Earlier this year, the Federal Trade Commission (FTC) went after Warner Bros. Home Entertainment Inc. for not clearly representing that several digital influencers were paid as part of a marketing campaign for the video game Middle Earth: Shadow of Mordor. (See our prior posts on FTC enforcement of its disclosure requirements.) According to the complaint, these influencers were paid amounts ranging from hundreds of dollars to tens of thousands of dollars and received advance-release copies of the game with instructions on how to promote the game. The sponsored videos were viewed more than 5.5 million times. One very popular influencer, Felix Kjellberg, known as “PewDiePie” on YouTube, created a video that has been viewed over 3.7 million times by itself.
We’ve written previously on the rise in FTC scrutiny and enforcement regarding the use by companies of paid digital influencers without the proper disclosures. Recently, retailer Lord & Taylor found itself in the FTC’s crosshairs when it employed bloggers and Nylon magazine as part of a very successful campaign to promote a clothing collection online and on social media. Unfortunately, the campaign was less successful in its compliance with the FTC Act.
Along with colleagues Lori Levine and Lauren Lynch Flick, we’ve taken a closer look at the case in Lord & Taylor Case Shows the Importance of Transparency in Advertising, itself just the latest example of how companies can run into trouble when they fail to fully disclose a promotion or advertisement.
For businesses offering services requiring a contractor’s license in multiple states, the rules governing traditional contractor advertising can be complex enough in their own right. But when you add social media to the mix? Well, then knowing where to look and what rules to follow can become even more of a challenge.
Over on the construction and real estate law blog, Gravel2Gavel, colleagues Amy Pierce and Rob James have written two posts of interest to any contractors trying to navigate the often complex intersection between advertising and social media. The first, Contractor Advertising in the Age of Social Media, explores some of the hows and whys of this increased complexity. Its companion piece, A Resource Guide for Contractor Advertising on Social Media, provides what could be an invaluable starting point for any contractor wishing to take advantage of the immense potential for customer generation and relationship building present with social media platforms … without running afoul of the ever-changing, myriad state and municipal laws, regulations and guidance that govern such advertising.
It’s an issue we discuss often and is becoming more prevalent as increased social media use blurs the line between manufacturer-promoted advertising and independent consumer opinions. The discussion investigates when consumer-generated content may be imputed to a manufacturer and best practices to remain in compliance with FDA regulations.
As we saw in a prior post regarding Kim Kardashian and Instagram, the FDA pays attention to how brand companies use paid celebrities to endorse their products. Likewise, the FTC closely scrutinizes how brand companies use paid or sponsored endorsers. Be it digital influencers or bloggers, brand companies must be mindful of the disclosures required to be made in connection with any advertisement or promotion disseminated by an endorser for the brand company. If the brand company provides compensation of any kind to the endorser in exchange for the promotion, FTC regulations require disclosure of this fact. Per the FTC’s 2013 .com Disclosures guidelines, the disclosure must be “clear and conspicuous.” If the brand company uses an advertising agency, the company must ensure that the agency is complying with the FTC’s regulations. Ultimately, the brand company can be held liable for FTC violations by its advertising agency.
Brand companies have come to view user-generated content as often one of the most effective and authentic ways to advertise their products or services. This is known as “user-generated content marketing.” For example, with the ubiquitous selfie, brand companies have discovered a rich supply of user-generated content. Consider a consumer who takes a selfie wearing a favorite pair of jeans, posts the photo on Instagram, and then tags the photo with #brandname. The jean company sees and likes the photo, re-posting it on the company website. Legal issues? If the consumer or user was hoping to get attention from the brand for the photo and opinions shared online, not at all. This is how many digital influencers get their start. But if the user was not seeking such attention? Then, problems can arise.
The evolution of social media in business from “occasional accessory” to “integral component” has in turn forced the law itself to evolve in an attempt to address social media’s increasing relevance. Recent developments in two different areas of law show a newly evidenced recognition of social media’s importance in business.
