United States: Recent FTC Findings Signal Closer Eye on Social Media Contests

Keywords: FTC, social media, product endorsement, regulations, contest rules

In closing a recent investigation, the US Federal Trade Commission (FTC) announced for the first time that an individual's participation in a social media contest may constitute a product endorsement under FTC regulations. Consequently, companies that use social media contests to advertise their products and services should ensure that their contest rules require adequate disclosure of any such endorsement.

The FTC made these announcements in a letter to Cole Haan regarding the company's "Wandering Sole" contest on Pinterest, which invited contestants to pin images of Cole Haan shoes with pictures of the contestants' "favorite places to wander" and the hashtag #WanderingSole. The prize for the most creative entry was a $1,000 shopping spree.

The FTC found that the Wandering Sole contest ran afoul of Section 5 of the FTC Act, which requires disclosure of any "material connection" between an advertiser and an endorser when their relationship is not otherwise apparent from the context of the communication containing the endorsement. Having determined that contestants' pins were endorsements of Cole Haan products, the FTC found that the #WanderingSole hashtag alone was insufficient to convey that contestants' pins were incentivized by a chance to win a prize. The FTC concluded that "entry into a contest to receive a significant prize in exchange for endorsing a product through social media constitutes a material connection that would not reasonably be expected by viewers of the endorsement." Acknowledging that this was its first public statement on that particular issue, however, the FTC did not recommend an enforcement action against Cole Haan.

While this investigation pertained to a Pinterest contest, the FTC's findings have broader implications for all social media platforms. Also, the FTC stopped short of providing clear guidelines for acceptable social media disclosures that adequately convey a material connection. As a result, companies should carefully review their social media policies and contest rules to determine whether revisions may be necessary in the wake of the FTC's recent findings.

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