Jul 23, 201512:39 PMLegal Login
with Mindi Giftos
Social media contests — creative marketing tools, but beware the FTC
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Social media contests, sweepstakes, and promotions are great ways for companies to promote new products, engage with customers, collect data, and enhance online branding. However, the Federal Trade Commission (FTC) has begun increasingly scrutinizing these practices. Before launching a social media promotion, companies should take steps to ensure that their promotion will not run afoul of FTC requirements.
The FTC has developed specific rules relating to advertising practices, including those on social media. These rules require companies to clearly disclose any relationships or financial incentives they offer to those who provide testimonials or endorsements of the company’s products or services. When there is a connection between an endorser and a company that consumers would not expect (known as “material connection”), and such a connection might affect how consumers evaluate the endorsement, that connection must be fully disclosed. The FTC enforces its advertising rules under the FTC Act, 15 U.S.C. § 45, which generally prohibits unfair or deceptive acts affecting commerce.
Example of a good contest gone bad
Last year, Cole Haan developed and promoted a contest called WanderingSole on Pinterest. To enter the contest, a participant had to: (1) create a Pinterest board entitled “WanderingSole,” (2) pin to the board five images of Cole Haan shoes and five images of the contestant’s favorite places to wander, and (3) tag each image with the hashtag #WanderingSole. The most creative board would win a $1,000 shopping spree.
The FTC investigated the contest and determined that Cole Haan violated Section 5 of the FTC Act. The FTC claimed that the contest entries (i.e., Pinterest boards with photos) constituted endorsements of Cole Haan’s products. Because the individuals posting the entries were doing so in exchange for a potential financial incentive ($1,000), Cole Haan was required to clearly disclose that material connection. Adding the #WanderingSole hashtag was not a sufficient disclosure, however. The FTC found this to be an unfair and deceptive practice because those who would encounter the Pinterest boards and images would not know that the people who posted them were doing so for the chance of winning $1,000.