The Federal Trade Commission (FTC) recently investigated whether Cole Haan, Inc. violated Section 5 of the FTC Act when it required entrants in its Pinterest contest to pin images of Cole Haan products in order to enter the contest.
The Bottom Line
The FTC's guidance makes it clear that that pinning may constitute an endorsement of a company or its products, and entry into a sweepstakes or contest may constitute a material connection that is required to be disclosed under the FTC Endorsement Guides. Before running any social media promotion, companies should check the social media platform's terms and conditions, and should ensure their bloggers, influencers, spokespeople, and even promotion entrants are disclosing their material connections and institute reasonable monitoring programs to ensure compliance.
According to the FTC, entrants' pins featuring Cole Haan products were endorsements of the company's products and the fact that entrants received an entry into the contest in order to win a $1,000 shopping spree was a material connection that needed to be disclosed in accordance with the FTC Guides Concerning the Use of Endorsements and Testimonials (FTC Endorsement Guides). Under the FTC Endorsement Guides, endorsers must disclose any material connections with the advertiser that viewers of the endorsement would not reasonably expect.
To enter the Cole Haan Pinterest contest, entrants were required to create boards entitled "Wandering Sole" and pin five shoe images from Cole Haan's Wandering Sole Pinterest Board, as well as five images of the entrant's "favorite places to wander". Entrants were also instructed to include the hashtag #WanderingSole in each pin description. The entrant with the most creative entry would win a $1,000 shopping spree.
The FTC's Decision
The FTC determined that entrants' pins featuring Cole Haan images were endorsements of the Cole Haan products. Notably, the FTC found the pins to be endorsements even though the entrants were not required to state anything about the products.
The FTC further explained that an entry into a contest to receive a significant prize in exchange for endorsing a product constitutes a material connection that would not reasonably be expected by viewers of the endorsement. As such, the fact that entrants pinned Cole Haan products in return for the opportunity to win a $1,000 shopping spree was a material connection that should have been disclosed under the FTC Endorsement Guides.
The FTC was also concerned that Cole Haan failed to instruct entrants to label their pins to make clear that they had pinned the products as part of a contest. While Cole Haan required entrants to include the hashtag #WanderingSole in their pins, the FTC found that the #WanderingSole hashtag did not adequately communicate the material connection between entrants and Cole Haan.
Fortunately for Cole Haan, after considering a number of factors, the FTC issued a closing letter declining to pursue enforcement action against the company. In explaining why it declined formal action, the FTC noted that this was the first time it had publicly addressed whether a contest entry was a material connection that needed to be disclosed and whether a pin on Pinterest could constitute an endorsement. The FTC also noted that the Cole Haan contest ran for only a limited length of time and that it drew a relatively small number of contestants and that Cole Haan had subsequently adopted a social media policy addressing the FTC's concerns. The FTC concluded by stating that it expects Cole Haan to take reasonable steps to monitor its social media influencers' compliance going forward.
While the FTC chose not to pursue action against Cole Haan at this time, the next company that runs a promotion in violation of the FTC Endorsement Guides may be subjected to enforcement now that the FTC has put the industry on notice as to what constitutes an endorsement and a material connection in connection with a social media promotion. Accordingly, companies should closely scrutinize whether their Pinterest and other social media promotions raise endorsement issues to ensure these promotions are in compliance with the FTC Endorsement Guides.
What Does This Mean?
First, the FTC's guidance makes clear that that pinning may constitute an endorsement of a company or its products. As such, if companies want to avoid endorsements in their promotions, they should not require entrants to pin only images of the company's products to their boards, but rather give entrants flexibility to pin whatever images they want to pin in order to enter the promotion (although companies must be careful if they decide to use those images after the promotion, since there may be third party intellectual property issues with the images). While the FTC's letter addressed only pins on Pinterest, the FTC may take the same position with respect to promotions that require entrants to post images or videos of, or make favorable comments about, a company and/or its products on other social media platforms, such as YouTube, Facebook, Twitter, and Instagram.
Second, entry into a sweepstakes or contest may constitute a material connection that is required to be disclosed under the FTC Endorsement Guides. As such, if companies want entrants to pin or post the company's images in order to enter a sweepstakes or contest, companies should instruct entrants to disclose their material connections. While the FTC did not find Cole Haan's #WanderingSole hashtag to constitute an adequate disclosure, hashtags such as #sweepstakes or #contest should effectively disclose the material connection.
Third, before running any social media promotion, companies should check the social media platform's terms and conditions, including Pinterest's Acceptable Use Policy. Pinterest's Acceptable Use Policy prohibits promotions that require entrants to pin from a selection of images, and Pinterest has begun to crack down on promotions that run afoul of its Acceptable Use Policy. Notably, failure to comply with a social media platform's terms may result in the platform terminating a company's promotion at any time without notice.
Last, the FTC is once again closely scrutinizing endorsements. The FTC's closing letter came only a few weeks after the FTC announced its settlement with the home security company ADT regarding claims that ADT's endorsers failed to disclose their material connections and misrepresented themselves as independent reviewers on television programs and in social media (read our previous Alert on the settlement here). The settlement is a further reminder that companies should ensure their bloggers, influencers, spokespeople, and even promotion entrants are disclosing their material connections and institute reasonable monitoring programs to ensure compliance.
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