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DIGITAL MARKETING REGULATORY UPDATE

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Randall Rothenberg, President, Interactive Advertising Bureau ... Tennis player touts results of surgery in a clinic on social networking site ... – PowerPoint PPT presentation

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Title: DIGITAL MARKETING REGULATORY UPDATE


1
DIGITAL MARKETING REGULATORY UPDATE
Presenters
  • Linda Goldstein, Partner, Manatt, Phelps,
    Phillips
  • Randall Rothenberg, President, Interactive
    Advertising BureauDonna Declemente, President,
    DDC Marketing Group

2
FTC Guides Concerning Use Of Endorsements And
Testimonials In Advertising
  • Background
  • Basic Requirements
  • Impact on the Industry
  • Association Perspective
  • Impact on the Blogging Community
  • Impact on the Brands

3
Background
  • Current Guides have not been revised since issued
    in 1980
  • Commission initiated review of Guides in 2007
  • Focus was on presentation of atypical results
    and typicality disclaimer safe harbor
  • Minor reference to blogs and new media
  • Final Guides issued on October 5, 2009
  • Effective Date December 1, 2009

4
What Are the Guides?
  • Administrative interpretations intended to
    provide guidance on compliance with the law
  • Do not have the force of law not a statute or
    formal trade regulation rule
  • No fines for violating the Guides
  • Violation of Guides likely will be viewed as
    violation of Section 5 of FTC Act

5
What Do the Guides Cover?
  • Endorsements and Testimonials
  • Advertising messages that consumers are likely to
    believe reflect the personal opinion or
    experiences of a person or organization other
    than the advertiser
  • Statements are perceived to reflect personal
    views of the speaker
  • Consumers give such messages a higher degree of
    credibility
  • BUT Applies only to SPONSORED ADVERTISING
  • Endorsements paid for/solicited directly or
    indirectly by the Advertiser

6
What the Guides Require?
  • Prohibits deceptive or unsubstantiated
    representations
  • Endorsements must reflect honest opinions,
    finding beliefs or experiences of the endorser
  • Endorsement may not convey a claim that would be
    deceptive if made directly by the advertiser
  • E.g., this supplement cured my cancer
  • If the ad represents that endorser used the
    product, endorser must have been a bona fide user
    of the product
  • Endorsements need to be presented verbatim but
    cannot be used out of context
  • Requires disclosure of material connections
    between seller and endorser
  • Special requirements for celebrity and expert
    endorsements

7
The Key Changes
  • Deletion of results not typical safe harbor
  • Broader definition of sponsored advertising
  • More restrictive requirements for disclosure of
    material connections
  • Expanded liability for advertisers and endorsers
  • Affirmative monitoring obligations for the brands

8
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9
The Key Changes Its a Whole New World
  • Then Traditional Marketing -- Advertising was
    controlled and disseminated by the advertiser
  • Now C2C Marketing -- Advertising messages are
    controlled and disseminated by the consumer as
    part of advertisers marketing campaign

10
The FTC Goal
  • Transparency and Honesty
  • Consumers are speaking for marketers
  • The audience doesnt know its an advertising
    message
  • Product promotion by advertisers has always been
    regulated
  • Guides make clear that product promotion by
    consumers is regulated too -- SAME RULES APPLY

11
Key Changes
  • Broader Definition of Sponsored Advertising
  • Example 8
  • Blogger purchases new dog food and talks about
    how it improved her dogs fur -- not an
    endorsement
  • Blogger gets same new dog food free with coupon
    received from store based on her purchasing
    habits -- not an endorsement
  • Same blogger joins network marketing program and
    periodically gets free products about which she
    can write reviews -- The new dog food came from
    that program ITS AN ENDORSEMENT
  • KEY POINT BLOGS/SOCIAL MEDIA MAY BE CONSIDERED
    SPONSORED ADS

12
Key Changes
  • Broader Definition of Sponsored Advertising
  • Relevant Factors
  • Was the speaker compensated by the advertiser?
  • Was the product or service provided for free?
  • Did the advertiser or someone on advertisers
    behalf solicit the opinion?
  • Is the speaker acting independently or on behalf
    of the advertiser or its agent?
  • Regularly followed
  • Part of a network marketing program
  • LACK OF ADVERTISER CONTROL OVER CONTENT IS NO
    DEFENSE!

13
What Does This Mean?
  • Broader definition of sponsored advertising
    triggers disclosure of material connections
  • Broader definition of sponsored advertising
    increases potential liability of advertisers for
    product claims

14
Disclosure of Material Connections
  • Receipt of free product is a material
    connection
  • May depend on value of product
  • Example College student/video game
    expert/blogger
  • Employee statements on a message board employee
    relationship must be disclosed
  • Incentivized street teams -- incentives offered
    and relationship to advertiser must be disclosed
  • Disclosure obligation applies to blogger/endorser
    and to advertiser
  • Blogger must disclose
  • Advertiser must monitor

15
Disclosure of Material Connections
  • Payment to celebrities -- disclosure generally
    not required in traditional media
  • Celebrity endorsements in non traditional media
    disclosure may be required
  • Tennis player touts results of surgery in a
    clinic on social networking site -- Is being paid
    by clinic for the endorsement

16
Liability for Product Claims
  • If endorsement is sponsored advertising
    advertiser and endorser are liable for product
    claims being made
  • Example 5
  • Skin care company participates in service
    matching advertisers with bloggers
  • Blogger is provided free product and asked to
    submit review
  • Blogger writes that lotion cures eczema
  • Blogger and advertiser liable for product claims
  • Material connection must be disclosed

17
Challenges For The Blogger Community
  • To speak or not to speak
  • That is the question!

18
The Association Perspective
  • Regulation of free speech or commercial
    speech
  • A fair or flawed process?

19
Brand Challenges
  • Lack of clarity/bright lines
  • Enhanced risks of liability
  • The risk/reward ratio
  • Practical/implementation challenges
  • Best practices

20
Lack of Clarity/Bright Lines
  • Expansion of Guides accomplished through
    examples only
  • Issues are fact specific
  • Examples are fact specific
  • Numerous gaps exists

21
Lack of Clarity/Bright Lines
  • When is it a sponsored ad or endorsement
  • Remember the FTCs motives
  • Is the speaker acting independently
  • Was the speakers opinion solicited/initiated by
    the advertiser
  • Is the endorsement an intended part of an overall
    marketing campaign

22
Lack of Clarity/Bright Lines
  • What is a material connection?
  • Freebies
  • Advertising on the bloggers site?
  • Furnishing of prizes for contests/prize
    promotions
  • WHEN IN DOUBT-- DISCLOSE

23
Increased Liability and Risk
  • Liability for unsubstantiated product claims
  • Liability for claims/challenges by competitors
  • Liability for bloggers failure to disclose
    material connections on their own sites/posts

24
Practical Challenges
  • Effective Date
  • Complying with disclosure requirements in media
    with limited real estate
  • Social media platforms encouraged to develop
    protocols
  • Example hashtags such as paid or ad

25
Best Practices
  • Develop a Social Media Policy for sponsored
    speakers
  • Substantive conduct provisions -- Dos and Donts
  • Prohibition on product claims
  • Disclosure of material connections/freebies
  • Procedures for training speaker and bloggers on
    the Guides
  • Procedures for monitoring communications
  • FTC ANALYSIS MANDATES SUCH A PROCEDURE

26
Best Practices
  • Conduct periodic audits
  • Ensure close collaboration between marketing and
    legal
  • Make sure your PR and other social media agencies
    are well versed in the Guides
  • Clearly delineate roles and responsibilities
    within the company and among agencies
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