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When the FTC brings a law enforcement action, we hope companies take notice. But sometimes there’s a nugget or two that businesses can glean from a decision by the FTC staff to close an investigation. A recent letter from the staff of the Bureau of Consumer Protection to Hyundai Motor America ticks a lot of timely boxes — bloggers, the Super Bowl, and the FTC’s Endorsement Guides — and is worth a read if your company has added social media to your marketing arsenal.

The staff’s inquiry focused on gift certificates given to bloggers to encourage them to link to Hyundai videos or to comment on upcoming Super Bowl ads. Had the bloggers been told to disclose to their readers that they’d received the certificates or were they told not to disclose that fact?

As advertisers and bloggers should know by now and as the FTC’s Endorsement Guides have always said, Section 5 of the FTC Act requires the disclosure of a material connection between an advertiser and an endorser when the relationship isn’t otherwise apparent to consumers. According to the staff letter, “An advertiser’s provision of a gift to a blogger for posting specific content promoting the advertiser’s products or services is likely to constitute a material connection that would not be reasonably expected by readers of the blog.”

But FTC staff decided to close its investigation. What gives?

The letter cites two main reasons for staff’s call. “First, it appears that Hyundai did not know in advance about 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.”

In addition, “[T]he actions with which we are most concerned here were taken not by Hyundai employees, but by an individual who was working for a media firm hired to conduct the blogging campaign. Although 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.”

So what does this mean for companies looking for more guidance on complying with the FTC’s Endorsement Guides? M.M.M.  OK, we just made up the mnemonic, but the principles are well-established:

  1. Mandate a disclosure policy that complies with the law;
  2. Make sure people who work for you or with you know what the rules are; and
  3. Monitor what they’re doing on your behalf.

Of course, the outcome in the Hyundai matter depended on specific facts, including non-public information submitted to the staff. And as the letter makes clear — or as clear as any sentence with four “nots” can be (Sorry, but we’re lawyers. We can’t help it.) — “Our decision not to pursue enforcement action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred.”

Quadruple negatives aside, the take-away is clear: Mandate a policy that complies with the law. Make sure your people know about it. And monitor what they’re doing. Looking for more? Read The FTC’s Revised Endorsement Guides: What People are Asking.


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