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How Does the FTC View “Sponsored Content”?

Like All Types of Online Advertisements, Sponsored Content is Subject to the FTC’s Oversight

Online content is a key driver of e-commerce. From news to consumer products, companies in virtually all industries rely on content to garner attention online. In addition to posting content on their own websites and social media platforms, many companies rely on third parties to post content as well. However, this “sponsored content” raises some unique concerns when it comes to U.S. Federal Trade Commission (FTC) enforcement.

The FTC is the federal agency responsible for overseeing consumer marketing practices in the United States. Over the past couple of decades, it has increasingly shifted its focus online. Currently, sponsored content is a hot-button issue, and the FTC is paying particular attention to companies’, agencies’, and influencers’ practices involving paid postings.

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What Qualifies as “Sponsored Content”?

Sponsored content is exactly what it sounds like: online content (i.e. videos, photos, articles, or social media posts) that one entity pays another entity to publish. While sponsored content has proliferated on Instagram, Twitter, Facebook, and other social media platforms in recent years, other forms of sponsored content remain prevalent as well. Blog articles and video reviews (including unboxing videos) can constitute sponsored content, and the FTC is currently placing particular emphasis on so-called “native advertising”.

The FTC defines native advertising as, “content that bears a similarity to the news, feature articles, product reviews, entertainment, and other material that surrounds it online.” While some companies are upfront about their native advertising (as the FTC requires), others try to make their promotional content look like news articles in order to instill a false sense of legitimacy in consumers’ minds.

Along with native advertising, the FTC is also focusing heavily on brands’ use of influencers to promote their products through sponsored content (the FTC has also shown willingness to go after influencers that violate its sponsored content rules). Sponsored social media posts have become commonplace; and, today, many influencers build their lists of followers with the specific goal of garnering companies’ attention so that they can get paid to promote their products. There are agencies that connect brands with influencers, and many seemingly “real life” social media posts and YouTube videos are heavily-produced pieces of content that serve the sole purpose of trying to get clicks.

What are the FTC Rules Regarding Sponsored Consent?

So, what are the rules regarding sponsored content? First, it is important to clarify that there is nothing inherently wrong with using sponsored content for advertising purposes. The FTC does not prohibit the use of sponsored content. Rather, it enforces parameters around how sponsored content is displayed and portrayed to consumers.

Sponsored content largely falls under the FTC’s Endorsement Guidelines. However, the FTC has also published specific guidance for native advertising, and it has published a guide to advertising disclosures for social media influencers. Together, these three documents cover most of what companies and influencers need to know about sponsored content. However, the FTC’s advertising regulations are extremely broad and complex, and companies and influencers must be careful to ensure that their content marketing practices comply with the Federal Trade Commission Act and other pertinent federal statutes as well.

The FTC explains the logic behind its focus on sponsored content in its Endorsement Guidelines:

“An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer couldn’t legally make. . . . [I]f there’s a connection between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed. . . . The reason is obvious: Knowing about the connection is important information for anyone evaluating the endorsement.”

With fundamental truth-in-advertising principles underpinning the FTC’s rules for sponsored content, the FTC’s rules in this area largely focus on disclosure. If a piece of content is sponsored, this needs to be made reasonably clear to consumers. Consumers have the right to know if an article or post has been sponsored—and this is true whether or not the sponsored content reflects a biased opinion.

How Can Companies, Agencies, and Influencers Comply with the FTC’s Sponsored Content Rules?

The FTC has published extensive guidance with regard to sponsored content; and, generally speaking, following this guidance will be enough to protect companies and influencers from enforcement action in most cases. However, as noted above, these guidelines are not necessarily the only rules and restrictions that apply. Thus, a careful and comprehensive approach is warranted; and, prior to utilizing sponsored content, companies and influencers must be careful to ensure that their content (and the disclosures surrounding this content) does not create a risk of legal liability.

Accurate and Non-Misleading Content

As with all marketing content, sponsored content must be accurate and non-misleading. This means that sponsored content cannot contain information that is untrue, whether that information is supplied by the company sponsoring the content or the influencer or media outlet publishing it. False and misleading advertising claims will often lead to FTC scrutiny, and this is particularly true when the claims appear in sponsored content.

Much of the FTC’s guidance concerning sponsored content has to do with disclosures. For example, with regard to native advertising content, the FTC indicates that, “[i]n general, disclosures should be”:

  • Clear and unambiguous
  • As close as possible to the native advertising content
  • In a font and color that are easy to read and a shade that stands out from the background
  • For video ads, on screen long enough to be read and understood
  • For audio ads, in words and at a cadence that are easy to understand and follow

With regard to sponsored content posted on social media, the FTC recognizes that the opportunities for making disclosures may be limited (i.e. on Twitter, where posts are limited to a certain number of characters). Nonetheless, the FTC expects companies, agencies, and influencers to do what is necessary to make an adequate disclosure. For example, while the FTC notes that, “[s]imple explanations like ‘Thanks to Acme brand for the free product,'” may be sufficient, it also indicates that disclosures should avoid abbreviations and shorthand “when possible.”

Different Rules for Different Media and Influencers

When it comes to FTC compliance in relation to sponsored content, it is important to note that there are different rules for different media, and potentially even for different influencers. As noted in the discussion of native advertising above, video and audio ads will need to include disclosures in formats that differ from those used for written content. Additionally, while a short and simple statement that a Tweet is an “ad” or “sponsored” may be enough, simply adding one word at the end of a longer Instagram or Facebook post might not be considered sufficient to provide adequate notice to consumers.

In its Endorsement Guidelines, the FTC also notes that different rules may apply to different influencers. The Endorsement Guidelines give the example of a famous athlete, and note that whether the athlete is required to disclose a sponsorship in every post, “depends on whether his followers understand that he’s being paid to endorse [the] product.” The FTC continues, “If they know he’s a paid endorser, no disclosure is needed. But if a significant portion of his followers don’t know that, the relationship should be disclosed. Determining whether followers are aware of a relationship could be tricky in many cases, so we recommend disclosure.”

FAQs: FTC Compliance and Sponsored Content

Do the FTC’s Rules Regarding Sponsored Content Apply to Companies and Influencers Located Overseas?

 

Yes, the FTC states that, “[t]o the extent it is reasonably foreseeable,” that sponsored content will be viewed by U.S. consumers, that content is subject to FTC rules and U.S. federal law. As a result, foreign companies that promote their products in the United States and foreign influencers who have a following in the United States must ensure that their sponsored content complies with all pertinent federal laws and regulations.

What are the Consequences of Failing to Comply with the FTC’s Sponsored Content Rules?

 

Failure to comply with the FTC’s sponsored content rules can lead to enforcement action, and potentially penalties such as fines and injunctive relief (i.e. a prohibition on making certain statements online). Due to the risks of non-compliance, it is strongly in companies’ and influencers’ best interests to take a proactive approach to compliance.

How Can Companies, Agencies, and Influencers Ensure that Sponsored Content is FTC-Compliant?

 

To ensure that their sponsored content is FTC-compliant, companies, agencies, and influencers can work with their legal counsel to address the FTC’s truth-in-advertising and disclosure requirements. In many cases, it will also be in each party’s interests to negotiate an agreement that establishes rules, requirements, and indemnification obligations related to the promotion of sponsored content.


Speak with an FTC Compliance Lawyer at Oberheiden P.C.

Does your company use sponsored content to promote its products or services? Or, are you an influencer or part of an advertising agency that promotes sponsored content? If so, we encourage you to speak with an FTC compliance lawyer at Oberheiden P.C. To schedule an appointment, call 888-680-1745 or tell us how we can reach you online today.

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