September 29, 2016

Regulators and Industry Thought Leaders Discuss Issues in Social Media Advertising

Highlights from "The FTC, Native Advertising and Consumer Privacy"
Holland & Knight Alert
Anthony E. DiResta | Kwamina Thomas Williford | Brian J. Goodrich

Holland & Knight and the Word of Mouth Marketing Association (WOMMA) on Sept. 21, 2016, held an informative, half-day seminar featuring presentations and a panel discussion of trends and forefront regulatory compliance issues in social media marketing and native advertising. The seminar featured speeches by an official from the Federal Trade Commission (FTC) as well as business professionals and other key players in the industry. The morning's presentations and panel discussions included a lively debate over current issues facing brands that market on social media platforms, including legal compliance risks presented by the increased role played by celebratory influencers in the marketing world.

Mary Engle, Associate Director for Advertising Practices at the FTC, served as the seminar's keynote speaker and provided insight on how the Commission applies traditional advertising law principles when regulating new forms of media. In particular, Engle discussed the FTC's expectation that all native advertising be accompanied by prominent disclosures. Engle also stressed that all brands should make a "good-faith effort" at achieving regulatory compliance. Such an effort, she noted, includes a reasonable monitoring program of all third-party marketing affiliates that may endorse or promote a brand.

Other speakers at the event included Tori Chami, Vice President and Senior Counsel, American Express, along with Robert Weissman and Kristen Strader of Public Citizen. The event concluded with a robust panel discussion of seminar takeaways with Chami; Mark Bisard, Vice President and Senior Counsel, American Express General Counsel's Office; Aba Rogers, Counsel at The Coca-Cola Company; and Devin Redmond, General Manager, Digital Security and Compliance Solutions at Proofpoint.

Key Takeaways

In his opening remarks, Holland & Knight Partner Tony DiResta noted the new paradigm shift brought about by social media in which the control of brand messaging has shifted from being in the hands of the brand into the hands of consumers. This posture, all of the speakers agreed, has presented compliance challenges. How can a brand maintain the expected level of compliance with advertising laws and regulations in this environment? Separately, how can a brand maintain control of its reputation in this now user-controlled space? And what behavior is considered ethical in this new landscape?

1. "Don't Be Naïve About Native"

Chami, author of "Don't Be Naïve About Native," WOMMA's guide to compliant and ethical native advertising, described the needs for disclosures when engaging in native advertising – i.e., marketing in a form such that the consumer is not expecting the content to be advertising material. Engle echoed this position, noting that the FTC expects unambiguous disclosures on native advertising. Otherwise, she cautioned, such ads may be considered "deceptive" and draw regulatory scrutiny.

2. #influencerproblems

The day's speakers discussed one of the most difficult current challenges in social media marketing: celebrity endorsements of a product or service on a platform such as Instagram and Twitter. Strader presented several prominent celebrity product endorsements in Instagram posts, pointing out the stark lack of labels or hashtags clearly indicating that the celebrity was paid to make the endorsement.

Engle stressed that all celebrity endorsements paid for by a brand must disclose that fact, and reiterated the importance of following the FTC's guidance in its Dotcom Disclosures Guide. As an example, she reminded that the guide indicates that writing "#ad" in a tweet may be a proper disclosure – as long as it is not buried under a number of other hashtags. Additionally, she reminded that the FTC has taken the view that "#spon" does not sufficiently disclose that a tweet is sponsored.

Engle also warned that brands may be held accountable for "deceptive" advertisements made by influencers. She cautioned that brands should not assume that those individuals or companies that market their products or services are compliant; rather, it is the FTC's expectation that all brands possess an implemented and effective monitoring program.

The panelists echoed Engle's concerns regarding brand influencers, agreed that brands must take an active role in ensuring compliance across all marketing campaigns, and discussed different strategies for protecting brand reputation and maintaining legal compliance. Rogers then discussed brand reputation in this environment, including the reputation risk that brands face by using influencers or other tactics that are not compliant.

3. Let's Get Ethical

Bisard reminded the seminar's attendees of the distinction between "compliant" and "ethical." He disagreed that brands should simply strive for compliance, noting that ethical practices serve to protect the industry as a whole. Bisard and the other speakers also noted that social media platforms are aimed primarily at young people and children; as such, all speakers agreed on the need for industry practices that prevent children from being taken advantage of by marketing practices and disclosures that children may not understand.

4. How Do We Face What's Next?

Engle counseled that brands should assume that traditional FTC principles and regulations apply to new types of platforms even if the FTC has yet to release official guidance. She noted the FTC will expect that companies continue to substantiate all claims, identify through disclosures all paid reviews and endorsements, and prominently display all disclosures regardless of the type of media. 


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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