FTC Compliance Tips
Failure to Maintain FTC Compliance Can Lead to Costly Investigations and Penalties. Here are Some Tips for Companies, Agencies, and Influencers.
Virtually all types of online advertising are subject to FTC compliance. The U.S. Federal Trade Commission (FTC) is responsible for enforcing a wide range of consumer protection statutes; and, while the FTC doesn’t necessarily monitor companies’ and influencers’ online content, it does pursue investigations when alerted to potential statutory or regulatory violations.
With this in mind, companies, influencers, and digital marketing agencies that work with companies and influencers need to ensure that they have a clear understanding of what it takes to maintain FTC compliance. While it is important to obtain custom-tailored legal advice, here are some general tips that most entities and individuals can follow:
10 Tips for FTC Compliance in Digital Advertising
Tip #1: Don’t Make Assumptions
There are several aspects to FTC compliance, and company and agency executives as well as influencers need to ensure that they are making informed decisions about all matters that are subject to the FTC’s oversight. Assumptions can be costly, both with regard to when compliance is required and with regard to what is required in order to comply.
Just because you see another company or influencer doing something a certain way online, this does not mean that way is appropriate. Many companies and influencers do not have a clear understanding of FTC compliance, and many unknowingly make mistakes on a daily basis. While these companies and individuals may or may not eventually get caught, taking the risk of making the same mistakes simply isn’t worth it.
Tip #2: Substantiate All Factual Claims
Substantiation is a key aspect of FTC compliance. When making any type of factual claim, it is necessary to have substantiation (or proof). If a factual advertising claim cannot be substantiated, then it cannot be made.
Oftentimes, there will be a fine line between a factual claim requiring substantiation and a statement of opinion. For example, while a statement such as, “Brand A is the best on the market,” may require substantiation (as well as an explanation of the characteristic(s) with respect to which the brand is considered the “best”) a statement such as, “I prefer Brand A,” may not. When substantiation is required, this step should be taken as a precursor to making the claim in question.
Tip #3: Don’t Pick and Choose
Picking-and-choosing is a common practice that often gets companies into trouble with the FTC. When publishing testimonials, for example, companies cannot selectively choose testimonials (or portions of testimonials) that give a misleading view of customer sentiment. The same goes for test results, success stories, and other similar types of advertising claims.
Tip #4: Avoid Making Overly-Broad Claims
Related to substantiation and picking-and-choosing, companies and influencers must also avoid making overly-broad claims. For example, if a survey reveals that most customers prefer the company’s brand over a competitor’s, the company cannot say that “Customers prefer Brand A” without also including qualifying statements and disclosures. Similarly, if an influencer tests a product once (or even a handful of times), a statement such as, “Brand A’s product always works,” would likely be considered overly-broad—and therefore misleading to consumers.
Tip #5: Get (or Provide) Training on FTC Compliance
Due to the variety of issues that can lead to trouble with the FTC, influencers can benefit greatly from compliance training. By understanding what is permitted, what is prohibited, and when qualifying statements and disclosures are required, influencers can significantly mitigate their risk of facing penalties due to an FTC investigation. For companies and advertising agencies, ensuring that all relevant personnel have a basic understanding of FTC compliance can go a long way toward mitigating their risk as well.
Tip #6: Be Careful When Using Sponsored Content
Recently, the FTC has been paying particular attention to sponsored content. This includes sponsored content in native advertising and on social media. The FTC requires companies, advertisers, and influencers to provide appropriate disclosures with all sponsored content—and it provides specific recommendations regarding format, context, and content in some cases.
If sponsored content does not comply with the FTC’s requirements (i.e. because it lacks adequate disclosures), this can lead to enforcement action for both the company sponsoring the content and the entity or individual promoting it. Thus, advertisers and influencers cannot rely exclusively on companies to provide compliant sponsored content, and companies cannot turn a blind eye to third-party publishers’ disclosures (or lack thereof).
