Analyzing Advertiser Liability for Blogger Reviews

Because only endorsements are subject to the requirements under the Guides, determining whether a social media post or blog message is an endorsement is extremely important. When an endorsement exists and is used in advertising, the FTC has long held that any “material connection” between the advertiser and the endorser must be adequately disclosed. A material connection means one that is not readily apparent or reasonably expected by the audience and that, if known, could affect the weight or credibility the audience gives the endorsement. Disclosing the connection thus allows the audience to determine for itself the proper level of credibility to give the endorsement.

The Guides define an “endorsement” as “any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings or experiences of a party other than the sponsoring advertiser.” (The FTC considers the terms “endorsement” and “testimonial” as being the same for purposes of the Guides. The party whose opinions, belief, findings or experience the message appears to reflect will be called the endorser and may be an individual, group or institution.) Accordingly, for a statement to be considered an endorsement under the Guides, the statement: 1) must be an advertising message (as opposed to a mere personal opinion or an editorial message); and 2) which consumers are likely to believe is the statement of someone other than the advertiser.

So the fundamental question in determining whether a positive message by a blogger or consumer about a product or service constitutes an endorsement under the Guides is whether, when viewed objectively, the relationship between the advertiser and the speaker is such that the speaker's statements can be considered “sponsored” by the advertiser and, therefore, an “advertising message.” A key question to ask is whether or not the speaker is: 1) acting solely independently, in which case there is no endorsement; or 2) acting on behalf of the advertiser (or its agent), such that the speaker's statement is an “endorsement” that is part of the advertiser's overall marketing campaign. And while the facts and circumstances that will determine the answer are extremely varied, and will be decided by the FTC on a case-by-case basis, such factors would include: whether the speaker is compensated by the advertiser; whether the product or service in question was provided for free by the advertiser; the previous receipt of products or services; or the value of the items and services received.

Clearly, a blogger who purchases a product with her own money and praises it on a personal post or blog is not making an endorsement, while postings by a consumer who is paid to speak about an advertiser's product will be covered by the Guides. Most posts fall somewhere between these far ends of the spectrum, and determining whether the post is an endorsement or not can often be difficult. For example, if a consumer or blogger receives products from an advertiser, but is not paid any compensation other than the value of the product itself, the FTC has stated that whether or not any positive statement the blogger posts would be deemed an “endorsement” would depend on many factors, including the value of the product and whether the blogger routinely receives such requests. Fortunately, recent FTC investigations and other legal actions in this area have helped to provide further clarity as to what level of connection is needed to establish an endorsement. Unfortunately for advertisers, however, the legal consensus seems to be that it is not very much connection at all.

Legal Guidance

In 2010, Ann Taylor LOFT (Ann Taylor) became the first company to be investigated by the FTC under the revised Guides. See, “Letter from Mary Engle, Associate Director, Federal Trade Commission” (April 20, 2010). Ann Taylor had invited bloggers to attend a preview event and post about the collection in exchange for gifts and the chance to win a gift card worth up to $500. All 31 bloggers who attended the event wrote positive reviews, but only two disclosed in their review that they had received gifts from Ann Taylor. The FTC decided to investigate because it was “ concerned that bloggers ' failed to disclose that they received gifts for posting blog content about the event.” Id. And although the FTC felt that the provision of gift cards did establish a material connection that needed to be disclosed in the blogger reviews, it declined an enforcement action due in large part to the fact that it was a one-time event, there was a sign at the event instructing bloggers to disclose any gifts received, and, importantly, Ann Taylor had created a written policy shortly after the event stating that it would not issue gifts to bloggers without first instructing them they must disclose the gifts in their blogs.

