ann Taylor, fashion bloggers were invited to a spring preview fashion show and provided with a free goodie bag and a sweepstakes entry for a $500 gift card. The FTC alleged that Ann Taylor had violated the Guidelines because the “free gifts” constituted a material connection that the bloggers needed to disclose, and it was Ann Taylor’s responsibility to ensure that the bloggers disclosed this connection on their blogs. The FTC declined to take formal action against Ann Taylor but only upon the company’s assurances that it would adopt policies and procedures to ensure bloggers would be informed of their obligations to disclose and that the company would affirmatively monitor their activities.

More recently the FTC brought a similar case against Hyundai for a social media campaign designed to build interest around ads scheduled to premiere during the Super Bowl. Apparently Hyundai’s social media advertising agency provided gift certificates to bloggers as an incentive for them to link to the ads and to comment favorably. Many bloggers did not disclose the gifts.

Ultimately, the FTC again decided to close the matter without formal action. However, its reasons for doing so should be instructive to any marketer looking to minimize legal risk when embarking on social media activities: Hyundai did not know that the gift certificates had been given to bloggers; the gift certificates were not distributed by employees of Hyundai, but by one employee of its social media agency; and, most importantly, both Hyundai and its social media agency had policies in place that prohibited the conduct this employee engaged in.

The fact that social media policies were in place was absolutely critical to the FTC’s determination. In fact, the FTC stresses that marketers looking to minimize their liability for social media activities should follow these “3 Ms”: Mandate a social media policy; make sure your employees and agencies are familiar with that policy; and monitor your social media agents.

Marketers also face potential liability for product claims made by their social media agents. As in traditional media, social media agents cannot make claims about a product that the advertiser cannot make on their own. To minimize liability, marketers must ensure that social media agents are well educated as to the claims that they can and cannot make, as well as appropriately monitor social media agents for compliance.

The world of social media is an exciting one, yet one that is also difficult to control. The FTC can and will expect marketers to monitor what is happening in their social media spaces and to take appropriate corrective action when necessary. While it is impossible to monitor everything that is happening, having a reasonable monitoring program in place will go a long way toward reducing liability.

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