Navigating the Updated FTC Guidelines: A DTC Guide to UGC and Digital Advertising Compliance
The FTC’s recent updates to its endorsement guidelines in October 2024 represent a significant shift in how brands, influencers, and digital agencies need to handle user-generated content (UGC) and disclosures in digital advertising. With social platforms like Instagram, Facebook, and TikTok playing a central role in brand marketing, the need for transparency has never been greater.
For Direct-to-Consumer (DTC) brands, these rules are crucial as many of your advertising strategies revolve around influencer partnerships, customer testimonials, and UGC. Non-compliance can lead to hefty penalties and damage to your brand’s reputation. In this article, we’ll break down the new rules, what DTC brands and agencies should do to comply, and examples of what needs to be disclosed on social platforms.
The Basics: FTC’s New Endorsement Guidelines
The FTC’s updated endorsement guides are rooted in a simple principle: if there is a material connection between a brand and a person endorsing it, this connection must be clearly disclosed. Whether it’s a paid partnership, free products, or any form of compensation, transparency is non-negotiable.
The rules apply broadly across platforms but are especially relevant on social media, where influencer marketing and customer endorsements often drive sales. Here are key elements that DTC brands and agencies need to be aware of:
1. Clear and Conspicuous Disclosures
Disclosures must be "clear and conspicuous" and visible to any consumer engaging with your content. This means avoiding vague or hidden language. Whether it’s a sponsored post or a paid review, the connection between the brand and the endorser should be unavoidable for the consumer.
Example: On Instagram or TikTok, using just the “Paid Partnership” tool is not enough. You should overlay text like “#ad” or “Sponsored by [Brand]” directly in the content or mention it verbally in videos. This should happen early in the content, not buried in captions or at the end of the post.
What Not to Do: Avoid vague language like “Thanks to [Brand]” or simply tagging a brand without explaining the partnership. These are seen as unclear and insufficient disclosures.
2. Influencers Must Disclose Material Connections
If you are working with influencers, make sure they understand their responsibility to disclose material connections. Whether they receive free products, a commission, or a flat fee, it all needs to be disclosed. Disclosures must be included in the text, spoken word, and visual elements if necessary.
Example: A TikTok influencer promoting your skincare product should say something like, “This product was gifted by [Brand]” in the video, include “#ad” in the video overlay, and write the same in the description. If it’s a paid partnership, adding “Paid partnership with [Brand]” at the start of the video is critical.
What Not to Do: Relying solely on Meta or TikTok’s "Paid Partnership" tool without further clarification in the content itself. Consumers should know the relationship between the influencer and the brand before they engage with the rest of the video.
3. Managing UGC: Authenticity Is Key
For DTC brands, leveraging authentic UGC (such as customer reviews or social media posts) can be powerful. However, under the new FTC guidelines, incentivizing UGC without proper disclosure, manipulating reviews, or using fake endorsements is illegal.
Example: If you run a campaign offering a discount in exchange for a review on Facebook, you need to ensure that participants clearly disclose that they received a discount for their feedback. Their post could include a statement like, “I received a discount in exchange for my review of [Brand].”
What Not to Do: Encouraging only positive reviews or pressuring consumers to avoid disclosing the compensation they received for the review. Review gating (filtering out negative reviews) or faking positive ones is strictly prohibited.
4. Expanded Definitions of Endorsements
The FTC’s new rules now include virtual influencers (AI-driven or 3D-animated personas) and endorsements that aren’t explicit, such as tagging brands in social posts without stating the relationship.
Example: If a virtual influencer on Instagram is promoting your brand, the same disclosure rules apply. Even though they are not a “real person,” the endorsement must be disclosed just as it would with a human influencer. The caption or video should indicate that the brand is compensating the influencer in some form.
What Not to Do: Simply tagging your brand without adding a disclosure when compensation is involved or thinking that virtual influencers don’t require the same level of transparency as human ones.
5. Responsibility of Agencies and Third-Party Partners
The FTC has made it clear that agencies and intermediaries facilitating these endorsements are just as responsible as the brands. This means digital agencies working with DTC brands must actively ensure that all influencer partnerships are FTC-compliant.
What You Need to Do: As a digital agency, you need to provide clear instructions to influencers and ensure they comply with FTC guidelines across every platform. This may involve reviewing their posts before they go live and conducting compliance training with your team.
6. Handling Negative Reviews
The FTC prohibits the manipulation of reviews, including incentivizing only positive ones, filtering out negative feedback, or suppressing reviews from dissatisfied customers.
Example: If you ask for customer reviews on Facebook, you cannot only display positive ones while removing the negative ones. Instead, it’s better to encourage honest feedback and use any negative reviews to improve your product or service publicly.
What Not to Do: Soliciting reviews under the condition that they must be positive or offering extra incentives for customers to remove their negative reviews. This kind of manipulation can lead to severe penalties.
Practical Steps for DTC Brands and Agencies
To stay compliant with the FTC’s updated guidelines, DTC brands and agencies should implement the following best practices:
1. Train Influencers and Partners: Educate influencers, UGC creators, and any partners on how to make proper disclosures. Provide clear guidelines and examples of what needs to be disclosed across Instagram, Facebook, TikTok, and other platforms.
2. Monitor and Audit Content: Regularly monitor UGC and influencer content to ensure compliance. Set up an audit system that checks whether influencers are using clear and conspicuous disclosures in their posts, especially on visual-heavy platforms like Instagram and TikTok.
3. Be Transparent in Paid Campaigns: Whether offering discounts in exchange for reviews or paying influencers, be upfront. Ensure every campaign clearly states the nature of the partnership and compensation.
4. Stay Updated: The FTC frequently updates its guidelines to keep pace with changes in the digital space. Regularly review FTC guidance documents, like the Endorsement Guides.
Conclusion: Comply and Thrive
The FTC’s new rules may seem stringent, but they’re ultimately designed to build trust between brands and consumers. For DTC brands and digital agencies, staying transparent, monitoring partnerships, and embracing authenticity will not only keep you compliant but also help strengthen your reputation in an increasingly competitive market. And hey, no one wants fines from the government.
Sources utilized in compiling this article.
https://www.govinfo.gov/content/pkg/FR-2023-07-31/pdf/2023-15581.pdf
https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking
https://www.ftc.gov/system/files/documents/plain-language/1007a_soliciting-and-paying-for-online-reviews-508_0.pdf
DISCLOSURE: We are not lawyers. If you need professional advice, seek that of a lawyer.