Employers, Employees, Endorsements and the Federal Trade Commission
Unless you have been hiding under a rock, you are aware that the use of social media has exploded over the past several years. Not only has social media become the go-to method for most communication and networking today, it is fast gaining popularity as a way of influencing consumer perceptions. Employers need to be mindful of how social media is used by employees. Even seemingly innocent public comments by employees in support of the employer’s products or services could result in compliance issues for both the employer and employee. Consumers reading comments, blogs, posts, or other social media published by employees about the employer’s products or services might not understand the employee’s relationship with the employer. Consumers relying on such an endorsement might later consider such an endorsement to be untruthful or misleading.
The Federal Trade Commission ("FTC") enforces truth-in-advertising laws which require advertisements and endorsements by individuals to be truthful, not misleading, and, when appropriate, backed by scientific evidence. In an effort to assist businesses with compliance and understanding of the issues related to product endorsement, the FTC published "The FTC’s Endorsement Guides: What People Are Asking", most recently updated in September 2017, and found at https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking (the "FTC Endorsement Guidelines"). These guidelines state that if there is a material connection between an endorser and the business advertising the product, then the connection must be clearly and conspicuously disclosed unless it is already clear from the context of the communication. A connection is material if it could affect that weight or credibility that consumers give an endorsement.
Endorsements can be especially problematic for employers who provide incentives through free products, substantial discounts, or compensation in turn for an employee’s kind words in support of the company’s products or services. Failing to conform to the FTC Endorsement Guidelines can leave employers vulnerable to heavy penalties. However, the good news is that employers can minimize the risk of being penalized by following FTC Endorsement Guidelines outlined below.
Under the FTC Endorsement Guidelines, it is acceptable for businesses to invite customers or other unrelated parties to post reviews about their products or services. However, if the business is offering some incentive in order to entice customers to post reviews, such as a sweepstakes entry in return for a customer review or a free product in return for an endorsement on social media, or there is a reason for the reviewer to expect a benefit for providing reviews, then the business should inform potential reviewers that the reward or discount will be conditioned upon the reviewer making a disclosure that they were incentivized to review the product or service. By including appropriate disclosures, consumers will be able to determine how much weight should be given to those reviews. Examples of proper disclosures include #XYZ_Sponsor and "XYZ provided this free product for review", as such disclosures clearly convey a material relationship between the company and the endorser.
Notably, businesses can ask customers about their experiences with the company’s products or services and feature those customer endorsements without disclosing any special relationship as long as the business has not compensated or provided the customer with any other benefit before the endorsement is given.
If a business allows or encourages its employees to promote its products, the employee should ensure that his or her relationship with the business is clear to individuals who will encounter the endorsement, as that disclosure may affect the amount of weight a reader gives the endorsement. This can be done by using a hashtag such as #XYZ_Employee or the words "my employer" in the body of the message. Direct statements such as "I am an employee of the Company that manufactures this product" would also satisfy the requirement for a clear disclosure. Employers should not encourage employees to endorse products or services that they have not used; nor should the employer encourage employees to make dishonest statements regarding their opinions on the product or service. If employees are encouraged or allowed to make endorsements for company products or services that they have used or experienced, the employer is responsible for instructing those employees to disclose their relationship to the business.
Businesses are responsible for what others say on their behalf – including employees. Therefore employers that encourage employees to promote products should have proper programs and procedures in place to monitor and train their employees on what is appropriate to put out on social media and what disclosures need to be included. According to the FTC, every such program should include the following elements:
- Explain to employees what they can (and can’t) say about the products and services;
- Instruct employees on their responsibilities for disclosing their connection to the company;
- Periodically search for what employees are saying about the product or service; and
- Follow up with employees if the company identifies questionable practices.
The FTC holds both companies and individuals liable for violations of the FTC Endorsement Guidelines. Violating the FTC’s guidelines can lead to penalties ranging from cease and desist orders to thousands of dollars in civil penalties, depending on the nature of the violation. So what if the employee puts something out there without the employer’s knowledge? Implementing a comprehensive compliance program, complete with policies and procedures related to endorsements can help employers reduce their exposure. Not only will the compliance program be good evidence of good faith efforts, such a program can decrease their risk of violating these standards in the first place by ensuring that employees are compliant with FTC Endorsement Guidelines. For questions related to compliance with the FTC Endorsement Guidelines, please contact a member of the Koley Jessen Employment, Labor, and Benefits Practice Group.