Does your construction company, architectural firm or development group have a Facebook fan page?  Are you worried about what advertising laws apply to a social media platforms?

The Federal Trade Commission has eliminated any question of whether liability can arise in connection with consumer endorsements for the obvious reason that consumers may rely on endorsements in making purchasing decisions.  Any third-party “claim” that a consumer derived some benefit from a product or service should meet false advertising standards, as with any other type of commercial advertising claim.  But what about when a company claims that a certain number of consumers “Like us on Facebook” – particularly where the company runs “like-gated” contests or giveaways (that require entrants to “like” a company as a condition to entry) that draw a large number of virtual “fans?”  

The tightening of endorsement regulations is reflected in the FTC’s revised Endorsement Guides issued in October 2009.  In 2010 and 2011, the FTC proved that it intends to enforce these more stringent guidelines by entering settlements with two companies who generated online “consumer endorsements” that were actually prepared and posted by affiliate marketers with financial ties to the sponsor.  See Legacy Learning Systems, Inc. File No. 102 3055 ($250,000 fine to settle charges that company deceptively advertised its products through online affiliate marketers who falsely posed and ordinary consumers or independent reviewers); Reverb Communications, Inc., C-4310( Aug. 26, 2010)(Challenging public relations agency hired by video game developers engaged in deceptive practices by having employees pose as consumers and post reviews on web site). 

Now, in a case of first impression, the National Advertising Division of the Council of Better Business Bureaus has considered the Endorsement Guides in the context of social media promotions.  The NAD focused on what claims a company can make regarding the strength of its following on Facebook and other social media sites.  The NAD concluded that because of the various message that a “Facebook like” may convey to consumers, that "the overall message conveyed by Facebook ‘like’ or the total number of ‘likes’ on Facebook is one of general social endorsement."  However, the NAD warned that had the advertiser presented the number of Facebook “likes” in a false or misleading manner, the claim may not have withstood NAD scrutiny and recommended that the company clarify that the number of “likes” it claimed was actually an aggregate taken from the company’s various international Facebook sites.

Companies should treat social media advertising as they do traditional forms of advertising and review “like-gated” promotions for compliance with applicable advertising guidelines.  A copy of the FTC’s Advertising Guides are available on the FTC web site.

Today’s post is by fellow Stites attorney Amy Sullivan Cahill, whose practice focuses on trademark and copyright litigation, advertising review, and trade secrets litigation.