In a recent case of first impression, the National Advertising Division of the Council of Better Business Bureaus (“NAD”) – an industry forum for resolving disputes among advertisers – addressed an advertiser’s use of Facebook’s “like” feature in connection with an online promotion. Such promotions – referred to as “like-gated” promotions, typically ask a Facebook user to “like” the advertiser’s Facebook page in order to receive a discount, rebate or other deal. If the user chooses to “like” such page or content, this information will appear on such user’s Facebook wall and possibly his or her Facebook news feed, where it can be viewed by the user’s Facebook friends. Moreover, the user’s name and image may be displayed in connection with the “liked” page or content. As a result, Facebook’s “like” feature can generate invaluable exposure for an advertiser, transforming a user’s interest in the advertiser into a public endorsement of such advertiser’s products and services.
In the NAD case, Coastal Contacts, Inc., offered a free pair of glasses to each person who “liked” its Facebook page. A competitor, 1-800 Contacts, Inc., challenged the offer, alleging that Coastal Contacts had failed to adequately disclose the offer’s material terms. 1-800 Contacts also charged that, on account of that failure, the “likes” that Coastal Contacts received were not legitimate, and the company’s use and promotion of such “likes” on the Facebook platform and in press releases were therefore fraudulent. 1-800 Contacts urged the NAD to recommend that Coastal Contacts remove and stop promoting the “likes” that it received via the allegedly misleading promotion, in order to remedy its allegedly unfair social gain.
The NAD agreed with the challenger that Coastal Contacts had failed to clearly and conspicuously disclose the terms of its free offer; however, the NAD did not agree that such failure rendered the resulting “likes” invalid, and it therefore declined to recommend that Coastal Contacts remove or stop promoting those “likes.” The NAD explained that, although Coastal Contacts’ promotion required modification, there was no evidence showing that participants were denied free pairs of glasses because they failed to understand the offer terms. In the NAD’s view, because actual consumers “liked” Coastal Contacts’ Facebook page and the consumers who participated in the offer received the benefit of such offer, Coastal Contacts did, in fact, have the general social endorsement that the “likes” conveyed.
What About the Endorsement Guides?
The case raises an issue that the NAD did not address: Should an advertiser be required to disclose that the Facebook “likes” received through a like-gated promotion were received in exchange for consideration? Under the Federal Trade Commission’s (“FTC”) Endorsement Guides, an advertiser is required to disclose any material connection between itself and a consumer who endorses its business. So, should a “like” given in exchange for a discount or other deal be accompanied by a disclosure of the connection? Is such a disclosure even possible?
To our knowledge, the FTC has not publicly addressed this issue, but we think that it could challenge an advertiser’s failure to disclose the consideration received in exchange for an endorsement conveyed by a “like.” Any disclosure that the FTC would seek to prescribe in connection with “likes” displayed within the Facebook platform would most likely have to be built into Facebook’s “like” feature itself – something that is not within advertisers’ direct control. This does not rule out an FTC action, as the FTC could take the position that advertisers should not use like-gated promotions if they are unable to make the disclosures required under the Endorsement Guides. The FTC may also assert that corporate Facebook users have the power to impress upon Facebook the need to modify the “like” feature to allow for necessary disclosures.
An advertiser considering a like-gated Facebook promotion should keep these issues in mind (and keep an eye out for further developments). It should also ensure compliance with the FTC’s Endorsement Guides to the extent possible (i.e., where it can make required disclosures), such as on its own Facebook page and in other online and offline media in which it promotes the “likes” that it has received as a result of any promotion.
Don’t Forget the Facebook Promotions Guidelines.
When structuring a contest, sweepstakes or similar promotion using Facebook, an advertiser must also comply with the Facebook Promotions Guidelines, which Facebook revises from time to time. Among other things, the Guidelines set limits on a promotion sponsor’s use of Facebook’s “like” feature. For instance, while “liking” a sponsor’s own Facebook page is a permissible requirement under the Guidelines for a user’s participation in a promotion, the act of “liking” such a page cannot function to automatically register the user for the promotion. Further, if a sponsor does condition participation on “liking” the sponsor’s Facebook page, the sponsor must extend eligibility for the promotion to users who previously “liked” the page, as well as to users who “like” the page from the first time in connection with the promotion.
Sponsors of promotions are also prohibited under Facebook’s Guidelines from requiring prospective participants to take any action using any Facebook features or functionality other than either “liking” the sponsor’s own Facebook page, checking into a particular location or connecting to the sponsor’s Facebook app. Nor may a sponsor require prospective participants to “like” any content other than the sponsor’s own Facebook page – for example, a sponsor may not condition a user’s participation on “liking” a specific wall post or any other particular piece of content. The Guidelines do not explain the reason for this distinction; however, it may be that the “News Feed” and other posts that result when a user “likes” particular content (as opposed to a Facebook page generally) may often constitute “unauthorized commercial communications,” which are prohibited by Facebook’s Statement of Rights and Responsibilities.
All this serves as an important reminder that running a successful and legally compliant promotion requires the promotion’s sponsor to be familiar with applicable laws, the social media platform provider’s various guidelines and contractual terms, and emerging best practices.