How new rules could change Canada’s social media marketing landscape

The U.S. Federal Trade Commission has been regulating social media promotion since 2009. Here’s what it can tell us about Canada’s incoming guidelines

DJ Khaled in a hot tub holding a bottle of Ciroc vodka

DJ Khaled, whose social media posts about Ciroc vodka have drawn the attention of the FTC in the U.S. (YouTube)

Last week’s news that Canada is finally getting rules that will require bloggers and social media influencers to disclose whether they’re been paid to promote products made some waves.

Bloggers and social media personalities are now wondering what the new rules will mean for them. Advertising Standards Canada, the organization that will be enacting the guidelines later this year or by early 2017, says they will closely reflect the rules administered in the United States by the Federal Trade Commission.

The FTC instituted its rules in 2009, and has published several clarifying updates since. A recent Bloomberg story, meanwhile, suggested the government agency is in the process of cracking down on enforcement and that it is looking at tightening its rules.

In an effort to get an idea of how the upcoming ASC rules might affect Canadians, I spoke with Mary Engle, associate director for advertising practices at the FTC, about whether the U.S. rules are changing, how they work and how effective they’ve been:

Is there a new effort to tighten up blog and social media disclosure rules in the U.S.?

You’re not the first person to ask me when we’re coming out with new guidance, but we’re not coming out with new guidance. That was just a misinterpretation or miscommunication of the Bloomberg article. I don’t know how they interpreted that.

We’re continuing to do the same sort of outreach and enforcement of the endorsement guides that we’ve been doing for the past several years. It could be that because we’ve brought more cases in the last few years against some well-known names that that’s interpreted as a crackdown, but that’s simply more a reflection of the fact that time has gone by since we’ve updated the guides in 2009 to make it clear it applies to social media marketing.

Our position is the FTC guides applied to all forms of marketing before, we just didn’t have any examples involving social media or the internet even because they were issued in 1980, which predated the internet considerably. We certainly wanted to give people a chance to come into compliance so we did our investigations and closed them without taking action. Maybe now that there’s more cases coming out, that was interpreted as a crackdown.

We issued FAQs after we put out the guide and we updated those FAQs last year and these reflected the questions we’ve been getting on how to apply the guides in different scenarios. I imagine we’ll continue to update those as time goes by, but there wasn’t an announcement of a new initiative.

Is the FTC now requiring social media users to put disclosures at the beginning of tweets and blogs, rather than at the end?

The requirement is that the disclosures be clear and conspicuous. They have to be effective. If the consumer doesn’t see them, there’s no point.

In the guidance we put out in our dot-com disclosures – it’s not the endorsement guides, it’s a business guide we updated in 2013 to talk specifically about making disclosures in short format, mobile devices in particular, in things like Twitter… there, the examples we gave of effective disclosures were at the beginning of a blog or a tweet. We’re not mandating or requiring that, we’re just suggesting that’s the way to make it most effective.

So, the Bloomberg reporter who spoke to someone in my office raised concerns that if #ad is in among five or six other hashtags at the end of a tweet, is the consumer really going to notice it? That’s just simply making an observation like we would make any observation that it has to be noticeable to consumers and understandable.

Does the FTC proactively monitor to see if influencers are complying with the rules, or are you more reactive, acting only when there’s a complaint?

We’re reactive. We’re not the NSA, we’re not monitoring people’s social media. It’s not just complaints directed to us, it’s articles, blog posts, tech press, articles and blogs where a lot of these issues surface, so we follow those pretty closely. If we learn something that strikes us as problematic, we can initiate an investigation. But there’s no practical way for us to monitor everyone’s social media.

You’ve typically been going after the sponsoring organizations and companies rather than the individual bloggers and influencers themselves, right?

Yes, all of our cases so far have been against a marketer, either a brand or an intermediary company. We haven’t had cases involved individual influencers. We have had some investigations of them that didn’t lead to cases, but we see the primarily responsible party as the brand or an intermediary ad agency or PR firm or the like. The Machinima case was a good example of an intermediary who we saw as primarily responsible.

(The FTC censured the YouTube network in March for not disclosing that it had paid YouTubers to say positive things about the Xbox One.)

Why focus on the companies rather than the influencers themselves?

It’s a matter of the most efficient use of our resources. Most of the time, you’re going to have a company that’s working with hundreds if not thousands of influencers. The idea is to get the company to do the right thing and make sure its influencers are disclosing correctly.

That’s not to say that there would never be a case brought against an influencer, particularly an influencer who was disregarding instructions from a brand to disclose and who had a large following or was making a lot of money. We would look at all of that.

We’re a pretty small agency with a pretty broad jurisdiction so we try to be most efficient in how we use our resources and that seems to be getting at the roots of the individuals plants.

The FTC hasn’t issued many fines for violations. Why is that?

To clarify, we don’t really have the authority to issue fines. We have the authority to issue civil penalties, which can be called fines when a company has violated one of our rules, like the do-not-call rules, or they’re already under order and have violated the order. We can get money back for consumers, but we don’t call that a fine, we call it redress or disgorgement of profits. It’s technically not fines.

When we get redress, it’s when consumers are out of pocket – they bought a product that doesn’t work, for example, and we try to get money back to them. In most of the endorsement guide cases, the issue has been more that there wasn’t a proper disclosure of a connection. We weren’t alleging that the video game wasn’t good or misrepresented.

So in the recent Warner Bros. case, where the company was ordered to enforce proper disclosures with its influencers, would there be some sort of redress if it happens again?

If they were to do it again and violate the order, then we could get civil penalties, yes. It used to be $16,000 (U.S.) per violation, but it’s just been increased. I can’t remember the exact number now, but it was literally just increased. We would be able to get a monetary penalty for that.

Would that be effective at all? That penalty would be nothing to a company the size of Warner Bros.

Well, it’s per violation, so it could potentially be much more than that [if many influencers are involved]. You also have to consider the effect on the reputation that acts as a deterrent in all our cases. It’s not just monetary, out of pocket. Being under FTC order is a pretty strong deterrent for most companies.