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C-Suite Executive, Social Media, and the FTC

If you are a C-Suite executive, chances are that you do not often consider the social media practices of your corporation.  After all, there is probably a communications department and social media experts that handle all of the social media posts, Internet endorsements and any contests or promotions held on behalf of your company.  Nevertheless, there is an argument to be made that C-Suite executives should give more careful consideration to their company’s business practices involving Internet and social media postings and to act defensively to mitigate the company’s exposure to claims by the Federal Trade Commission.

The Federal Trade Commission

As a senior executive of your company, you are familiar with recent new stories concerning the Federal Trade Commission’s (FTC) position regarding the Staples/Office Depot merger and the agency’s concerns about a lack of competition.  Or the FTC claims filed in the spring of 2016 against five businesses that falsely claimed their products were 100% natural when in fact the products contained some form of artificial or synthetic additives.  As the company’s CEO or CFO, however, you may not be as familiar with the FTC’s Enforcement Guidelines and their interplay with social media.  If this is a topic where you lack expertise, you may want to consider consulting with an executive employment attorney to review your company’s social media and endorsement policies before the FTC continues with what is appears to be a crackdown in this area.

The Business of Social Media

In May of 2015, the FTC released Enforcement Guidelines confirming that truth in advertising applies to blogs, social media, and other digital formats in addition to the more traditional television, magazines, and print media.  This was quickly followed by FTC’s tougher policies regarding deceptive endorsements.

In March of 2016, the FTC reached a settlement with Lord & Taylor after the agency had filed a complaint against the company for paying fashion influencers to write social media and Instagram posts without disclosing that the company had provided its 2015 fashion line to the influencers at no charge.  Included in the settlement is a prohibition against Lord & Taylor from misrepresenting that paid advertisements are from independent sources.

In July 2016, the FTC reached a settlement with Warner Brothers after the company failed to include “conspicuous” disclosures in a social influencer campaign to promote a new game after paying thousands of dollars to an influencer to post positive gameplay videos on YouTube and social media.  As a part of the settlement, the company is barred from failing to make such disclosures in the future.

These types of enforcements were expected in light of the FTC 2015 guidelines and it appears that their enforcement policies are only strengthening.  In an August 2016 Bloomberg report, Michael Ostheimer, deputy chief in the FTC’s Ad Practices Division, confirmed that the agency will be further increasing the requirements for disclosure on sponsored posts, with most of the burden falling on the advertisers.  Mr. Ostheimer further emphasized that disclosures such as “#ad,” “#sp,” and “#sponsored” are not sufficient due to the fact that consumers do not notice the disclosures and do not appreciate their significance.  If a consumer’s opinion would be changed or altered if they understood that the influencer had been compensated, then there is a need for the company to provide disclosure.

Influencer Marketing

In October of 2015, Adweek reported that 75% of companies were using influencer marketing to reach new audiences and 84% planned to implement an influencer marketing strategy in the next twelve months.  In the past year, it is likely that these numbers increased, causing Forbes to refer to this brand of marketing as the “Gold Rush.”

With the FTC doubling down on its enforcement efforts against deceptive practices and social media, it may be time for every C-Suite executive to review their company’s guidelines and internal compliance systems with an executive employment attorney who is familiar with the ins and outs of these complex laws and how they apply to your company’s Internet marketing and advertising policies.

About the Author

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George Birnbaum

Since 1980, sophisticated business people have relied on George to apply the meticulous preparation, attention to detail, and devotion to his clients he learned from fabled trial lawyer Louis Nizer. A graduate of Harvard College and Harvard Law School, George has over 35 years of distinguished deal-making, litigation, mediation and arbitration experience which he has used to negotiate high-stakes agreements for senior executives and select business clients throughout the United States.