In late July, we posted our client alert titled FCC Expands Reach of Telephone Consumer Protection Act. The Alert discusses the FCC’s July 10, 2015 long-awaited omnibus Declaratory Ruling and Order. The Ruling focuses largely on providing guidance, particularly for new and emerging technologies, regarding what an automated telephone dialing system (aka ATDS or autodialer) is and when consent to use one to place a call or send a text message is required under the Telephone Consumer Protection Act and its implementing regulation, 47 C.F.R. § 64.1200. All businesses should immediately reevaluate their calling and text messaging practices to ensure compliance with the new Ruling, as it is likely to escalate the continued upward trend in TCPA class action filings.
A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.
Microsoft Points Retired
The latest Xbox 360 system update has retired Microsoft points and now all transactions on the platform will make use of local currency.
Software Patent Mess Hits High Court with WildTangent Case
In what attorneys hope will be the first step toward clearing up the muddled legal standard for when software is patent-eligible, WildTangent Inc. asked the U.S. Supreme Court on Friday to address a question it said the Federal Circuit had left in “complete disarray.”
9th Circ. Weighs in on Player Likeness in Video Games
On Wednesday, July 31, 2013, the Ninth Circuit issued two opinions assessing the parameters of use of individual player likenesses in video games in two highly watched cases.
Foursquare deal could be a goldmine for Yahoo
Yahoo and Foursquare are in talks for a data partnership.
‘Candy Crush’ Maker Accuses Rival of Cloning its Games
Facebook game developer King.com Ltd., creator of the popular “Candy Crush Saga,” launched a suit in California federal court Tuesday accusing rival 6 Waves LLC of infringing its copyright on two online games.
Facebook wins final approval for ‘Sponsored Stories’ settlement
The social network pays out $20 million and adds more controls to settle a lawsuit over a feature that publicized users’ “likes” on advertisements without permission or compensation.
Facebook: Actually, here’s how we’re using your data for ads
In proposed terms of service, the social network illustrates how member data is used as a part of Sponsored Stories – because a court ordered it to do so.
On March 12th, the Federal Trade Commission issued a report updating its mobile and online advertising guidelines. The recently issued report was a follow-up to the year 2000 “Dot Com Disclosures” to address the marked technical and legal changes that have occurred in the past 13 years. The FTC guidelines emphasize that no matter how technology changes the delivery of content, consumer protection laws continue to apply equally “across all mediums, whether delivered on a desktop computer, a mobile device, or more traditional media such as television, radio, or print.” The intent of the report is to assist advertisers to better identify when a disclosure is needed in connection with social media ads and how best to ensure that any disclosures are conspicuous and not deceptive. In order to maximize its usefulness, the report used more than 20 mock ads to illustrate the updated principles.
The FTC report advises that advertisers should ensure that clear and conspicuous disclosures are made on all devices and platforms that an advertisement can be accessed on and if the disclosure cannot be made clearly and conspicuously on a particular device or platform, then that device or platform should not be used. Not only does the new report take into account the space limitations inherent in certain social media sites, like Twitter, but also the growing user viewing habits of content make available on small screen smartphones. “The new guidance points out that advertisers using space-constrained ads, such as on some social media platforms, must still provide disclosures necessary to prevent an ad from being deceptive, and it advises marketers to avoid conveying such disclosures through pop-ups, because they are often blocked,” the FTC said. In order to accomplish this in a better form the report suggests that an advertiser can include “Ad” or “Sponsored” before the message itself. Additionally, the report admonished advertisers to consider whether a consumer will be able to view any disclaimers if it is required to “zoom-in” to read any part of the ad. However, the new report is slightly more flexible when dealing with smaller screens by, allowing advertisers to make sure disclosures are “as close as possible” to the ad claim instead of the original guidelines which discussed having disclaimers “near or on the same page” as the advertisement.
If you have any questions about the new FTC guidelines and how they may affect your business Pillsbury would be happy to speak with you about them.