A recent challenge at the National Advertising Division (NAD) of the Council of Better Business Bureaus (bbb.org) brought by the yogurt company Chobani against its competitor General Mills for certain Yoplait advertising, has provided further evidence that provision of a gift card, even one of very low value, is enough to establish a material connection between an advertiser and consumer reviewer which must be disclosed. See , General Mills, Case #5715, NAD Case Reports (05/19/14). General Mills had sent around 5,000 consumers a $4 gift card so that they could purchase Yoplait, and had encouraged consumers to complete their own yogurt taste tests and share their results on social media using the hashtag “#tasteoff.” Chobani charged that Yoplait had provided consumers with the free products or gift cards so they could post positive reviews online, and that neither the bloggers nor General Mills, when it republished the reviews, disclosed this material connection. Yoplait countered that because consumers were not obligated to post a review as a condition of receiving gift cards or sent a gift card as a reward for a positive review, the gift card was not conditional upon posting a review. This, combined with the fact that the value of the card was so low and it was a one-time gift offering, meant that the gift cards did not create a lasting relationship between the brand and the consumer and did not constitute a material connection between it and the consumers. In other words, a $4 gift card was insufficient to influence the opinions shared or impact a consumer's opinion when reading that post.

The NAD disagreed. It determined that a $4 gift card was not such a small incentive as to render the connection “immaterial” in light of the level of consumer engagement, and that the gift card served to establish a connection between General Mills and those consumers that would be unexpected by the audience. The NAD stated that its determination was influenced heavily by the FTC's guidance and in particular the example given in the Guides in which the FTC advised that a movie ticket provided as an incentive to provide an opinion of the movie was a material connection that required disclosure. See , Section 255.2, example 7. The NAD was also influenced by the FTC's recent investigation into the Cole Haan contest on Pinterest, which seems to have broadened the scope of what the FTC may consider a material connection and an endorsement. See, “Letter from Mary Engle” (March 20, 2014).

In the Cole Haan contest, entrants were required to create their own pin boards entitled “Wandering Sole” and pin images of Cole Haan shoes from Cole Haan's Wandering Sole Pinterest Board, as well as images of the entrant's “favorite places to wander.” Entrants were also instructed to include the hashtag #WanderingSole in each pin description. The entrant with the most creative entry (based on Cole Haan's judging criteria) would win a $1,000 shopping spree. The FTC determined that an entry into a contest to receive a significant prize in exchange for a positive product message constitutes a material connection that would not reasonably be expected by viewers of the endorsement. The FTC felt that the mere pinning of an image to a personal Pinterest board constituted enough of a positive message that, when combined with advertiser influence, made the pins an endorsement under the Guides. As such, the fact that entrants pinned images of Cole Haan products to their own publicly viewable pin boards in return for the opportunity to win a $1,000 shopping spree was a material connection that should have been disclosed. Furthermore, according to the FTC, the #WanderingSole hashtag did not adequately communicate the material connection between entrants and Cole Haan.

What is curious about the FTC's statements in the Cole Haan matter is that the Commission had previously stated that if a consumer receives a single, unsolicited item from an advertiser and speaks positively about it once, her statements would not likely be deemed an endorsement given the absence of a course of dealing with the advertiser that would suggest that the consumer is disseminating a “sponsored” advertising message. The FTC had indicated that it is only when a person frequently receives products because he or she is known to have wide readership within a particular demographic group that is the advertiser's target market, the person's statements on his or her blog or social media page about the products would likely be deemed an endorsement. Furthermore, the higher the value of the item received, the more likely the recipient is to speak positively about the advertiser's product.

This type of “value-based” reasoning may have been a factor in the NAD's 2011 decision in Coastal Contacts, Case #5387, NAD Case Reports (October 2011), where it addressed “like-gated” Facebook promotions. “Like-gating” is the requirement that consumers “like” a brand's Facebook page to enter a contest or sweepstakes, to gain access to a deal or a coupon code, to obtain early access to merchandise, or to get other savings. In the NAD matter, Coastal's competitor, 1-800-Contacts, challenged the practice of “like-gating” by claiming that Coastal's posting of the total number of likes it has accumulated was deceptive since they were inappropriately obtained. But the NAD found that the likes were legitimate “general social endorsements,” which could be interpreted in many ways by the consumer, one of which was that the like was obtained as part of a like-gated promotion. Unfortunately, the NAD decision left open the question of whether the Guides would require that the advertiser disclose the extent to which likes were obtained in response to a like-gated promotion. However, come November this issue may be moot, because Facebook has announced in its Platform Policies that “[e]ffective November 5th, 2014, [advertiser's] may no longer incentivize people to like [the advertiser's Facebook page].” https://developers.facebook.com/policy. Advertisers can continue to request that people “like” a page ' only like-gating has been barred. Facebook's decision shows a continuation of the trend that incentivized endorsements, no matter how small the incentive, must be disclosed, and when disclosure is not possible, either the incentive or the endorsement withdrawn.

