The emergence of the internet, coupled with the widespread popularity and acceptance of social media, has greatly expanded, for both advertisers and athletes alike, the platforms available for promoting products and services.
“Social media platforms like Facebook and Twitter would seem to be provide a ‘home run’ for athletes seeking to endorse products and services,” Steve McKelvey, a sports law professor at Mark H. McCormack at the University of Massachusetts at Amherst, told Sports Litigation Alert recently. “But what are the rules that govern endorsements and other commercial activity on such social media platforms?”
McKelvey is well-equipped to answer his own question. A nationally recognized expert when it to comes to the intersection on marketing and sports law, McKelvey presented on this topic in the spring. Thus, the editorial team at Sports Litigation Alert viewed him as the ideal candidate for a question and answer interview on the topic.
1) Why did FTC revise “Guides” to include social media such as Facebook and Twitter?
The FTC Guides, which provide administrative guidance on rules and regulations, had not been updated since the 1980s. Obviously, a lot has changed since that time, most notably the proliferation of the internet and social media platforms like Facebook and Twitter that have expanded the opportunity for celebrities and athletes to align themselves with companies for whom they may be paid endorsers, and to use social media to promote their endorsement deals.
2) To what degree, exactly, must endorsers “disclose their relationship” with advertisers? For example, if one’s Facebook page identifies the company they work for, should he/she include an additional disclosure when he/she talks about how great their products are?
The Guides require that a person disclose their relationship based on a few elements. For the purposes of this answer, I am going to base the answer on social media activity by athletes (the Guides refer generally to professional bloggers, celebrities and athletes). First, there must be a “material connection” between the company and the person making a statement of endorsement. Obviously, a material connection exists when a company is paying the athlete. However, the issue of whether or not a material connection exists is not explicitly spelled out in the Guides when the athlete is receiving free products or has been provided stock in the company in exchange for promoting the company. The Guides suggest that the dollar value of the free product and/or the frequency with which free products are provided to athletes help determine if a material connection exists. For instance, an athlete who receives a one-time shipment of a case of energy drinks probably would not rise to the level of a material connection; however, if the athlete receives a free case every month, he or she would likely have a material connection.
Second, the athlete must be making a statement of endorsement (as the term “endorsement” is defined in the Guides). Athletes can mention products in their social media activity without it necessarily being an “endorsement.” For instance, an athlete could tweet “I am eating Wheaties now.” This is not an endorsement. However, if she tweeted “I am eating Wheaties now, and it’s the fiber and fuel I needed to win last week’s tournament” would be much closer to a statement of endorsement and, hence, a potential violation assuming first that a material connections exists between the athlete and Wheaties.
Third, assuming a material connection exists, and the athlete is making a statement of endorsement, he or she is only required to disclose a relationship if a reasonable consumer would not otherwise expect that a relationship exists between the athlete and the company. Prior to social media, the use of traditional media typically made this possible. If you see Michael Jordan in a TV or print ad, the reasonable consumer knows that Jordan is getting paid for the use of his likeness. However, this is often much less obvious when an athlete tweets or blogs about a company or a brand. In sports and entertainment, most consumers know, and assume, that if an athlete is “endorsing” a product or service, he or she must be getting paid for it … so in reality, as social media becomes more commonplace as a vehicle for product/service promotion, it is also likely that social media platforms will come to be seen much like “traditional” media (TV, radio, print).
3) Has FTC received complaints about misleading blogs from celebrities/athletes?
I am not personally aware of, nor have I read of FTC complaints about celebrities/athletes in potential violation of the Guides. This can be for several reasons. First, most reasonable sports fans likely understand that if an athlete is “plugging” a product or service, he or she is likely getting paid for it. In this respect, their actions on social media are, as stated above, becoming more and more akin to their use in traditional mediums. Second, most athletes with their own websites include their sponsors (endorsement deals) on their websites, so this may serve as a safe harbor, so to speak. Third, the blogs, posts and tweets themselves might not rise to the level of “endorsements” as defined by the Guides. Fourth, most athletes are using social media to build their brands and connect with their fans … not to sell product and services! And fifth, and probably most likely, athletes (and their agents) realize that the more prominent they are, the more of a potential target they would be to the FTC to make an example of them. Hence, most athletes seem to be adhering to the Guides. In researching this topic for a law review article, my co-author and I reviewed hundreds of athlete tweets and found only a few that might arguably be in violation of the Guides.
Although it involved a corporation (and not an individual athlete), one recent issue within the sport context involved Hyundai’s 2011 Super Bowl promotion, in which it rewarded gift certificates to bloggers in exchange for talking up and linking to its Super Bowl ad (see, http://www.ncjolt.org/blog/2012/02/02/hyundai-avoids-penalty-no-yellow-flag-promoting-super-bowl-ad). Although the FTC pursued a complaint against Hyundai, the resulting action illustrates how the FTC typically handles such potential violations.
The FTC in its decision noted that Hyundai did not know in advance about the use of these incentives, that a relatively small number of bloggers received the gift certificates, and that some of them did, in fact, disclose this information. Also, the acts were committed not by an employee of the company, but by an outside media firm hired to conduct the blogging campaign.
Perhaps most importantly, Hyundai had a written and well-enforced compliance policy, which prohibited the conduct that occurred and required its agents to abide by its policies. While the FTC noted that advertisers are legally responsible for the actions of those working directly or indirectly for them, the actions at issue here were contrary both to Hyundai’s established social media policy, which calls for bloggers to disclose their receipt of compensation, and to the policies of the media firm in question. Moreover, upon learning of the misconduct, the media firm promptly took action to address it. This incident illustrates the importance of corporations maintaining and frequently communicating their compliance policies to the athletes that they endorse.
4) How does an endorser make a disclosure? Is there a certain way or process one must follow?
When the Guides came out, they were silent on how exactly to make a disclosure on social media platforms like Facebook and Twitter. As for bloggers, the Guides simply stated that bloggers could state in their blogs that they received free product. As for websites, it would seem that celebrity and athlete endorsers can disclose their relationships by including sponsor logos on their home page. The issue of how to disclose on Twitter was a question until a few months ago, when the Word of Mouth Marketing Association (WOMMA) distributed its recommendation that endorsed tweets be accompanied by one of the following: #spon, #samp or #paid.
5) If an acclaimed athlete has thousands of followers on Twitter and is well known as a spokesperson for a certain product, does he have to disclose he’s being paid every time he tweets about the product?
The FTC Guides don’t specifically address this, and it’s a good question. Assuming the tweet is actually an “endorsement” as defined by the Guides, the answer would seem to lie at the intersection of two questions: 1) would a reasonable consumer assume that a material connection exists between the athlete and the product and 2) is the athlete intending to mislead his followers by not disclosing the material connection? It’s probably best to error on the side of caution and disclose it every time with a simple #spon or #paid.
6) Will FTC fine athlete/celebrity bloggers who violate Endorsement guidelines?
The Guides are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding laws themselves. In any law enforcement action challenging the allegedly deceptive use of testimonials or endorsements, the Commission would have the burden of proving that the challenged conduct violates the FTC Act. If found in violation, the FTC can administer fines but these would most likely be levied against the advertiser, not the athlete. However, the primary recourse is “corrective action,” not fines.
