NOVEMBER 2018 ADVERTISING, MARKETING & PROMOTIONS >> ALERT FTC BRINGS ACTION AGAINST PR AGENCY AND PUBLISHER FOR MISLEADING ONLINE ENDORSEMENTS AND DECEPTIVELY FORMATTED ADVERTISING The Federal Trade Commission (FTC) announced a settlement with a public relations agency and its chief executive officer, as well as a magazine publisher and its sole owner, alleging claims that they misrepresented paid endorsements as independent consumer opinions and commercial advertising as independent journalistic content.

THE COMPLAINTS According to the complaints, THE BOTTOM LINE HealthPro Brands Inc. (HealthPro) The FTC is, once again, making it clear that all involved parties have a duty to comply hired Georgia-based public relations with the FTC’s rules regarding paid endorsements and native advertising practices agency, Creaxion Corporation – and that it is equally willing to take action against agencies and publishers when (Creaxion), to help launch and promote a new insect repellent during the 2016 they violate these rules. Failing to comply with these FTC requirements could expose Zika virus outbreak to consumers, an agency, the associated publisher, and even their owners, officers and directors in media, retailers, and others. their individual capacities, to significant liability.

The FTC claimed that Creaxion’s CEO contacted the owner of Inside and “advertorial” promoting the “friends” for purchasing the repellent Publications, LLC of Georgia (Inside repellent, and marketing the repellent and posting online reviews for the Publications) to broker a partnership on social media. product (again, without instructing between HealthPro and Inside these individuals to disclose their The FTC alleged that two Olympic Publications through which Inside relationship with HealthPro in their gold medalists – Carly Patterson and Publications would distribute the posts). repellent to athletes and others Jake Dalton – posted endorsements attending the 2016 Summer Olympics for the repellent on social media The FTC contended that the in Brazil, the epicenter of the Zika without disclosing that they were paid respondents drafted, reviewed, and outbreak. several thousands of dollars for their monitored several paid social media endorsements. These endorsements posts and advertorials that lacked According to the FTC, HealthPro and were allegedly reposted by Inside appropriate advertising disclosures, Inside Publications also entered into Publications – once again without any and that Inside Publications’ magazine a “Social and Digital Media Activation disclosures. According to the FTC, ran paid ads for the product that were and Athlete Engagement” agreement Creaxion and its CEO also conducted disguised as independent, editorial providing that Inside Publications an online consumer review program features or other articles of interest to would be paid for various services, that reimbursed employees and their its readers. including publishing a feature article >> continues on next page Attorney Advertising 2698 NOVEMBER 2018

ADVERTISING, MARKETING & PROMOTIONS >> ALERT

The complaint alleged that these In particular, the settlements prohibit practices violated Section 5 of the the respondents from: FOR MORE INFORMATION FTC Act by: (1) falsely representing Allison Fitzpatrick >>>> misrepresenting the status of any that endorsements reflected the Partner endorser or reviewer of a product or independent opinions and experience 212.468.4866 service, including misrepresenting [email protected] of impartial users; (2) failing to disclose that the endorser or reviewer is an material connections between the Paavana L. Kumar independent user or ordinary Associate endorsers and the marketer of the consumer; 212.468.4988 product, specifically that certain [email protected] endorsers were paid or reimbursed by, >>>> making any representation about or the D&G attorney with whom you or employees of, the public relations any endorser of a product or service have regular contact. agency promoting the product; and without clearly and conspicuously (3) falsely representing that paid ads disclosing, in the endorsement, any were the independent statements and Davis & Gilbert LLP unexpected material connection 212.468.4800 opinions of impartial publications. between the endorser and any 1740 Broadway, New York, NY 10019 respondent or anyone else affiliated www.dglaw.com Notably, the FTC looked to the with the product or service; and © 2018 Davis & Gilbert LLP agency’s and publisher’s contracts, as well as their degree of responsibility >>>> misrepresenting that paid for and involvement in the marketing commercial advertising is a materials, in determining which parties statement of opinion from an should be named in the action – and, independent or objective publisher in an unusual but telling move, did not or source. name the advertiser, HealthPro, in its complaint. The orders also require that the respondents take specific steps to ensure that endorsers they use THE PROPOSED SETTLEMENTS comply with the endorsement The proposed settlements prohibit provisions of the orders, including by the respondents from making such affirmatively notifying endorsers of their misrepresentations going forward, responsibilities, creating a monitoring and require that they disclose material system to review their endorsements, connections with, and otherwise and terminating endorsers who fail to monitor, any endorsers they hire and comply. refrain from deceptively formatted advertising practices.