Conclusion

Under the revised Guides, an advertiser can be liable for a consumer or blogger's omission of material disclosures and/or misleading or unsubstantiated statements in consumer-generated media if an endorser-sponsor relationship exists. If such a relationship exists, and the blogger fails to disclose a material connection with the advertiser, or makes a misleading or unsubstantiated statement about the advertiser's product, the FTC will consider the advertiser's efforts to advise the blogger of blogger's responsibilities and to monitor the blogger's online behavior when determining what action, if any, would be warranted. Thus, it is important that advertisers advise bloggers and consumers with whom they have a material connection to disclose their relationship with the advertiser whenever making a positive review about the advertiser or its products or services, and to be truthful in the claims they make. And advertisers should monitor such bloggers to ensure that they make the necessary disclosures and that their statements are not misleading or unsubstantiated. If the blogger does not make the necessary disclosures or makes misleading or unsubstantiated statements about the advertiser's products, the advertiser should cease sponsoring the blogger and take steps necessary to halt the publication of misleading or unsubstantiated representations when they are discovered.

Ronald R. Urbach is chairman of Davis & Gilbert and co-chair of its advertising, marketing and promotions practice group. Edward Kabak is chief legal officer of the Brand Activation Association. Matthew E. Smith is an associate at Davis & Gilbert. This article originally appeared in the New York Law Journal, an ALM sibling of this newsletter.

This holiday shopping season, millions of Americans will look to their social media friends or favorite bloggers for advice when deciding which gifts to buy. And with over 42 million blog sites in the United States alone, there are plenty of “peer” opinions to consider. See, “State of the Blogging World” Infographic at Blogging.org. But are consumer-generated product-related reviews or commentary always the mere opinion of the person posting them, as many readers may believe? What if the company whose product is the subject of the review had, in fact, exerted such influence over the reviewer that it affected what was written, turning a seemingly personal post into something more akin to advertising?

There's no question that in today's consumer marketplace, digital “word-of-mouth” reviews are a major influence on the purchasing decision. This new reality was expressly recognized by the Federal Trade Commission (FTC) when it released its updated Guides Concerning the Use of Endorsements and Testimonials in 2009 (the Guides), 16 C.F.R. '255. The FTC included examples in Guides that made it clear that the FTC believed its authority to regulate commercial speech extends into a consumer's personal posts when a certain type of quid pro quo relationship between the consumer and advertiser exists. In the opinion of the FTC, when a benefit from the advertiser is exchanged for a positive consumer review, that consumer's post should no longer be considered merely to be her personal opinion, but instead must be seen as an endorsement and an advertising message, and subject to '5 of the FTC Act, 15 U.S.C. '45.

The Guides

Because only endorsements are subject to the requirements under the Guides, determining whether a social media post or blog message is an endorsement is extremely important. When an endorsement exists and is used in advertising, the FTC has long held that any “material connection” between the advertiser and the endorser must be adequately disclosed. A material connection means one that is not readily apparent or reasonably expected by the audience and that, if known, could affect the weight or credibility the audience gives the endorsement. Disclosing the connection thus allows the audience to determine for itself the proper level of credibility to give the endorsement.

The Guides define an “endorsement” as “any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings or experiences of a party other than the sponsoring advertiser.” (The FTC considers the terms “endorsement” and “testimonial” as being the same for purposes of the Guides. The party whose opinions, belief, findings or experience the message appears to reflect will be called the endorser and may be an individual, group or institution.) Accordingly, for a statement to be considered an endorsement under the Guides, the statement: 1) must be an advertising message (as opposed to a mere personal opinion or an editorial message); and 2) which consumers are likely to believe is the statement of someone other than the advertiser.

So the fundamental question in determining whether a positive message by a blogger or consumer about a product or service constitutes an endorsement under the Guides is whether, when viewed objectively, the relationship between the advertiser and the speaker is such that the speaker's statements can be considered “sponsored” by the advertiser and, therefore, an “advertising message.” A key question to ask is whether or not the speaker is: 1) acting solely independently, in which case there is no endorsement; or 2) acting on behalf of the advertiser (or its agent), such that the speaker's statement is an “endorsement” that is part of the advertiser's overall marketing campaign. And while the facts and circumstances that will determine the answer are extremely varied, and will be decided by the FTC on a case-by-case basis, such factors would include: whether the speaker is compensated by the advertiser; whether the product or service in question was provided for free by the advertiser; the previous receipt of products or services; or the value of the items and services received.

