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FTC Provides Guidance on Social Media Promotions

Entry into a contest to receive a prize in exchange for endorsing a product through social media constitutes a material connection and the endorsement needs to be disclosed.

On March 20, 2014, the FTC sent Cole Haan a closing letter regarding the company’s Wandering Sole Pinterest Contest. The Contest’s structure and requirements to enter were consistent with how many other companies have conducted promotions. The contest required contestants to create Pinterest boards titled “Wandering Sole.” The contest instructed that a board include five shoe images from Cole Haan’s Wandering Sole Pinterest Board as well as five images of the contestants’ “favorite places to wander.” Finally, contestants were instructed to use “#WanderingSole” in each pin description. Cole Haan promised to award a $1,000 shopping spree to the contestant with the most creative entry.

The FTC stated that participants’ pins featuring Cole Haan products were endorsements of the Cole Haan products, and the fact that the pins were incentivized by the opportunity to win a $1,000 shopping spree would not reasonably be expected by consumers who saw the pins. The FTC also took exception that Cole Haan did not instruct entrants to label their pins and boards to make it clear that they had pinned Cole Haan products as part of a contest. Specifically, the FTC believed that the “#WanderingSole” hashtag did not adequately communicate the material connection between contestants and Cole Haan, namely that they were trying to win a $1,000 shopping spree.

The FTC decided not to recommend enforcement action against Cole Haan for violations of Section 5 of the FTC Act, which requires the disclosure of a material connection between a marketer and an endorser when their relationship is not otherwise apparent from the context of the communication that contains the endorsement. In not bringing an enforcement action, the FTC considered a number of factors: 1) the FTC has not previously publicly addressed whether entry into a contest is a form of material connection, nor has the FTC explicitly addressed whether a pin on Pinterest may constitute an endorsement; 2) the Contest ran for a limited length of time and drew a relatively small number of contestants; and 3) Cole Haan has since adopted a social media policy that adequately addresses the FTC’s concerns.

This serves as an important reminder that businesses need to make sure that if there is a material connection with an entrant, that the connection is adequately disclosed. This requirement applies to all social media promotions, not just those that exist on Pinterest. In addition, companies need to review their social media policies and make necessary changes to address this issue.

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