FTC Takes a New S‘Pin’ on Its Testimonial and Endorsement Guides8 Apr, 2014 By: Linda A. Goldstein
Since the Federal Trade Commission (FTC) issued its latest Endorsement and Testimonial Guides in 2010, direct response marketers have been struggling to deal with the elimination of the typicality disclaimer as a safe harbor and with the challenge of presenting compelling testimonials without risking legal scrutiny by the FTC.
Now, the FTC has created yet another challenge for marketers by taking a rather stringent view of what constitutes an “endorsement” in the social media world. In a somewhat stunning letter announcing the closing of an investigation against Cole Haan, the FTC stated that it considered the act of “pinning images featuring the advertiser’s product” to be an endorsement subject to the FTC’s guides. While the FTC elected not to take any formal action against Cole Haan, the conclusions set forth in the closing letter represent the most expansive view to date that the FTC has taken in connection with its interpretation of the Endorsement and Testimonial Guides sand should send a loud warning bell to marketers just as social media is becoming an integral part of many direct response marketing campaigns.
For those not familiar with Pinterest, it is a social media platform in which users can save and organize images that are known as “pins” in collections that are called “boards.” Typically, Pinterest users will “pin” images that they like, are of interest or relate to a hobby, or that they would like to share with their followers. The “pins” do not need to be accompanied by any text.
It is quite common for marketers to conduct contests on Pinterest, which in some way require contestants to pin one or more images onto a board. In this case, the FTC’s investigation of Cole Haan arose out of a Pinterest contest in which contestants were asked to create Pinterest boards with the title “Wandering Sole.” The contest rules required that each participant pin five images from a group of preselected images provided by Cole Haan, as well as five images of the contestants’ “favorite places to wander.” The contestants were instructed to use the hashtag #WanderingSole in each pin description. According to the contest rules, the contestant with the most creative entry would win a $1,000 shopping spree.
In its closing letter, the FTC stated unequivocally that they believe that the contestant’s pins “featuring the advertiser’s products constitute endorsements of the Cole Haan products.” The FTC then went on to conclude that since the pins were incentivized by the opportunity to win a contest there was a “material connection” between Cole Haan and the contestants that needed to be disclosed. According to the FTC, Cole Haan’s use of the hashtag #WanderingSole was insufficient to disclose this material connection and accordingly constituted a violation of the FTC’s guides.
The FTC’s position in this case has huge implications for marketers. First, as the FTC itself noted, this is the first time that the FTC has publicly stated that entry into a contest is a material connection that has to be disclosed, and that pins on Pinterest constitute an endorsement.
This position naturally raises the question whether other seemingly benign tasks like “likes” on Facebook, posting of photos on Instagram, or Tweeting an advertiser’s tag line might be viewed similarly by the FTC. While the answers to those questions remain unclear, marketers must certainly take a fresh look at their social media campaigns to determine whether they could be considered endorsements under the FTC’s expansive view of the Guides. One can no longer assume that just because there is no textual statement by a consumer actually endorsing the product, that the consumer’s action will not be considered an endorsement. The lesson from the FTC is: when in doubt, disclose. Second, the FTC’s letter makes clear that the disclosure needs to be clear and apparent to the consumer. Using hashtags like #advertisement or #paid or #sponsored, which clearly indicate the existence of a financial connection, are likely to be viewed much more favorably by the FTC.
As direct response marketers begin to embrace the power of social media, compliance with the FTC’s guidelines is yet another item that should be on the checklist for compliance. While in this case the FTC elected not to take any formal action, it may not be as generous the next time.
Linda Goldstein is chair of the Advertising, Marketing and Media division of Manatt Phelps & Phillips LLP, based in the firm’s New York office. She can be reached at email@example.com.