Last month, the National Advertising Division (NAD) of the Council of Better Business Bureaus addressed two increasingly relevant issues in the emerging area of social media advertising in a case of first impression for NAD. In Coastal Contacts, Inc., NAD Case #5387 (10/25/11), NAD discussed Coastal Contacts, Inc.’s “like-gated” Facebook promotion and the use of the number of Facebook “likes” or “fans” in promotional and investor communications. (A “like-gated” promotion is a fairly new advertising tool in which consumers must first “like” a company’s Facebook fan page in order to access the savings or deal presented in the advertisement. Once a consumer “likes” a company’s Facebook fan page, that consumer is considered a “fan” of the company.)
In its decision, NAD applied FTC’s Dot Com Disclosures Guidance and NAD case precedent that “free” claims must clearly and conspicuously disclose, at the outset of the offer, the material terms and conditions of the offer in close conjunction with the free merchandise claim. Providing these material terms and conditions only after a consumer has entered a promotion is not sufficient. As applied to “like-gated” Facebook promotions, NAD seems to indicate that any material terms and conditions, such as limitations on the availability of the promotion and additional fees for shipping, handling, and product upgrades, should be provided before a consumer “likes” the company page.
More significantly, NAD offered factors for a company to consider when using promotions to entice consumers to engage with it through social media and in promoting its social media presence. In its decision, NAD cautioned that a negative ruling could result in a case where a company obtained “likes” in a misleading manner or where consumers who participated in a “like-gated” promotion could not or did not receive the benefit of that promotion. NAD specifically offered the examples of requiring employees to “like” a company Facebook page without informing consumers that they work for the company and paying a service to inflate the number of a company’s “likes” as misleading and artificial means of obtaining “likes.” Thus, advertisements aimed at enticing consumers to “like” a company’s Facebook page should follow established FTC advertising guidance. This should apply to advertisements on all forms of social media (e.g., advertisements or offers encouraging consumers to follow a company’s Twitter feed or “retweet” a company’s “tweets”).
NAD determined that the display of Facebook “likes” on a company’s Facebook fan page could mean many things to consumers and that the overall message conveyed by “likes” is one of general social endorsement. It also recognized the value of the number of a company’s “likes” and “fans” as a “measure of a company’s social presence which, in turn, speaks to the company’s ability to engage consumers, enhance loyalty to the brand, broaden [its] customer base and of course, increase sales.” Coastal Contacts at p.16. Because claims regarding the number of a company’s “likes” or “fans” made in press releases appearing on an advertiser’s website constitute a form of advertising, such claims should not be misleading. NAD recommended that, “[i]n order to avoid conveying the unsupported claim that Coastal’s U.S. Facebook page alone has obtained ‘500,000’ or ‘one million’ Facebook fans,…the advertiser [should] clarify that such numbers are based on the total number of ‘fans’ or ‘likes’ the Company has received from all of its Facebook pages globally.” Id. at p. 20. Accordingly, companies should be vigilant not only about the manner in which they encourage consumers to “like” their Facebook pages but also about the manner in which they promote their social media presence.
This recent case underscores the general recognition of social media platforms as advertising media and the need for companies to adhere to established regulatory requirements in using these platforms to advertise their products. Competing companies, as well as the FTC and FDA, are increasingly scrutinizing advertising on these platforms. Companies should continually monitor their social media promotions and presence to ensure that they are not making unsupported or misleading claims. The interactive nature of social media and the rapid development of these platforms will likely continue to present new issues in regulation; companies should aim to keep abreast of these developments and monitor the responses of the regulatory agencies to provide guidance for their current and future promotions.
Tags: advertising, Coastal Contacts, Facebook, FTC, like-gated, NAD, promotions, social media
