Publisher, PR Firm Settle With FTC Over Endorsements

Advertising Law

Providing yet another reminder about regulatory oversight of endorsements, a publisher and public relations firm reached a deal with the Federal Trade Commission (FTC) over paid endorsements that were used in a marketing campaign for insect repellant.

After being hired by HealthPro Brands Inc. to help launch and promote FIT Organic Mosquito Repellant, Georgia-based Creaxion Corporation partnered with Inside Publications to produce a strategic media campaign tied to the worldwide outbreak of the Zika virus and the 2016 Summer Olympics in Brazil.

Inside Publications, the publisher of specialty sports periodicals such as Inside Gymnastics, Inside Cheerleading, Inside Dance and Inside Volleyball, agreed to publish two magazine articles featuring the product, including a “feature article” and an “advertorial” declaring it the publisher’s “Official Mosquito Repellant.”

Two athletes competing for spots on the U.S. Olympic Gymnastics team—Carly Patterson Caldwell and Jake Dalton—were tapped as endorsers of the product and were each paid “several hundred thousand dollars” for promotional activities. Each posted social media endorsements of the FIT product, but did not disclose their paid promotional relationships, the FTC said.

In one Facebook post, Patterson Caldwell wrote, “I am so thankful to have found a safe and organic product (FIT Organic) that will ease my worries as mosquito season approaches,” while Dalton posted on Instagram: “Looking forward to the holiday weekend! And, of course, I’ll be using my organic mosquito repellant from @fitorganicusa. You should too!” accompanied by a picture of him holding a bottle of the FIT product.

Inside Publications posted and reposted statements on social media about FIT—including the Patterson Caldwell and Dalton endorsements—without disclosing the spokespersons’ paid promotional relationships or that its own statements were paid commercial advertising, according to the agency’s complaint.

For example, the publisher’s Inside Gymnastics Twitter account posted a picture of Dalton applying FIT, adding “Great choice champ! @Jake_Dalton will use @fitorganic mosquito repellent on the Road to Rio! #FightZika.” And in a July 2016 issue of Inside Gymnastics, the publisher ran a “Guide to the Games” issue with a “social scene” article featuring Patterson Caldwell and her use of the FIT product, but failed to disclose it was paid commercial advertising.

Additionally, the FTC alleged that Creaxion conducted an online consumer review program that reimbursed employees for purchasing FIT Organic Mosquito Repellent and posting positive online reviews. “The reviews did not disclose that the reviewers were reimbursed for buying the product or the reviewers’ relationships to the public relations and marketing company hired to promote the product,” the FTC said.

The complaint accused the companies and related individual defendants of false or misleading endorsement claims, deceptive failure to disclose material connections with endorsers, and deceptively formatted advertising, all in violation of Section 5 of the FTC Act.

Pursuant to the proposed consent orders settling the charges, the defendants are prohibited from future misrepresentations about the status of any endorser or reviewer of a product or service or that paid commercial advertising is a statement of opinion from an independent or objective publisher or source.

Further, the defendants must disclose material connections with and otherwise monitor any endorsers by creating a monitoring system and terminating endorsers who fail to comply.

To read the complaint and proposed consent order in In the Matter of Creaxion Corporation, click here.

To read the complaint and proposed consent order in In the Matter of Inside Publications, click here.

Why it matters: The FTC’s enforcement action and proposed consent orders offer several important lessons for advertisers. If a “material connection” exists between an endorser and an advertiser, then clear disclosures are required and paid ads should not mimic the look of independent content, the commission noted in a blog post. Marketers should also ensure that online reviewers disclose any connection to a brand.