A recent closing letter from the Federal Trade Commission (FTC) to Cole Haan relating to a contest conducted on the social media site Pinterest is instructive for companies that sponsor online contests that involve the submission of user-generated content. The FTC revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising in 2009, which are administrative interpretations of Section 5 of the FTC Act, to address new forms of consumer-generated media, such as blogs and social media sites. However, this is the first time that the FTC has addressed whether a contest entry constitutes a “material connection” between a marketer and endorser that must be disclosed under Section 5, and whether a Pinterest “pin” by an entrant constitutes an endorsement of the sponsor. The FTC concluded that such contests require endorsement disclosures under the Guides.
The FTC determined that requiring entrants to “pin” images of Cole Haan products as part of their entries for a chance to win a prize amounted to endorsements of the company’s products and created a material connection between entrants and the company that must be disclosed. According to the FTC, the #WanderingSole hashtag that entrants were required to use for entries did not adequately communicate the material connection and the fact that the pins were made in connection with a contest. The FTC did not provide examples of disclosures that would satisfy the requirements for endorsements, but some reference to the contest is required.
Despite this determination, the FTC chose not to recommend enforcement action against Cole Haan, citing the absence of prior action by the Commission addressing whether a contest entry is a form of material connection or whether a Pinterest pin constitutes an endorsement. The FTC was also persuaded by the fact that the contest had a short duration and a small number of entries, and Cole Haan adopted a social media policy to address the issues raised.
The FTC’s analysis with respect to Pinterest pins should be examined for applicability to other social media promotions. As brands seek to engage with consumers on social media sites, it is reasonable to expect them to leverage current relationships with consumers to develop new ones. After all, “word of mouth” recommendations are one of the oldest forms of advertising. But the line between mere engagement and soliciting endorsements can be blurry, especially on social media that offer new ways of connecting with consumers and promoting brands through leveraging relationships with consumers. Because a determination of compliance with the FTC requirements is highly fact-specific, brands should carefully analyze each element of an advertising campaign or promotion conducted on a social media site, including required hashtags and disclosures for user-generated submissions.
The FTC’s decision also highlights the importance of having a written social media policy in place that governs use of social media not only for personal and business communications, but also for the conduct of advertising and promotions. Finally, in a world of fast-paced technological change and evolving legal standards, periodic review of social media policies will also be necessary to assess whether procedures should be updated in light of new information.
For additional information about structuring online promotions, see our publication “Likes” and “Tweets” for a Chance to Win: Conducting Sweepstakes and Contests in a Digital World.
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