Clearly, a blogger who purchases a product with her own money and praises it on a personal post or blog is not making an endorsement, while postings by a consumer who is paid to speak about an advertiser's product will be covered by the Guides. Most posts fall somewhere between these far ends of the spectrum, and determining whether the post is an endorsement or not can often be difficult. For example, if a consumer or blogger receives products from an advertiser, but is not paid any compensation other than the value of the product itself, the FTC has stated that whether or not any positive statement the blogger posts would be deemed an “endorsement” would depend on many factors, including the value of the product and whether the blogger routinely receives such requests. Fortunately, recent FTC investigations and other legal actions in this area have helped to provide further clarity as to what level of connection is needed to establish an endorsement. Unfortunately for advertisers, however, the legal consensus seems to be that it is not very much connection at all.

Legal Guidance

In 2010, Ann Taylor LOFT (Ann Taylor) became the first company to be investigated by the FTC under the revised Guides. See, “Letter from Mary Engle, Associate Director, Federal Trade Commission” (April 20, 2010). Ann Taylor had invited bloggers to attend a preview event and post about the collection in exchange for gifts and the chance to win a gift card worth up to $500. All 31 bloggers who attended the event wrote positive reviews, but only two disclosed in their review that they had received gifts from Ann Taylor. The FTC decided to investigate because it was “ concerned that bloggers ' failed to disclose that they received gifts for posting blog content about the event.” Id. And although the FTC felt that the provision of gift cards did establish a material connection that needed to be disclosed in the blogger reviews, it declined an enforcement action due in large part to the fact that it was a one-time event, there was a sign at the event instructing bloggers to disclose any gifts received, and, importantly, Ann Taylor had created a written policy shortly after the event stating that it would not issue gifts to bloggers without first instructing them they must disclose the gifts in their blogs.

A recent challenge at the National Advertising Division (NAD) of the Council of Better Business Bureaus (bbb.org) brought by the yogurt company Chobani against its competitor General Mills for certain Yoplait advertising, has provided further evidence that provision of a gift card, even one of very low value, is enough to establish a material connection between an advertiser and consumer reviewer which must be disclosed. See , General Mills, Case #5715, NAD Case Reports (05/19/14). General Mills had sent around 5,000 consumers a $4 gift card so that they could purchase Yoplait, and had encouraged consumers to complete their own yogurt taste tests and share their results on social media using the hashtag “#tasteoff.” Chobani charged that Yoplait had provided consumers with the free products or gift cards so they could post positive reviews online, and that neither the bloggers nor General Mills, when it republished the reviews, disclosed this material connection. Yoplait countered that because consumers were not obligated to post a review as a condition of receiving gift cards or sent a gift card as a reward for a positive review, the gift card was not conditional upon posting a review. This, combined with the fact that the value of the card was so low and it was a one-time gift offering, meant that the gift cards did not create a lasting relationship between the brand and the consumer and did not constitute a material connection between it and the consumers. In other words, a $4 gift card was insufficient to influence the opinions shared or impact a consumer's opinion when reading that post.

The NAD disagreed. It determined that a $4 gift card was not such a small incentive as to render the connection “immaterial” in light of the level of consumer engagement, and that the gift card served to establish a connection between General Mills and those consumers that would be unexpected by the audience. The NAD stated that its determination was influenced heavily by the FTC's guidance and in particular the example given in the Guides in which the FTC advised that a movie ticket provided as an incentive to provide an opinion of the movie was a material connection that required disclosure. See , Section 255.2, example 7. The NAD was also influenced by the FTC's recent investigation into the Cole Haan contest on Pinterest, which seems to have broadened the scope of what the FTC may consider a material connection and an endorsement. See, “Letter from Mary Engle” (March 20, 2014).