Tip #7: Be Careful When Running Giveaways and Promotions
Giveaways and other similar types of promotions have become popular marketing tools online as well. When conducting these types of promotions, companies and individuals must be careful to comply with the FTC’s rules and regulations that govern lotteries, sweepstakes, and contests.
Generally speaking, companies and individuals cannot require potential participants to give anything of value (including their email address or signing up for a subscription). Even if this is the entire purpose of the promotion, there must generally be a “no-cost” option as well. In addition, the rules of the promotion must be clearly defined (and published), and the giveaway must be conducted according to these pre-defined rules.
Tip #8: Be Careful When Negotiating Contracts
In light of the risks of FTC non-compliance and the fact that companies and individuals can be held liable for others’ mistakes in some cases, careful contract negotiation is extremely important. Contracts between companies, agencies, influencers, and other publishers should clearly establish each party’s respective roles and responsibilities, and they should include appropriate warranty, indemnification, and insurance provisions as well.
Generally speaking, the FTC generally does not allow private parties to use contracts to shift liability entirely. But, having adequate contractual protections in place helps ensure that both (i) the risk of violations is limited, and (ii) in the event of a violation, appropriate remedies will be available.
Tip #9: Document Your FTC Compliance Efforts
Ideally, efforts to maintain FTC compliance will prevent the need to assert a defense during an FTC investigation. But, in the event that this becomes necessary, having documentation of compliance on hand will significantly reduce the risk of facing liability. It can also significantly reduce the cost of asserting a successful defense.
For companies and agencies, this means adopting written FTC compliance policies and procedures. It also means monitoring the company’s or agency’s compliance efforts—and documenting the company’s or agency’s findings consistently and on an ongoing basis. For influencers, this may simply mean getting advice from legal counsel. While any direct communications will be subject to the attorney-client privilege, simply being able to show that you have relied on legal advice can often go a long way toward avoiding undesirable consequences.
Tip #10: Don’t Forget about Consumer Data Security
Finally, any time a company or individual collects consumer data, that company or individual must comply with the FTC’s data security requirements. This is another area where we have seen increased enforcement in recent years. As cybersecurity threats continue to proliferate and evolve at unprecedented speeds, the FTC and other agencies are prioritizing compliance in this area.
With regard to cybersecurity, the FTC has different expectations for different entities. While large companies are expected to devote substantial resources to implementing strict cybersecurity protocols, influencers who collect their followers’ contact information generally have lesser obligations. With that said, the importance of cybersecurity cannot be overlooked, and companies and individuals alike should address cybersecurity from the perspective of doing what is necessary to keep the data in their custody safe—and not necessarily doing the minimum that the FTC requires.
FAQs: What Do Companies, Agencies, and Influencers Need to Know about FTC Compliance?
How Important is It for Companies and Influencers to Maintain FTC Compliance?
Maintaining FTC compliance is extremely important. Not only can non-compliance potentially lead to an FTC investigation, but many violations can lead to civil litigation as well.
How Do I Know if I Need (or My Company Needs) to Comply with FTC Rules and Regulations?
The Federal Trade Commission Act and the FTC’s rules and regulations govern content marketing, social media marketing, pay-per-click (PPC) advertising, and other forms of online advertising in various respects. If you promote a company’s products or services online, or if your company relies on digital marketing, then you need to give due consideration to FTC compliance.
What Should I Do if I Have Questions about FTC Compliance?
If you have questions about FTC compliance, you should consult with a lawyer. There are several issues to consider, and there are several missteps and miscues that can lead to trouble with the FTC. At Oberheiden P.C., we can help, and we encourage you to contact us for a complimentary consultation.
Speak with an Oberheiden P.C. Lawyer about FTC Compliance
If you have questions or concerns about FTC compliance, contact us today. Call 888-680-1745 or inquire online to speak with a senior FTC compliance lawyer at Oberheiden P.C. in confidence.