How not to get caught by the FTC

Just like broadcast and print advertising, the Federal Trade Commission regulates online marketing communication – including social media. Any fraudulent or deceptive marketing can draw huge fines from the agency. Some deceitful tactics can be easy to overlook or innocently put into practice. Here’s a closer look at what to watch out for when advertising online.

(Keep in mind that SMRT Social is not a law firm, and this is not legal advice. This is marketing advice. It’s best to consult an attorney for more technical questions.)

First, a cautionary tale. Lord and Taylor, a fashion department store in New York City, decided they were going to use Instagram to promote their spring fashion release of a new line of clothing. The store wanted to highlight one dress in particular. Lord and Taylor contacted 50 women and paid them between $1,000 and $4,000 to show it off on their personal Instagram posts.

Long story short, they were heavily fined and settled a lawsuit with the FTC. Full story here



They may have been fined as much as $16,000.

What in the world did they do wrong?

It seemed innocent enough, but in the eyes of the FTC, Lord and Taylor were lying. None of the Instagram posters told their audience they were being paid. This gives the impression that these women were impartial and objectively found that dress to be better than the competition.

That’s false advertising. Think of it this way: if someone you trust tells you about a product, are you more likely to buy it? Now what happens when that someone tells you, “Oh yeah, they paid me to say it.”? The conversation has dipped from trusting a third party to essentially a washed out multilevel marketing presentation.

How do you protect yourself from getting fined? Keep these things in mind:

1. Know the difference between organic and paid posts. You, yourself can make any claim (that is true) or sell your product until your tweet-fingers get cramped. Customers and other influential people can boast about your product for free whenever they want. When you pay someone to say something about or feature your product or business, that post becomes a paid/sponsored post. (Paid and sponsored are interchangeable terms.)

Once you pay them, you then have to…

2. Disclose. If you incentivize people to promote you, they have to say in their promotion that it is being paid or sponsored. According to Jessica Rich, Director of the FTC’s Bureau of Consumer Protection during the Lord and Taylor investigation, “Consumers have the right to know when they’re looking at paid advertising.”

Keep in mind that it has to be obvious. Using the hashtags #ad or #sponsored in the post should cover most social media posts. When in doubt, however, ask your influencer to be explicit. Don’t let them bury the hashtag or breeze over the disclosure. Put it at the beginning, and be straight with the audience right away. This goes for customers you are giving an incentive in a contest or some other way, too.

Don’t be too intimidated with this, however! Influencer marketing is a phenomenal tool for getting your message out there. (See our video on influencer marketing here.) Consumers hate junk mail, spam, telemarketers and obnoxious, interrupting ads. But they listen to people in the media all the time. When done tactfully, consumers appreciate that their celebrity is being honest about loving a product. They are much more willing to cut them some slack because they know most social media influencers need to make money with their content.

As a bit of an aside, one group that needs to disclose their relationship with you is your employees. They have a financial investment and are certainly not objective. They need to disclose they are a part of the company.

It’s best to write guidelines down and include them in a manual for employees to review, and preferably sign to agree to. This indemnifies you from legal action, but more importantly, keeps your employees out of trouble. Help them understand how this can affect them, and see if they appreciate you a little more.

Reviews are also a common method of influencer marketing. The influencers in this case are anyone you have paid or offered a t-shirt or given a material reason in any way to review your business. These can show up on places like Yelp, Google or Facebook. The biggest problem with reviews is that they attract the unsatisfied customers and the happy ones rarely comment. Giving customers a little bonus can help your profile online.

Just stick with the rules. Have them disclose if you incentivize them to leave a review.

If you run a contest, let entrants know how and when they have to disclose they are getting something or may potentially get something. Make sure to add it to your official rules. You can send an email with exact phrasing or words for them to put in their posts or videos.

Remember, if the advertising is on your page coming from you, the ad is assumed to be self-identifying.

An example of an influencer campaign done right are the Tom brand of shoes. They ran an ad campaign asking celebrities to wear their shoes. Other people took pictures of the shoes and it created a buzz. Consumers began buying and promoting the shoes because they liked the idea that Toms was going to send free shoes to poor children. It was obvious enough that the celebrities were paid, and they were in the clear. But those people who took pictures and retweeted and shared their excitement were ok, too. They weren’t getting paid.

That’s a great example of a paid post duplicating itself over and over again. A single, strategic campaign can live for a long time well after it’s executed. Remember the ALS Ice Bucket challenge? If you do, great! It happened two years ago!

Just know that the FTC is paying attention. They monitor social media as much as other media. If you are straightforward and honest, you have little to worry about. It’s worth the time and effort. I don’t know many small businesses that can blink at a $16,000 fine! It’s safe to assume all new forms of media that have the ability to market will follow the same rules.

In short: if you pay, have them say. Incentives equal disclosure.

P.S. Any company dealing with food or nutritional supplements has to clear health claims with the FDA. They have reams of guidelines on when to mention diagnosis and treatment of illness. The rule of thumb is unless you have an MD, you can’t make a medical claim. Even then, statements need to be approved or disclose that they aren’t. These fines can be even worse, and include other, stiffer penalties. Consult a lawyer for that.

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