FTC advertising guidelines

Last week, FCC Commissioner Michael O’Rielly was in the news for sending a letter to the major record labels asking for information about their practices in paying broadcast stations for airing the label’s music.  The letter follows correspondence last year between the Commissioner and the RIAA (the Recording Industry’s trade group) asking for similar information, which the RIAA claimed that it did not have.  This process began after a Rolling Stone magazine article suggested that “payola” was still a common practice in the broadcast industry.  These actions, and the press reports that followed, raise a couple of interesting questions including what the FCC rules are on payola, and how broadcast practices compare to those of online companies.

The Communications Act prohibits the practice of “payola” by requiring, in Section 317, that when any content is aired on a station in exchange for anything of value, the station must disclose that “consideration” has been paid by the person or entity that pays for the consideration.  Thus, “payola” arises when a broadcast station employee or contractor receives or is promised anything of value in return for putting any content on the air, and that payment is not disclosed to the public.  Payola usually occurs when someone makes a gift or payment to a person involved in station programming (i.e., station employees, program producers, program suppliers) in exchange for favorable on-air exposure of a product or service.  While the term “payola” is most often associated with the receipt by a station announcer or music director of money, trips or other value for playing songs on the station, the same prohibition applies whenever any station programming personnel receive anything of value in exchange for airing any content where a sponsorship identification is not broadcast.  For examples of fines for airing programming for which consideration was received without acknowledging the receipt of valuable consideration, outside the context of music, see our articles here, here and here
Continue Reading FCC Commissioner Asks Record Labels for Information About Payola Practices – What are the FCC Rules?  How Do These Practices Compare to Online Music Providers?

We’ve written many times about the legal concerns about advertising for various vices – including e-cigs (see, for instance, our article here) and CBD (see for instance our articles here and here). The issues with these products never seem to go away, and in recent days, they have become even more pronounced. On e-cigs and vaping products, we have advised that ads need to avoid health claims, must contain an FDA-required warning that they contain nicotine and can be addictive (see our articles here and here), and that they should not be aired during programming targeting children (see our article here). We recently also added a warning that action might be coming against flavored vaping products. This week, the headlines are full of news announcing a new Federal ban on flavored vaping products that may go into effect in the next few months, following a state ban that was recently instituted in Michigan. On CBD, in addition to concerns about laws that still make the product illegal in many states, we’ve discussed concerns about whether the product is legally produced from hemp (see our article here), and highlighted prohibitions on health claims (see our article here) and ads directed to an underage audience. This week, we saw another set of warnings from the FTC targeting advertisers making specific health claims about their products. These actions should serve as a warning to broadcasters and other media companies to proceed very carefully, only after receiving legal advice, before jumping into advertising for these products.

On the vaping front, Michigan recently became the first state to totally ban flavored e-cigarettes – including mint and menthol flavored vaping products. See the Michigan Department of Health and Human Services “Finding of Emergency” here, and the Governor’s announcement here. While there was some indication that the vaping industry might fight that ban, with the news yesterday that the Trump administration plans to ban these products on a Federal level (see this statement from the FDA indicating that it will soon announce specific rules for the Federal ban on these products), broadcasters need to be concerned about running advertising for products that may be considered illegal. With the recent rash of other serious health consequences of vaping, it is quite possible that further regulation of these products will follow, and so may lawsuits from the vaping industry. In the interim, the FDA notes that it will be running advertising to combat underage vaping and to warn about the potential health issues, so look for those advertising opportunities.
Continue Reading New Concerns About Ads for E-Cigs and CBD

The developments surrounding the regulation of cannabis products, and the impact of that regulation on the ability of broadcasters and other media companies to run ads for these products, continue on an almost daily basis.  Of course, the developments don’t all point in a single direction.  As described below, at the same time as the FDA schedules a hearing to look at cannabis products and the rules that should apply to them, the FTC and FDA together have written warning letters to CBD marketers advising them to stay away from making specific health claims about their products and to avoid promoting edible products.  What does this mean for media companies that have been approached to advertise these products?

We very recently wrote about the murky state of the law on CBD advertising (mentioning our continuing concerns about marijuana advertising even in states where it has been “legalized”).  In that article, we warned that broadcasters should be particularly concerned about selling advertising that markets CBD products to be ingested, or advertising which makes unsupported health claims.  In a joint action announced last week, the FTC and the FDA wrote letters to three sellers of CBD products, warning those companies that their marketing raised legal issues.  In these letters, the FTC expressed concern that the marketing contained health claims that could not be substantiated, and the FDA was concerned about the marketing of supplements and other CDB products to be taken orally that had not been approved by the FDA as either foods or medicines.  At least one of the letters cited a “salve” that presumably was not to be ingested, so the concern there seemed to be solely the specific health claims made for the product.  These letters reinforce the concerns that we expressed about advertising that contains specific health claims or which deals with products to be taken by mouth (either as dietary supplements, medicines or in other foods) – so stations should be especially wary of such ads. 
Continue Reading FDA Schedules Hearing on Cannabis; FTC and FDA Send Cease and Desist Letters to Sellers of CBD Products – What is the Effect on Advertising?

On December 1, 2009,  FTC revised Guidelines went into effect updating policies dealing with advertising using testimonials and endorsements, specifically affecting celebrity endorsements and sponsorship disclosure.  These revised guidelines directly impact the established practices of broadcasters and new media companies.  These revised endorsement and testimonial guidelines effectively ban the old standard “results not typical” disclaimer so commonly in use in connection with a great deal of testimonial advertising, confirm independent liability for the “endorser” (including celebrities) for false product or service claims, and expand and clarify the need for disclosure of “material connections”, that is consideration (money and other “freebies”) received by new media companies in connection with reviews or other online coverage of products or services.  It is vital that media companies, in particular new media, understand the key provisions of these guidelines to make sure that they don’t become a target of any FTC enforcement action.  The FTC has indicated that for now at least, its focus will be on enforcement in the new media world (bloggers, social media, viral campaigns) and other “non-traditional” advertising (celebrity guests on news and entertainment shows, endorsements by media personnel such as on-air DJ’s).

Like all FTC Guidance concerning advertising, the revised guidelines are specific regulations, but instead they set out standards (in essence a safe harbor) that outline how the FTC will review advertising to determine if it is “false and deceptive” or otherwise misleading to the consumer in violation of Section 5 of the FTC Act.  The revised guidelines provide specific examples as to how they will apply to insure sufficient disclosure so that the listener has all the background necessary to be able to evaluate the strength of the endorsement for him or herself.  For broadcast advertising, the new guidelines make clear that endorsers can themselves be liable for misleading statements made during a product pitch.  So a radio announcer paid to try a diet plan or some other product and to report about its results on the air needs to be sure not only that his statements are truthful, but that the “results” claimed are in line with what the advertiser can actually prove for the product through clinical study and research.  The radio pitchman cannot turn a blind eye to claims that are inherently incredible.  In the past, a simple disclosure that "your results may vary" or "these results are not necessarily typical" was sufficient.  Today, that disclaimer is no longer enough.  Instead, the new guidelines state that any testimonial about the results of using a product be accompanied with a disclosure of the results that a typical user can expect to get from the product.  So the announcer must be informed as to what results can be expected by the typical user, and that these results are objectively verifiable, so that the proper disclosure can be made.  As the announcer (or the station) can now be liable for statements made in such testimonials, stations should take care to be prepared to make the required disclosures. 


Continue Reading New FTC Guidelines on Endorsements and Sponsorship Disclosure – Broadcasters and New Media Companies Beware