Social Media PolicyBusinesses that rely on user endorsements to promote their products, take note: the Federal Trade Commission is watching you. 

Positive user testimonies can make for very powerful advertising. So powerful, writes Ian Schick of law firm Pillsbury, that some companies compensate users for endorsing their products. That’s where the FTC comes in:

“The Federal Trade Commission's endorsement guidelines impose requirements on both the endorser and the advertiser if there is a ‘material connection’ between the two parties, … when there is a commercial link that consumers would not expect.”

Schick makes it clear that compensating for endorsements is not illegal. What is: misleading consumers who read the reviews by not telling them about the benefits received in exchange for the positive message.

Further complicating the issue, the definition of “endorsement” and “compensation” continues to evolve in today’s social media world. Schick explains:

“… a company's website may include a button that, when clicked by a user, causes a positive message about the company to be posted via the user's Facebook, LinkedIn, Twitter, or other social media account. When there is compensation for that endorsement--even soft compensation such as through loyalty program points or virtual goods--federal laws may come into play.”

The safe bet: making a clear connection between the product plug and benefits received. Because the FTC is watching…

“The advertiser has affirmative duties to advise the endorser regarding the disclosure requirement and to have procedures in place to monitor compliance by the endorser. While both the endorser and the advertiser are subject to liability, the FTC has indicated that its enforcement activities will generally focus on advertisers.”

[Link: Endorsement-based Advertising Subject to Law Enforcement by FTC – Pillsbury]