In the Cole Haan contest, entrants were required to create their own pin boards entitled “Wandering Sole” and pin images of Cole Haan shoes from Cole Haan's Wandering Sole Pinterest Board, as well as images of the entrant's “favorite places to wander.” Entrants were also instructed to include the hashtag #WanderingSole in each pin description. The entrant with the most creative entry (based on Cole Haan's judging criteria) would win a $1,000 shopping spree. The FTC determined that an entry into a contest to receive a significant prize in exchange for a positive product message constitutes a material connection that would not reasonably be expected by viewers of the endorsement. The FTC felt that the mere pinning of an image to a personal Pinterest board constituted enough of a positive message that, when combined with advertiser influence, made the pins an endorsement under the Guides. As such, the fact that entrants pinned images of Cole Haan products to their own publicly viewable pin boards in return for the opportunity to win a $1,000 shopping spree was a material connection that should have been disclosed. Furthermore, according to the FTC, the #WanderingSole hashtag did not adequately communicate the material connection between entrants and Cole Haan.

What is curious about the FTC's statements in the Cole Haan matter is that the Commission had previously stated that if a consumer receives a single, unsolicited item from an advertiser and speaks positively about it once, her statements would not likely be deemed an endorsement given the absence of a course of dealing with the advertiser that would suggest that the consumer is disseminating a “sponsored” advertising message. The FTC had indicated that it is only when a person frequently receives products because he or she is known to have wide readership within a particular demographic group that is the advertiser's target market, the person's statements on his or her blog or social media page about the products would likely be deemed an endorsement. Furthermore, the higher the value of the item received, the more likely the recipient is to speak positively about the advertiser's product.

This type of “value-based” reasoning may have been a factor in the NAD's 2011 decision in Coastal Contacts, Case #5387, NAD Case Reports (October 2011), where it addressed “like-gated” Facebook promotions. “Like-gating” is the requirement that consumers “like” a brand's Facebook page to enter a contest or sweepstakes, to gain access to a deal or a coupon code, to obtain early access to merchandise, or to get other savings. In the NAD matter, Coastal's competitor, 1-800-Contacts, challenged the practice of “like-gating” by claiming that Coastal's posting of the total number of likes it has accumulated was deceptive since they were inappropriately obtained. But the NAD found that the likes were legitimate “general social endorsements,” which could be interpreted in many ways by the consumer, one of which was that the like was obtained as part of a like-gated promotion. Unfortunately, the NAD decision left open the question of whether the Guides would require that the advertiser disclose the extent to which likes were obtained in response to a like-gated promotion. However, come November this issue may be moot, because Facebook has announced in its Platform Policies that “[e]ffective November 5th, 2014, [advertiser's] may no longer incentivize people to like [the advertiser's Facebook page].” https://developers.facebook.com/policy. Advertisers can continue to request that people “like” a page ' only like-gating has been barred. Facebook's decision shows a continuation of the trend that incentivized endorsements, no matter how small the incentive, must be disclosed, and when disclosure is not possible, either the incentive or the endorsement withdrawn.

Conclusion

Under the revised Guides, an advertiser can be liable for a consumer or blogger's omission of material disclosures and/or misleading or unsubstantiated statements in consumer-generated media if an endorser-sponsor relationship exists. If such a relationship exists, and the blogger fails to disclose a material connection with the advertiser, or makes a misleading or unsubstantiated statement about the advertiser's product, the FTC will consider the advertiser's efforts to advise the blogger of blogger's responsibilities and to monitor the blogger's online behavior when determining what action, if any, would be warranted. Thus, it is important that advertisers advise bloggers and consumers with whom they have a material connection to disclose their relationship with the advertiser whenever making a positive review about the advertiser or its products or services, and to be truthful in the claims they make. And advertisers should monitor such bloggers to ensure that they make the necessary disclosures and that their statements are not misleading or unsubstantiated. If the blogger does not make the necessary disclosures or makes misleading or unsubstantiated statements about the advertiser's products, the advertiser should cease sponsoring the blogger and take steps necessary to halt the publication of misleading or unsubstantiated representations when they are discovered.

Ronald R. Urbach is chairman of Davis & Gilbert and co-chair of its advertising, marketing and promotions practice group. Edward Kabak is chief legal officer of the Brand Activation Association. Matthew E. Smith is an associate at Davis & Gilbert. This article originally appeared in the New York Law Journal, an ALM sibling of this newsletter.