The FTC has approved the final order in its February complaint against AmeriFreight for failing to disclose that it compensated consumers for their online reviews.  Coordinated and paid advertising campaigns that do not disclose paid endorsements test the FTC’s guidelines known as the Disclosures issued in March 2013.

In this enforcement action, the FTC highlighted that AmeriFreight advertised on its website that it has “more highly ranked ratings and reviews than any other company in the automobile transportation business.”  AmeriFreight also provided potential customers with written price quotes that also refer to their online reviews.  The company did not, however, disclose to its potential customers that it offered a $50 discount on the price of its services if a customer agreed to review AmeriFreight’s services online.  AmeriFreight also awarded cash prizes to those customers with the best monthly review.  The FTC’s complaint notes that the majority of the online reviews of AmeriFreight’s services fail to disclose that the endorsers were compensated to post an online review or that its endorsers were eligible to receive an additional monetary award if selected for the “Best Monthly Review Award.”

According to the FTC’s guidelines, advertisers must make clear and conspicuous disclosures, regardless of the platform, in order to prevent an advertisement from being deceptive or unfair.  If a platform does not provide the opportunity to make these necessary disclosures, then the advertisers should refrain from using such platform.

A recent controversy over an advertising campaign by Lord & Taylor through Instagram has brought awareness to disclosures in advertising campaigns.  Earlier this month, Lord & Taylor gave 50 popular style bloggers a paisley dress and paid them to post a photo of themselves wearing the dress on Instagram.  The campaign was a success: the dress sold out almost immediately.  However, the bloggers all failed to mention that Lord & Taylor paid them for the Instagram post.  With the Lord & Taylor campaign, the bloggers likely would have been in compliance with these FTC guidelines if they had added a hashtag to the post that indicated their relationship with Lord & Taylor, such as “#ad” or “#sponsored.”

The FTC advises that when in doubt, it is best to clearly disclose when a post or review is an ad or a sponsored message.  It is important to note that the FTC’s .com Disclosures state that “necessary disclosures should not be relegated to ‘terms of use’ and similar contractual agreements.”  Therefore, merely placing a notice in the Terms of Use or Privacy Policy may not be sufficient when advertising through consumers on social media platforms, especially when the company is paying the consumer for the positive social media post or online review.

Reporter, Jennifer Raghavan, San Francisco, +1 415 318 1234, jraghavan@kslaw.com.