In a recent (March 20, 2014) letter, the Federal Trade Commission (FTC) offered guidance as to the factors to consider in evaluating whether entry into a contest on a social media site is a form of material connection requiring disclosure under the FTC Endorsement Guidelines.  At issue before the FTC was a promotional contest held by Cole Haan on Pinterest.  The letter is one of the first instances in which the FTC has offered guidance as to the applicability of the Endorsement Guidelines to contests conducted on social media sites.

In Cole Haan’s “Wandering Sole” promotion, participants created boards on the social media platform Pinterest titled “Wandering Sole.”  Participants were to post five images of Cole Haan shoes along with images of the participants’ “favorite places to wander.”  Participants were also instructed to use “#WanderingSole” in each pin description.  The most creative entry won a $1,000 shopping spree.

In its letter, the FTC asserted its belief that the contest participants’ pins featuring Cole Haan products constituted endorsements of the depicted Cole Haan products.  In addition, because the pins on Pinterest were incentivized by the opportunity to win the $1,000 shopping spree, the FTC believed that this resulted in a material connection between the contestants and Cole Haan that was not reasonably expected by viewers of the pins, turning each participant into a Cole Haan endorser.  Although participants were instructed to use the “#WanderingSole” tag on their pins, the FTC concluded that the hashtag did not adequately communicate the material connection between participants and Cole Haan.  The FTC noted that its revised Endorsement Guides require the disclosure of any “material connection” between a marketer and an endorser when the relationship is not otherwise apparent to a reasonable consumer.  According to the FTC, the Cole Haan contest presented an example of where an entry into a contest to receive a prize in exchange for endorsing a product through social media constituted a material connection that would not reasonably be expected by viewers of the endorsement.

The FTC staff explained that it determined not to recommend enforcement action because the FTC had not previously addressed whether an entry into a contest would be considered, among other reasons specific to the promotion, a form of material connection nor, with respect to Pinterest, had it addressed whether a pin on Pinterest may constitute an endorsement.

Promotion contests on social media platforms like Facebook (using its “Like” feature) and Pinterest are becoming increasingly popular digital advertising strategies.  The FTC has advised that federal advertising laws and guidelines apply to online advertising just as they do to any other medium, and the FTC’s letter to Cole Haan is one of the first instances that the FTC has offered guidance regarding contests that may trigger the endorsement rules and the specific types of disclosures that advertisers should include in online contests and promotions to keep them in line with federal law.  Of particular interest here, the FTC has indicated that hashtag disclosures may be inadequate to disclose a material connection in the context of a contest or promotion.

In light of this new guidance from the FTC, advertisers that incorporate contests on social media platforms like Facebook, Pinterest and Instagram as part of their advertising strategies should pay close attention to the structure of such contests, and especially the nature of any “prize” awarded to the winner, to ensure that such promotions are legally compliant.