Fashion & Business / legal / US and Canada

FTC Prepares for Stronger Enforcement and ASC Plans for the Same

The Federal Trade Commission (FTC) has announced that it will be looking more seriously at media companies in addition to the brands and individuals themselves. Sponsored content has become a major part of companies looking to secure digital revenue. However, the FTC is concerned about sponsored content causing confusion in consumers. Specifically, that the sponsored content will be misconstrued as authentic opinions that are not incentivized. Sponsored content, also known as native advertising, is growing at an exponential rate and according to Adyoulike, it is expected to be a $59 billion global industry by 2018 (1). With such power comes great responsibility, and according to the FTC, that responsibility means ensuring that consumers are not being deceived.

Most famously, the FTC began focusing on native advertising in the Lord & Taylor campaign that was produced by Nylon Media. This focus on media companies is a widening of the FTC’s gaze. Lord & Taylor and Nylon failed to disclose that the content they were posting was incentivized and as such was deemed deceptive.

The Kardashians have come under similar scrutiny with the FTC for not disclosing their brand endorsements. A letter sent by Truth in Advertising advised the family that they need to disclose their endorsements in their social media posts in line with FTC regulations. This means including #ad or #sp or some variation of overt disclosure.

The FTC is promising stricter enforcement of their rules, because until now the FTC fine has only come when a company violates a prior order and outside of that the agency has not aggressively pursued any parties. This lack of enforcement is likely a result of limited resources, however this approach must change as the use of native advertising grows.

In a time where consumers are bombarded with advertising in every social medium, it is critical that we be able to distinguish authenticity. Endorsements have leaked into all things media related, and have recently found its way into politics with First Daughter, Ivanka Trump. In her 60 Minutes interview, “Ms. Trump’s company first drew flak after sending a “style alert” to journalists promoting a gold bracelet that Trump wore during an interview…Her company has since been named in a class action suit, alleging that the First Daughter’s company has engaged in unfair business practices and conspiracy as a result of the Trump administration’s “favoring” of the brand” (2).

As the reach of native advertising expands, it will be interesting to see whether the FTC starts engaging in more aggressive enforcement methods, or whether it will continue to issue periodic warnings as it is doing now.

Is the situation the same in Canada? Yes! Social media is a key feature of all businesses today. Until recently, Canada’s advertising guidelines had not provided rules regarding influencers. Earlier in 2016, Advertising Standards Canada (ASC), announced that they will be falling more in line with the FTC regulations in the U.S and require full disclosure of paid endorsements or mentions.

The ASC is a not-for-profit advertising self-regulatory body that created the Canadian Code of Advertising Standards. The Code “has become a well-publicized industry standard for acceptable advertising in Canada. The Code sets out a number of different types of standards relating to accuracy of advertisements, misleading advertising, and so on.”(3) Although the code is comprehensive, it does not specifically address social influencing, which is why the ASC has endeavoured to implement new rules specifically relating to endorsements of this nature.

The new ASC guidelines will require proper disclosure on all social media platforms. This may include a disclosure statement, or the inclusion of hashtags. However, similar to the FTC regulations, these disclosures must be immediately visible and proximate, and not buried.

Unlike the FTC, the ASC is planning on enforcing these new guidelines on companies rather than individuals. Also unlike the FTC, the ASC is not a government agency and does not have the ability to issue fines. In Canada, this power would remain with the Competition Bureau, who does not yet have formal rules regarding bloggers and influencers. That does not mean that the Competition Bureau does not intend to take action. In 2015, Bell Canada was fined $1.2 million after engaging in misrepresenting advertising that included employees posting reviews about Bell products without disclosure (4).

As Canada plays catch up, we can expect to see similar changes in social media posts by influencers as in the U.S. International brands must begin strategizing to adhere to U.S. regulators and Canadian regulators in order to advertise without penalty in North America.

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Lord & Taylor campaign that had them in hot water with the FTC

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Although the Kardashians were called out for failing to include disclosures, notice the use of #sp (sponsored post) in this post 

Check out the WWD link below for a more in-depth discussion on the FTC regulations. 


(1) http://wwd.com/business-news/media/federal-trade-commission-to-crack-down-on-media-companies-native-advertising-10784810-10784810/

(2) http://www.thefashionlaw.com/home/ftc-says-it-will-begin-holding-media-companies-accountable-for-undisclosed-ads

(3)(4) https://www.essentialaw.ca/single-post/2016/12/06/Canada-Cracks-Down-on-Paid-Social-Media-Endorsements

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