Sewing Influencers - Part 3: The Federal Trade Commission Act
Reminder: I am not a lawyer and you should not consider the contents of this post to be legal advice. Please seek out a qualified legal expert if you need to pursue this topic with more depth in relation to your own business. Thank you for reading and I hope we all learn something!
Are you new here? I suggest you start at the beginning.
We started the discussion in Part 1 about why I care about advertising and where my interest in disclosure began but now we are going to get into why YOU should also care about this topic. Join me as we journey back into United States History…
Back in the early 1900s, President Roosevelt created a government agency called the Bureau of Corporations in order to investigate and issue reports on the actions of businesses and how they were affecting the economy. The purpose of this bureau was to protect the consumer. When the Federal Trade Commission Act of 1914 was passed (which we will come back to in just a moment), President Wilson expanded the Bureau to become what is now the Federal Trade Commission.
Back to the FTC Act. If you want to read the entirety of the ACT, you can here: https://www.ftc.gov/enforcement/statutes/federal-trade-commission-act
What you really want to know is how this applies to your interaction with businesses and your friends online, so let’s skip to the applicable parts. Section 5 of the FTC Act is the most important for you to know. I’m going to share it here:
45. Unfair methods of competition unlawful; prevention by Commission
(Sec. 5) (a) Declaration of unlawfulness; power to prohibit unfair practices; inapplicability to foreign trade
(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.
(2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, savings and loan institutions described in section 57a(f)(3) of this title, Federal credit unions described in section 57a(f)(4) of this title, common carriers subject to the Acts to regulate commerce, air carriers and foreign air carriers subject to part A of subtitle VII of Title 49, and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921, as amended [7 U.S.C.A. § 181 et seq.], except as provided in section 406(b) of said Act [7 U.S.C.A. § 227(b)], from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.
My quick version: the FTC Act prohibits deceptive business practices and the Commission is set up to monitor and prevent unfair methods of competitions that trickle down to the consumer.
Now that we know what regulations have been in place since 1914 our job is to look at our own business interactions and see if any of this applies to us. Lucky for you, the FTC is hip to the “influencer” culture and has done a ton of work for you!
The FTC has create something called Endorsement Guides to clarify how the FTC Act can be applied to the influencer and business relationship. The Endorsement Guides are fairly broad and apply to all ends of the advertising spectrum. If you look through the document, you will see there are specific examples outlined to show how the FTC Act applies to different situations. It’s surprisingly thorough! Way to go FTC!
I did find one part of the Guide to be particularly interesting related to liability and disclosure. This is Section 255.1 (d)
Example 5: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated The Commission tested the communication of advertisements containing testimonials 1 that clearly and prominently disclosed either “Results not typical” or the stronger “These testimonials are based on the experiences of a few people and you are not likely to have similar results.” Neither disclosure adequately reduced the communication that the experiences depicted are generally representative. Based upon this research, the Commission believes that similar disclaimers regarding the limited applicability of an endorser’s experience to what consumers may generally expect to achieve are unlikely to be effective. Nonetheless, the Commission cannot rule out the possibility that a strong disclaimer of typicality could be effective in the context of a particular advertisement. Although the Commission would have the burden of proof in a law enforcement action, the Commission notes that an advertiser possessing reliable empirical testing demonstrating that the net impression of its advertisement with such a disclaimer is non-deceptive will avoid the risk of the initiation of such an action in the first instance. representations made through the blogger’s endorsement. The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services. [See § 255.5.]
See that last sentence? It’s pretty clear. If you are in a business relationship with a company and are receiving payment for your services, you must disclose clearly and conspicuously. Also, pretty clear in this section is that the burden of proof falls to the Commission to prove that a blogger is deceiving their audience by not disclosing the business relationship (or, in this example, sharing false statistics). That does lead me to another question—one you are probably wondering as well.
Is the FTC concerned with the sewing social media accounts of bloggers who have less than 10,000 followers?
I can’t say for certain, but the Endorsement Guides does address this.
You don’t have to read the entire Endorsement Guides to get a feeling on where the FTC stands on most of our collective questions. I recommend you refer to the FAQ page for the Endorsement Guides? There are questions on this page such as “Do the Endorsement Guides apply to social media? “ and “Are you monitoring bloggers? “ (Spoiler: yes and not closely.)
In Part 4 I’m going to focus on answering (without giving legal advice) the questions I was asked about disclosure of business and affiliate relationships. I’m going to refer directly to the language in the Endorsement Guides and the FTC Act. I encourage you to also do some research now that you know where to look! We may come to a better understanding of this topic through discussion and encouragement.
Do you have a question on this topic you would like me to address? Please leave it in the comments and I will add it to my list!