Social media contests — creative marketing tools, but beware the FTC
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.
Fortunately for Cole Haan, the FTC elected not to take formal enforcement action and simply sent Cole Haan a closing letter, which essentially constituted a formal warning. The FTC elected not to pursue an enforcement action because it had not previously taken action in these types of situations, the contest was run for a limited time with a limited number of entries, and Cole Haan acted quickly to change its social media policies. The FTC stated that it “expects that Cole Haan will take reasonable steps to monitor social media influencers’ compliance with the obligation to disclose material connections with endorsing its products.”
Social media contests after Cole Haan
The FTC’s response to Cole Haan’s WanderingSole contest provides some important takeaways companies should consider when developing and administering social media contests:
- Endorsements: It is clear that a “pin” on Pinterest can constitute an endorsement. While the FTC only addressed Pinterest in this case, the FTC will likely apply the same position to contests that require the use of other social media platforms, such as Facebook, Instagram, Twitter, and others.
- Material connections: If the contest has a prize and requires the contestant to post content relating to the company, its products, or services, the contestant’s entry into the contest will likely constitute a “material connection” between the advertiser and the contestant that must be disclosed.
- Disclosures: Including a contest name alone in a title or hashtag is not a sufficient disclosure. Contest rules should require contestants to use the words “contest” or “sweepstakes” in any hashtags, descriptions, or titles. Entries that fail to include such disclosures should be disqualified.
- Contest monitoring: The FTC requires that advertisers have reasonable programs in place to train and monitor members of their network. While it is unrealistic to expect a company to monitor every statement made in its network, companies should take reasonable steps to monitor entries being posted to ensure that disclosure requirements are being followed.
- FTC rules: The FTC updates its advertising guidelines periodically and provides information about them on its website. It is a good idea to review these rules prior to launching any promotional campaigns.
Mindi Giftos is an attorney with the law firm of Whyte Hirschboeck Dudek S.C., practicing in the areas of intellectual property and technology law, and is leader of the Technology Law Team. She can be reached at email@example.com.
Eric Hansch is an attorney with the law firm of Whyte Hirschboeck Dudek S.C., practicing in the areas of corporate transactions, commercial real estate, and commercial finance law. He can be reached at firstname.lastname@example.org.
Click here to sign up for the free IB ezine – your twice-weekly resource for local business news, analysis, voices, and the names you need to know. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.