Most professional marketers don’t understand the FTC rules that apply to online marketing. So as a busy freelancer or small business owner, it’s certainly understandable if this isn’t on your radar.
But this is a critically important thing, as new guidelines are being released that you need to understand. The FTC is about to make an example out of companies that cross the line, even if only out of ignorance.
But you’re an ethical marketer who doesn’t lie in your marketing materials or engage in deceptive practices, right? Even so, you may be unknowingly violating the FTC endorsement guidelines, and the penalties can be harsh.
Now, I used to be an attorney, but I’m not one now. So this isn’t legal advice, but I do know the rules and have to live by them running my company.
In this episode I discuss:
- How “media advertising” laws now apply to us all
- What types of behavior the FTC wants to prevent
- What “endorsement” and “compensation” mean legally
- Examples of situations in which you must disclose (and how)
- How your employees can get you innocently in trouble online
- How “incentive marketing” can cause you serious pain
- Why compliance with the rules is just good business
Listen to 7-Figure Small with Brian Clark below ...
The Show Notes
- FTC Puts Social Media Marketers On Notice With Updated Disclosure Guidelines
- The FTC’S Endorsement Guides: Being Up-Front With Consumers
- How to Turn Disclosure Into a Selling Point
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Brian Clark: Hey there everyone, welcome to another episode of Unemployable. I’m your host, Brian Clark and today, yeah, we are talking about a legal issue again but this one is important. It affects everyone who does any form of marketing online and know one seems to understand it, and it’s also in the news again because we are about to see some of the ramifications of this topic.
How “Media Advertising” Laws Now Apply to Us All
It’s said that thanks to the Internet, and specifically the rise of social networks, that we’re all the media now. If that sounds like philosophical hyperbole, just know that the US Federal Trade Commission takes it quite literally.
As you likely know, the FTC is an independent agency of the United States government with the principal mission of consumer protection. And they’re protecting consumers from people like you when you promote your business, products, and services online.
Now, that may have struck a nerve. You’re an ethical marketer who doesn’t lie in your marketing materials or engage in deceptive practices, right? Even so, you may be unknowingly violating the FTC endorsement guidelines, and the penalties can be harsh.
What “Endorsement” Means Legally
In general terms, “endorsement” refers to promoting something or someone to other people for some sort of incentive or gain. The easiest example is the celebrity spokesperson who is paid to promote a product in a TV commercial, but the application of the rules goes way beyond that sort of obvious paid endorsement.
Giving paid endorsements is fine, as long as the people you’re communicating with understand “what’s in it for you” from the standpoint of material gain. If “what’s in it for you” is not easily apparent, you must affirmatively disclose it.
If you’re in the dark on this, you’re not alone. A 2014 survey revealed that 29% of marketers were completely unaware of the endorsement disclosure rules, and that only 10% were both aware of and understood the FTC guidelines. And these are professional marketers!
As a busy freelancer or small business owner, it’s certainly understandable if this isn’t on your radar. Unfortunately, that won’t matter one bit to the FTC if you end up in their crosshairs.
So, this is a quick primer on what you need to know. The rules apply in two broad scenarios that you need to know what to do and what to avoid: when you are endorsing outside products, services, or people, and when others are endorsing you, your company, products, or services.
When You’re Endorsing for Compensation
Let’s look at five examples that demonstrate when you must disclose, and what “compensation” means in this context. Keep in mind that in all cases what you say must be truthful and not amount to deception, regardless of the disclosure aspect.
- Someone pays Kim Kardashian to promote a product in a tweet. She must disclose the compensation in the tweet itself.
- Kobe Bryant is an investor in a sports drink company. When he promotes the drink on Facebook, he must disclose that he’s an investor.
- When Joe Blow tells his email list to buy a book using an Amazon affiliate link, he must disclose that he will receive payment for every purchase made.
- When Joe Blow tells his email list to buy a book that an author or publisher sent him for free, he must disclose that the book was a gift.
- When Jenny Freelancer promotes the product or service of a client, she must disclose the client relationship.
Endorsements that Don’t Require Disclosure
Now, let’s look at a few endorsements that don’t require disclosure:
- You buy, read, and love a book, and tell your audience to buy it (no affiliate link).
- You profess your undying love for Apple products, just because you do, not because Apple of anyone else has or is giving you something.
- You recommend that others consider buying a stock that you don’t personally own or have any financial incentive in.
Compensation really boils down to some material gain, either in the form of money (now or in the future) or receiving goods and services that you didn’t have to pay for. Of course, we gain other intangible benefits when we recommend great things to our friends and followers, but those are not the type of benefits the FTC is concerned with.
It’s also important to realize that the disclosure must accompany the endorsement. A blanket notice on your website about the use of affiliate links is likely not going to cut it. And the FTC guidelines have specifically said that a disclosure in your social media bio isn’t good enough – it’s got to be in the post or tweet itself.
