Hyundai avoided a collision with the Federal Trade Commission on the treacherous social media marketing course. The FTC suggested yesterday that its decision not to recommend enforcement action against Hyundai for a blogger outreach effort designed to build buzz around the brand's Super Bowl XLV ads could be a lesson for marketers.
The FTC's Division of Advertising Practices investigated whether Hyundai Motor America violated the FTC Act in its campaign to encourage bloggers to write about its Super Bowl XLV ads, according to a letter sent to the automaker in November. The act requires that endorsers disclose any material connections between themselves and advertisers.
In the end, the commission determined that Hyundai was not aware in advance that gift certificates were provided to "a relatively small number of bloggers" as an incentive to post about the car ads. Hyundai's use of an outside firm to handle the social media effort seemed to be a saving grace, despite the fact that advertisers are legally responsible for the actions of the companies they work with in such cases. The FTC did not disclose the name of the media firm working with Hyundai.
Noted the letter to Hyundai, "the actions at issue here were contrary both to Hyundai's established social media policy, which calls for bloggers to disclose their receipt of compensation, and to the policies of the media firm in question. Moreover, upon learning of the misconduct, the media firm promptly took action to address it."
The letter and the Endorsement Guides revised by the FTC in 2009 are "worth a read if your company has added social media to your marketing arsenal," suggested Lesley Fair of the FTC's division of advertising practices in a blog post yesterday.
Fair laid out three rules of thumb for social media marketers: "1) Mandate a disclosure policy that complies with the law; 2) Make sure people who work for you or with you know what the rules are; and 3) Monitor what they're doing on your behalf."
However, the decision not to take enforcement action against Hyundai, and the FTC's reasoning behind it may only cause confusion. "The FTC's reliance on the social media policies of Hyundai and its marketing agency is interesting and yet another data point in favor of adopting a social media policy," wrote Venkat Balasubramani, co-founder of Focal PLLC, on the Technology and Marketing Law Blog on December 20 - before Fair's post was published.
Balasubramani questioned "whether the FTC's reliance on these policies is inconsistent," adding, "The FTC doesn't seem to accept affiliate agreements at face value for the proposition that companies are policing their affiliates. It's odd for the FTC to accept a social media policy for the same purpose."
He updated his original commentary after Fair's post was published, calling it, "a nice explanation for the FTC's rationale in this matter." However, the FTC's explanation leaves room for interpretation.
Balasubramani's fellow Technology and Marketing Law Blogger Eric Goldman, associate professor of law at Santa Clara University School of Law, chimed in this afternoon: "Because the FTC won't go after the direct violators, they are casting a net for other folks to hold responsible.... Because they are going after the secondary players with a weak theoretical justification for holding the secondary players responsible while not simultaneously enforcing the rules against the principal players, the FTC is effectively developing its rules of the road on the fly. Not surprisingly, such an ad hoc development of rules can be hard to keep consistent.
He went on to note, "If the FTC is going to hold advertisers liable for third party actions--a liability paradigm I think they should categorically abandon...then it would be great if the FTC would publicly reconcile these different attitudes towards third party liability. Given the FTC's steadfast refusal to provide bright-line rules that might limit its future discretion, I wouldn't hold my breath waiting for such clarification."
In related news, deputy director of the FTC's Bureau of Consumer Protection, Jessica Rich, will lead the Bureau's Division of Financial Practices starting Jan. 9, 2012. Former staff attorney in the Division of Advertising Practices, Daniel Kaufman, will fill Rich';s current role.
UPDATE: This story originally attributed Balasubramani's comments to Goldman.
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Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.
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