How to manage ad partners in regulated industries: Retail (Part 3 of 5)
Retail marketers must tread carefully to avoid running afoul of the Federal Trade Commission. Columnist Lori Weiman lays out the relevant considerations so marketers may move forward with confidence.
Welcome to Part 3 of my five-part series on managing your online advertising partners in highly regulated industries.
I created this series after my clients at The Search Monitor shared their confusion over federal advertising regulations and expressed concern that advertiser lawsuits were on the rise. These worries had caused them to second-guess expanding their partner marketing efforts. The aim of this series is to get marketers up to speed on relevant regulations so that they may move forward with confidence.
Let’s get you caught up: Part 1 introduced the advertising challenges specific to four highly regulated industries: finance, retail, education and pharmaceuticals. Part 2 looked specifically at ad regulations in the financial industry, focusing on the key agencies, regulations and lawsuits, as well as discussing three ad examples.
Today, I will perform the same deep dive for Retail. Let’s start by discussing the federal agency that rules the roost for retail advertisers, The Federal Trade Commission (FTC), whose mission is to “protect consumers and promote competition.”
Ad regulations for retailers
A cornerstone of FTC policy has always been its Truth In Advertising laws, which say that “when consumers see or hear an advertisement, whether it’s on the Internet, radio or television, or anywhere else, federal law says that ad must be truthful, not misleading, and, when appropriate, backed by scientific evidence.”
The advent of digital advertising has led the FTC to update its rules to account for more complex forms of advertising. In general, the FTC pays special attention to retailers that:
- promise health benefits, such as claims about food, weight-loss products and dietary supplements;
- make “high-performance” claims related to computers, ISPs and other high-tech products;
- make “environmentally friendly” claims; or
- use paid endorsements in a potentially deceptive way.
1. Native advertising
The FTC also pays attention to certain ad formats and elements. One area is native advertising (aka sponsored content) which has the potential to deceive consumers by blending into a website’s editorial content. The FTC released a special enforcement policy statement for native advertising (PDF) in December 2015. Check it out to get the full detail.
In a nutshell, this relatively new ad format must abide by Section 5 of the FTC act (PDF), which prohibits “unfair or deceptive acts or practices in or affecting commerce.” In addition to the policy statement above, the FTC released a guide on how to properly use native advertising, along with 17 examples. Share this with your affiliates ASAP, as you are responsible for their actions!
2. Paid endorsements
This is a critical topic for your affiliates. The FTC created a Guide Concerning Use of Endorsements and Testimonials In Advertising that I suggest you review. It includes 35 examples of advertisers using endorsements — both the good and the bad — including several involving social media and personal blogs.
The guide shows how the rules apply to the three major types of endorsements: consumers (often called testimonials), experts and organizations.
A few important highlights:
- Content: Must be truthful and not misleading. Unsubstantiated claims are prohibited, as are claims that do not represent the typical results expected after product usage.
- Connection: Must disclose any connection between the endorser and advertiser that would affect consumers’ opinions of the product (e.g., endorser is part owner of the brand).
- Compensation: Must tell readers if they were compensated in some form by the advertiser. Tricia Meyer, an affiliate marketing consultant, explains that the “compensation to a blogger means anything of value, including commissions, free products, or special treatment that other consumers or bloggers are not receiving.” Further, Tricia explains that even without any payment, just the fact that the “advertiser asks for the blogger’s endorsement would create a connection between the two, and any future activity between the two would be closely scrutinized.”
- Language: As stated in this guide by the Performance Marketing Association (PMA) (PDF), “there is no magical disclosure language.” Language must be used that any “reasonable consumer” (an important phrase for the FTC) would know that an affiliate is getting paid for their endorsement.
- Location: Endorsement disclosures must appear above any review or affiliate link, not in the footer or on a separate page. For video endorsements, disclose all important connections before the endorsement begins.
- Space-limited disclosures: These still apply to small spaces like Facebook and Twitter. The PMA recommends putting “AD:” at the beginning of a tweet, for example, rather than just adding a hashtag at the end.
Product claim disclosures
In addition to policing the use of endorsements, the FTC wants to improve how advertisers disclose important claims about a product’s performance.
The FTC takes product claim disclosures very seriously, having issued a 53-page FTC guide to disclosures (PDF). I recommend grabbing an espresso and a comfy chair and reviewing the guide.
Here are a few highlights in the meantime:
- Proximity: List the disclosure as close as possible to the claim, for both text and image claims. Do not simply link to a disclosure elsewhere
- Prominence: It’s all about being “clear and conspicuous.” Make sure you use the appropriate size, colors, contrast, and even supporting graphics/icons if they help. Don’t bury it with less important copy. Further, make sure the prominence is consistent across all devices, especially mobile.
- Distractions: Make sure other factors do not distract the viewer from the disclosure, including links, buttons or unrelated graphics.
Retail advertising lawsuits
The regulations previously discussed are not mere suggestions from the FTC. The FTC’s newsroom contains many examples of costly lawsuits filed against retailers. A few interesting examples are:
- The FTC sued a major fashion retailer for running a seemingly objective native advertisement and for not disclosing it had paid 50 fashion influencers to post product usage photos on a social media site.
- The FTC sued an affiliate network for posting deceptive product claims on fake news sites to promote weight-loss products.
Endorsement example: health affiliate
This blogger was paid to create a blog and promote a menopause product (Amberen), but did not disclose her relationship with the company. The FTC filed a $40-million suit against Lunada, the maker of the drug, for failing to disclose this business relationship, since the relationship would be “material to consumers” in deciding to purchase Amberen. The suit claimed that the blog appeared to be a personal account of the blogger’s, and not created for marketing purposes.
Lesson: Affiliates must disclose their paid relationship with an advertiser or risk running afoul of the FTC’s deceptive advertising rules.
Endorsement example: electronics affiliate
Here, we see an electronics blogger recommending the Chromebook. The link contains an affiliate ID, so they are being compensated for the recommendation. However, the disclosure about this paid relationship appears on a separate page, in a list of bullets. (Thanks to this blogger for providing this example and for helping educate other affiliates on this tricky issue.)
Lesson: This blogger needs to put the text about the paid relationship before the affiliate link. It’s as simple as that.
Endorsement example: health tweet
The affiliate is a paid endorser for Fat-away pills and shares her results from taking the pills. This example comes from the FTC itself in their disclosures guidelines (PDF). Did you spot the two things the affiliate and her advertiser need to pay attention to?
Lesson: The endorser fails to mention that this is effectively a paid ad. She should put “AD:” at the start of the tweet. And since her results were much better than the average for the product, she needs to explain that her results were not typical.
Next steps for retail advertisers
- Train your affiliates. Share this article and its links, and follow up with training. Get confirmation that the rules are understood.
- Monitor your bloggers. Use ad monitoring technology to alert you if your affiliates’ ads do not contain required disclosures or are making unsubstantiated claims. Let the technology do the heavy lifting, since it’s impossible to do a thorough job manually. Also, require your affiliates to monitor their own ads as a backup.
- Enforce FTC rules. Don’t stand for repeat violations. Remove affiliates who break your rules.
Note: The Performance Marketing Association reports (PDF) that when deciding how to deal with infractions, the FTC considers the presence of a blogger education program and strict enforcement policies as positive factors. Another reason to monitor your affiliates closely.
My next article dives into another important area of advertising regulation: Education. I’ll talk about several recent lawsuits against educational advertisers making bogus claims about the success of consumers who use their products.
Stay tuned for even more tips on how to keep your company and its affiliates off the government’s radar.