In This Issue:

• FTC Mows Down Astroturfing at Yahoo
• With “Operation Full Disclosure,” FTC Wants Ads to Let It All Hang Out
• FDA’s Social Media Guidance Questioned, Challenged

FTC Mows Down Astroturfing at Yahoo

The Federal Trade Commission has closed an investigation into “astroturfing” by Yahoo employees and declined to take enforcement action because of the limited number of workers involved and the fact the apps reviewed were free.

The agency took a look at allegations that Yahoo employees posted positive reviews of Yahoo mobile apps without disclosing that they worked for the company, according to a letter from Mary K. Engle, Associate Director for Advertising Practices at the FTC.

Section 5 of the Federal Trade Commission Act requires that material connections between a marketer and an endorser be disclosed when their relationship is not otherwise apparent from the context of the communication that contains the endorsement, Engle explained.

Although Yahoo’s social media policy requires that its employees disclose their status when reviewing Yahoo apps, “we were concerned that employees were not adequately informed of the policy,” Engle wrote.

But the agency elected not to take enforcement action against the company. Several factors contributed to the decision, including “that only a very small number of Yahoo employees” reviewed the company’s apps without disclosing their affiliation. In addition, “it does not appear that Yahoo encouraged or otherwise incentivized any of these employees to write these app reviews,” and the apps at issue were free and did not include in-app purchases.

Yahoo also “committed to improve its social media policy and to more actively inform its employees of the policy,” Engle added, closing out the investigation.

To read the FTC’s letter to Yahoo’s counsel, click here.

Why it matters: Although Yahoo managed to avoid an enforcement action for astroturfing, other companies haven’t fared as well. In March 2011 the maker of learn-to-play-guitar-at-home DVDs paid the FTC $250,000 for paying affiliates to promote its products in positive endorsements in blog posts and articles. The agency also settled charges with Reverb Communications, a public relations firm that posted glowing reviews about its clients’ game apps from persons posing as independent users. Advertisers must disclose any material connections and have social media policies in place that clearly emphasize the need for such clear and conspicuous disclosures.

With “Operation Full Disclosure,” FTC Wants Ads to Let It All Hang Out

In a new initiative, dubbed “Operation Full Disclosure,” the Federal Trade Commission sent warning letters to more than 60 companies the agency claimed did not make adequate disclosures in either print or television ads. The recipients of the letters tucked their disclosures away in fine print or otherwise made them easy to miss and hard to read, even though they had important information for consumers, the agency said. The letters identified a broad array of disclosure failures in products and services ranging from food and drugs to consumer electronics to personal care products, household items, and weight loss products.

Twenty of the 100 largest advertisers in the country were among the recipients, the agency said, but did not disclose the identity of the companies involved.

Disclosures in print advertisements should appear in a font that is easy to read and in a shade that stands out against the background, the FTC said. They should not be hidden or buried, but located close to the claims to which they relate. Disclosures for television ads should be on screen long enough to be noticed, read, and understood, without being obscured by other elements of the commercial.

Some of the problematic ads quoted the price of a product or service, for example, but failed to disclose the necessary conditions to obtain that price or that automatic billing was required. Other advertisements failed to disclose that an additional product or service must already be owned before the product advertised could be used.

Advertisements claiming a unique or superior product did not adequately disclose how the advertiser defined the category or the basis of the comparison, while “risk-free” or “worry-free” trial period claims cited in some letters failed to disclose that consumers had to pay for certain expenses, such as initial or return shipping.

The agency also targeted weight-loss ads featuring testimonials with “outlier results” that did not adequately disclose the amount of weight loss consumers could generally expect to achieve. Some ads failed to disclose that a product demonstration had been materially altered. Finally, some companies were told that their contradictory disclosures could not cure the false claims made in their ads.

The letters advised recipients to review all of their advertising to ensure that any necessary disclosures were truly “clear and conspicuous” and stood out in the ads without consumers having to conduct a search.

To read the FTC’s press release about Operation Full Disclosure, click here.

Why it matters: Operation Full Disclosure focused exclusively on print and television ads, but it seeks to achieve goals similar to those achieved with the release of last year’s updated Dot.Com Disclosures. “Consumers depend on information in advertising to make their buying decisions – whether it’s computers or cleaning products, televisions or tools, hotel rooms or hair care,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a press release about the operation, which noted that the response to the letters has been “extremely positive.” The agency added that “advertisers who did not receive a letter should not assume that their advertisements are fine,” so marketers may want to review their disclosures to ensure compliance with the FTC’s “clear and conspicuous” standard.

FDA’s Social Media Guidance Questioned, Challenged

Are the Food and Drug Administration’s proposed social media regulations unconstitutional?

According to comments filed by several pharmaceutical companies and industry groups, the draft guidance issued by the agency in June 2014 presents both practical hurdles as well as constitutional concerns about freedom of speech. In the guidance, consisting of two separate documents, the FDA emphasized that risk information must be communicated to consumers, no matter the space constraints or other limitations of social media.

“Risk information should be comparable in content and prominence to benefit claims within the product promotion,” the agency wrote. “Achieving a balanced presentation requires firms to carefully consider the desired benefit claims and risk profiles for their products when choosing a promotional platform.”

But in comments filed in response to the draft, groups such as the Pharmaceutical Research and Manufacturers of America and the Medical Information Working Group (“MIWG”), as well as several leading pharmaceutical companies, said the guidance would have a chilling effect on their attempts to convey product information to consumers via social media.

The FDA’s guidance is “tantamount to a ban on the use of space-limited communications,” the MIWG wrote, because of the abundance of information required by the agency to be included in a statement (brand name, nonproprietary name, usage, risks, and a link to the full prescribing information) with limited space. The guidance makes it “a practical impossibility for manufacturers to use Twitter and similar media to communicate the availability of their products,” the group said.

Another practical obstacle noted by commenters is the FDA’s requirement that sitelinks be included in ads to more fully disclose risks. One problem: search engines such as Google have a policy that sitelinks may not always appear. “Thus, under FDA’s proposed approach, manufacturers can use Google’s sponsored links only at risk, and the draft operates as a ban with respect to this channel as well,” the MIWG wrote. Several commenters noted that the FDA has not been following its own guidance. The agency tweeted on June 27 that a new diabetes drug, Afrezza, had been approved. About 60 entities retweeted the comment. Although the guidance advised drug manufacturers to list all serious risks and contraindications, the FDA did not mention a single risk in its tweet, let alone that Afrezza carries a black box warning, the PhRMA noted in its comments.

“Needless to say, FDA did not – and could not – punish the retweeters for merely repeating what FDA said about Afrezza,” the group wrote. “And yet the draft guidance suggests that companies that research, develop and deliver innovative medicines – and these companies alone – could be punished for doing just that.”

To read the comment from the Medical Information Working Group, click here.

To read the comment from the Pharmaceutical Research and Manufacturers of America, click here.

Why it matters: After waiting years for some form of social media guidance from the agency, the pharmaceutical industry was overwhelmingly negative about the FDA’s efforts. Perhaps in hopes for more positive feedback, the agency reopened the comment period for the two documents, allowing an additional 30 days for interested parties to comment starting September 29.