MARKETING
I n a retail landscape dominated by the power of social media and influencer marketing , the Federal Trade Commission has ushered in transparency and accountability for retailers , by recently releasing long-anticipated updates to the Guides Concerning the Use of Testimonials and Endorsements in Advertising .
The guides cover everything from social post disclosures , to use of influencers , to customer reviews and ratings , to affiliate marketing practices and beyond . It also includes an expansion of what defines a brand as endorsed and , therefore , covered by regulation – which could mean something as simple as a social tag .
The guides are the FTC ’ s interpretation of Section 5 of the US FTC Act , which prohibits “ unfair or deceptive acts or practices in or affecting commerce ” in the context of testimonials and endorsements . Last updated in 2009 , they prescribe various dos , don ’ ts and hypothetical scenarios for compliance with the truth-in-advertising laws .
The FTC asserts that the rise in social media influencers has led to widespread deceptive advertising practices , and this latest update of the guides tackles the issue head on .
Some key takeaways include :
Clear disclosures are required The guides strongly emphasize the importance of transparency when it comes to brand-endorser relationships . Brands must ensure that any material connections – including payment , other compensation or even gifting , an age-old practice in fashion – between themselves and endorsers , are clearly disclosed in a way that is easily noticeable and understandable to consumers . Endorsers can include celebrities , influencers , media , etc .
For instance , influencers should write “ Sponsored by XYZ ” at the top of a social post spotlighting a brand ’ s handbag , not buried under a long section of copy or in a comment that just says “ thanks XYZ !”.
Brands may share liability with endorsers Brands and their partners , including PR , marketing , advertising , and reputation management teams , can be held responsible if an endorser misleads the public about a material connection to a brand , or a product ’ s effectiveness or their own experience with it .
To prevent this , brands need to offer clear guidance to endorsers , and their own marketing and communications teams and partners , on how to avoid misleading consumers and ensure they disclose important information properly . This is necessary both in endorsement contracts and in development of content and campaigns .
Avoid manipulation of customer reviews Customer reviews , a hallmark of the digital shopping experience , are also addressed in the guides . They state that in “ procuring , suppressing , boosting , organizing , publishing , upvoting , downvoting , reporting , or editing consumer reviews of their products , advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products , regardless of whether the reviews are considered endorsements under the guides .”
Some examples of deceptive practices included in the guides include retailers suppressing negative reviews ; for example , if reviews have a star rating scale , suppressing any reviews below four stars , or highlighting or promoting certain reviews as “ most helpful ” if only the retailer , and not the customers themselves , have selected them as most helpful .
Retailers must take care to ensure that reviews , if posted , are presented fairly and accurately .
Monitoring and enforcing compliance is essential The FTC does take enforcement seriously . In 2021 , the FTC put over 700 companies across all industries “ on notice ,” with a letter advising that violations of the then-existing endorsement guidelines could result in significant financial penalties . In 2022 , the agency brought a highly publicized enforcement action against Kim Kardashian for failing to disclose her promotional relationship with EthereumMax digital tokens . She paid a $ 1.26 million fine .
With these new guides and an anticipated fresh wave of FTC enforcement , it ’ s crucial for brands to monitor and enforce internal compliance proactively , and thoroughly assess , educate , and oversee their influencer and endorsement partners to ensure their compliance as well .
Regular audits and reviews of creative assets , endorsement practices and customer review policies can identify potential issues before they escalate . By showing that they take endorsement compliance seriously and creating a record of compliance efforts , brands may reduce the risk of FTC enforcement action .
Beyond mere compliance : embrace authenticity The updated guides mark a turning point in the influencer age , demanding accountability , honesty and vigilance from retailers . They are more than just legal stipulations ; they signify a call for brands to re-evaluate their approach to marketing and consumer engagement .
Navigating this landscape demands not only compliance but also a strategic shift towards building meaningful connections . As retailers adapt to these regulations , they have a unique opportunity to transcend mere adherence and harness transparency as a tool for cultivating authenticity . This resonates profoundly with a customer base that is increasingly insistent upon genuine engagement .
Nicole Marra is the founder and CEO of Fixer Advisory .
Brooke Crescenti Bulan is the COO of Fixer Advisory .
September 2023 www . insideretail . us 43