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FTC Settles with PR Firm and Publisher Over Social Media Endorsements

Just before the Thanksgiving holiday, the Federal Trade Commission (“FTC”) announced the issuance of consent orders involving Creaxion Corporation and Inside Publications, LLC to settle allegations that the companies misrepresented paid endorsements as independent opinions, and misrepresented paid commercial advertising as independent editorial content.  As a result, these companies and their principals are now prohibited from making misrepresentations about the status of their endorsers, required to clearly and conspicuously disclose material connections with such endorsers, and are required to monitor their endorsers.

According to the FTC’s complaint, PR firm Creaxion, which represented FIT Organic Mosquito Repellant (“the FIT Repellant”), and Inside Publications entered into a commercial agreement, pursuant to which Inside Publications would help promote the FIT Repellent at the 2016 Summer Olympics in Brazil, which coincided with the Zika virus outbreak.  Inside Publications, publisher of Inside Gymnasticsmagazine and other periodicals, engaged Olympic gold medal gymnasts Carly Patterson Caldwell and Jake Dalton to promote the FIT Repellent in exchange for several thousand dollars.  The FTC alleges that (i) both spokespersons posted social media endorsements in which they did not disclose that they were paid for the posts; (ii) Inside Publications reposted some of these endorsements, along with some of its own posts, many of which were not presented as commercial advertising; (iii) Inside Gymnastics also published paid advertisements in print and online that were made to appear as editorial content; and (iv) Creaxion reimbursed employees and other individuals for purchasing the FIT Repellent and posting online reviews on Walmart.com.

Based on these findings, the FTC charged Creaxion, Inside Publications, and their principals with making false or misleading endorsement claims; failing to disclose material connections to endorsers; and deceptively formatting advertisements as independent and impartial editorial content.  The consent orders prohibit them from engaging in these practices.

The consent orders also require the companies to take the following steps to monitor endorsers:  (1) provide each endorser with a clear statement of his or her responsibilities to disclose any material connection to the product or service; (2) implement a system to monitor and review the endorsers’ statements and disclosures; (3) terminate payment to an endorser who has misrepresented his or her independence or failed to disclose a material connection, unless such misrepresentation was inadvertent (in which case a notice will suffice); and (4) create reports on monitoring.

The FTC has been actively monitoring endorsements and testimonials made by influencers on social media, and acting against companies running endorsement campaigns without clearly disclosing connections between the endorsers and the products being endorsed.  Last year, the Commission updated its guidance on its official Endorsement Guides.  The guidance provides specific tips for using endorsers and influencers in advertising, including examples of how to do so on platforms like Twitter, Instagram, and Facebook.

© 2018 Covington & Burling LLP

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