When Others Are Endorsing You for Compensation
The first thing to make clear here is that when you’re selling your own stuff directly, these rules don’t apply. It’s reasonable to expect that people understand that your company website and company branded social media accounts are promoting the goods and services of the company.
The personal social media accounts of company employees are a little different. It should be clear that the employee is representing the company when she is endorsing a company offering, and the FTC has said that the notation of employment in the bio area is NOT enough.
- If a restaurant employee leaves a review on Yelp about the restaurant, employment must be disclosed in the review.
- If an employee tweets about a company offering, the content must make it reasonably clear that they are a part of the company. Something like “I’m so proud of all the new features in our
,” as opposed to just “Check out .”
Endorsements from People Outside the Company
Finally, let’s talk about endorsements from people outside the company, or word of mouth. This is the most valuable form of organic promotion you can get, as long as it’s not incentivized.
Again, examples are the best way to get clarity on this:
- Cole Haan did a promotion that required Pinterest users to pin product photos from their website for a chance to win a $1,000 shopping spree. Because those Pinterest posts served as endorsements of products and were incentivized, the Pinners needed to include a disclosure about the contest, but it was Cole Haan that got the letter from the FTC. This actually happened, and was the case that led to the latest clarification of the FTC endorsement guidelines.
- Let’s say I’d like you to leave an honest review of the Unemployable podcast over at iTunes, which of course I’d love. To reward you for taking the time, I promise to give you a free ebook after you leave the review. I would have to make it a condition of the promotion that you disclose in your review that you where incentivized by the ebook to give the review, which pretty much defeats the purpose of how honest reviews are supposed to work.
This last example truly gets at the heart and spirit of the law. If someone reads reviews over at iTunes in order to get an accurate impression of the Unemployable podcast, the fact that I rewarded you for leaving one is information that might change that person’s impression. Therefore, it must be legally disclosed.
So, your next question may be “What are the odds that the FTC will come after little ol’ me?” After all, it’s a really big Internet.
Why Compliance With the Rules is Just Good Business
It’s true that it’s impossible to monitor everything that happens online, so the FTC has historically made examples of infringers, often big brands, in order to scare everyone into compliance. That said, there’s nothing to stop them making an example of my company, your company, or anyone else’s.
Ultimately, complying with the FTC guidelines is just smart business. Misleading your prospects, customers, and clients – even inadvertently – can lead to the kind of networked word of mouth that buries your business instead of building it.
All right, that’s enough for this episode. Hopefully, this was helpful and not just frightening. It really is pretty simple once you get it clear, the type of miscommunication or misperception that the FTC wants to avoid for consumer protection, even if it’s relatively harmless.
Next up, we are going to talk about marketing processes. Something a little sexier and fun, but for now, let’s wrap this one up and have a great week. Keep going.
Hm. I contacted people from our list to see if they would leave an honest review on Amazon if I sent them a free book. Several did. Issue?
You know, all kinds of product providers incentivize positive Amazon reviews. I just did one last month to get a free bottle of supplements. I wonder if the FTC would nail Amazon for this non-disclosure…
Brian Clark says
Yes, that’s exactly the kind of thing the new guidelines clearly say is out of bounds. And yes, it’s a common thing, which is why the FTC is specifically saying “don’t do that.”
As for Amazon, they may benefit indirectly from this type of stuff, but they’re not the promoter. You are the one providing the incentive (like Cole Haan in the example), and Amazon (as with Pinterest) is only the platform.
Hope this helps!
I wonder if I were to say in my email soliciting reviewers: “According to FTC rules, your review must state that you were provided a free book in exchange for a review, so if you decide to participate, you’ll be agreeing to this condition.”
I would think that would cover me if the reviews didn’t state that and the FTC questioned them.
My thinking is that it is not out of bounds to request such a review as long as the conditions are clearly stated and there is implied acceptance of those conditions. In the end, I have no mechanism for forcing another party to live up to the terms since the review is left on a 3rd party platform, but I did my part in good faith.
Brian Clark says
That’s exactly what you would have to do, and certainly can. I just wonder how effective that review ends up being in the minds of those who are reading the review.
Will they just mentally discount them, or even be turned off? Personally, I’ll be working on ways to encourage reviews without incentives, which is tougher, but doable.
Steven Davis says
Great content, sadly, it probably won’t get read by those who need it most.
Thank you for this episode. Very insightful. It did make me wonder about giveaways… How do you think “RT for a chance to win” or “Share a tweet for an extra entry” is effected by the FTC rules?
Brian Clark says
KC, if you’re not asking people to same something nice about you or promote a product or service, it’s not an endorsement. The thing you would have to look out for in your example are the sweepstakes laws that apply to contests.