In mid-April, the Federal Trade Commission (FTC) sent out 90 letters to advertisers, celebrity endorsers and influencers who use their fame and the power of digital advertising to help promote products.  The facts in each letter vary, but the FTC’s message was a strong reminder that clear and conspicuous disclosure is required if a “material connection” exists between and endorser and the marketer of a product.

Typically, the marketer is a manufacturer, importer or an advertising agency that establishes a relationship with an endorser.  In 2009, the FTC created endorsement guides to ensure that consumers are on notice that an endorser or influencer is being compensated by a marketer.  In 2015, the FTC published an Enforcement Policy Statement on Deceptively Formatted Advertisements.  Those sources provide straightforward guidance to inform consumers that an endorser is acting on behalf of a marketer and to differentiate advertising from truly independent news or reviews of products.

Throughout history, producers of consumer goods marketed their wares with endorsements from famous people and “satisfied consumers.”  Social media provides an enormous boost to the most ancient form of marketing, “word of mouth.”  An image of your product with a celebrity or the perfect “ordinary consumer” in a creative setting can quickly go viral to millions of consumers or receive hundreds of thousands of likes on Facebook.

All ads should be truthful, targeted appropriately, and compliant with industry codes.  If appropriate, ads should also be clearly identified as paid endorsements or advertising material to reduce the risk of consumer deception.  These principles are especially important in the digital domain where viewers tend to move rapidly from one destination to another.

A successful ad that includes use of celebrities or influencers should meet the FTC’s standards to avoid future enforcement initiatives.  The reputation of the advertiser and endorser as well as the integrity of the brands should not be placed at risk by the failure to include clear and conspicuous notices or disclaimers.  Congress granted the FTC broad jurisdiction to police deceptive ads.  The FTC’s guidance has now been around long enough to be on the checklist of every advertiser—particularly those under pressure to publish the next iconic image on Facebook or Instagram!

On December 22, 2015, the Federal Trade Commission (FTC) published an “Enforcement Policy Statement on Deceptively Formatted Advertisements” (2015 Policy Statement) with unanimous support of the Commissioners.[i]  The Policy Statement applies to advertising and promotion of all goods and services, and it supplements prior FTC guidance that advertisers have relied on since the 1960s.[ii]  Given the FTC’s longstanding interest in alcohol beverage advertising by large and small suppliers, industry members should pay particular attention to the latest guidance on deception.

The 2015 Policy Statement focuses on so-called “native advertising” or “sponsored content,” which reasonable consumers may perceive to be “non-promotional content” such as news, articles, feature stories or educational information.  The FTC provides an example of digital advertising content in a publication that is formatted in the same manner as the publication itself.  The deception standard is summarized as follows:

Regardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising.[iii]

Extensive guidance is provided for advertisers to avoid consumer deception in online and digital placements using fairly straightforward disclosures or other means of distinguishing ad content from the publication in which the ad content appears.  Recent enforcement actions are also discussed.  The key to compliance and avoiding FTC enforcement actions is to clearly inform consumers that they are viewing or reading advertising content.

The FTC has also prepared further specific guidance with discussions of issues arising in all forms of media and examples of recommended disclosures and formatting.  Guidance supplementing the 2015 Policy Statement is titled, “Native Advertising:  A Guide for Businesses.”[iv]

Over the last 15 years, several FTC special orders have been issued to beer, wine and spirits manufacturers requiring production of virtually all advertising content for a specified period (e.g., six months or a year).  The FTC staff reviewed those materials thoroughly with a focus on (i) voluntary compliance with industry advertising codes and (ii) compliance with federal laws prohibiting deceptive and unfair advertising practices.  The 2012 special orders issued to the top 14 beer, wine and spirits suppliers in the U.S. also requested privacy policies and terms and conditions of web sites and social media pages.[v]

Four detailed reports on alcohol beverage advertising have been issued since 1999 summarizing the FTC’s findings on alcohol beverage advertising.  The 2014 report was one of the first widely publicized reviews of digital advertising practices by a consumer products industry.[vi]


[i] Full statement is available at https://www.ftc.gov/public-statements/2015/12/commission-enforcement-policy-statement-deceptively-formatted

[ii] See, e.g. Statement in Regard to Advertisements That Appear in Feature Article Format, FTC Release, (Nov. 28, 1967), 73 F.T.C. at 1307 and FTC Statement on Deception, 103 F.T.C. 174, 175 (1984) (appended to Cliffdale Assocs., Inc., 103 F.T.C. 110 (1984)) (“Deception Policy Statement”).

[iii] See, 2015 Policy Statement, p. 2 and p. 10.

[iv] https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses

[v] Cite 2012 Special Order April 12, 2012; press release and link to order available at https://www.ftc.gov/news-events/press-releases/2012/04/ftc-orders-alcoholic-beverage-manufacturers-provide-data-agencys.

[vi] Because the https://www.ftc.gov/news-events/blogs/business-blog/2014/03/alcohol-advertising-ad-placement-self-regulation

Alcohol beverage suppliers were among the first U.S. business sectors to embrace self-regulation of advertising and marketing in the 1930s and 1940s.  Voluntary codes have evolved from simple commitments to truthful advertising to comprehensive guidance documents containing mechanisms for independent review of consumer complaints.

Compliance with voluntary industry codes does not absolve an advertiser from compliance with laws and regulations covered in Part 2 and Part 3 of this series.  The codes cover areas that would be difficult for government to regulate such as non-misleading advertising content, which enjoys significant First Amendment protection.  The codes also provide best practices in minimizing exposure of persons under the legal drinking age to alcohol advertising.

As indicated in Part 1 of this series, the Federal Trade Commission (FTC) views compliance with voluntary codes as an essential part of an alcohol beverage advertising and marketing function.  A detailed FTC review of advertising practices initiated in 2012 will likely result in a report to Congress by the end of 2013.  That report will include a detailed analysis of digital advertising activities and expenditures along with recommendations for future code enhancements.

The codes subject the digital marketing space to the same list of traditional “dos and don’ts” in advertising content that apply to all other media.  Beyond those fundamentals, digital advertising is subject to unique placement and audience measurement requirements that require communication with host networks and/or advance research on the audience demographics of traditional web sites or networks.

Voluntary industry codes are developed and disseminated by trade associations for distillers, vintners, and brewers.  Similar guidelines exist across all codes for advertising content.  Audience demographic standards are included in the codes of the Distilled Spirits Council of the United States, Beer Institute and Wine Institute.  Those standards are the same as they are based on U.S. Census data.  Links to major industry codes and examples of media policies follow:

Beer Institute Advertising and Marketing Code and Buying Guidelines

Brewers Association Advertising Code

Distilled Spirits Council of the United States Code of Responsible Practices and Note on Responsible Digital Marketing Communications

Facebook Alcohol Advertising Policy

Google Alcohol Advertising Policy

Wine Institute Code of Advertising Standards

In Part 2 of this series, we highlighted recent developments in federal regulation and oversight of alcohol beverage advertising with implications for digital media.  State alcohol and consumer protection laws also apply and can make regional or national ad campaigns challenging.

An overarching concern to state officials is the potential appeal of alcohol beverage advertising to persons below the legal drinking age.  In the digital space state attorneys general and regulators quickly responded to the advent of social media and asserted authority to prevent dissemination of inappropriate advertising content to children.  Attorneys general signed consent agreements on alcohol and tobacco advertising with Facebook, MySpace and several other social networks in 2008.  As a result, the networks developed technology to limit access to alcohol advertising content to registered users over the age of 21.  Advertisers must ensure that they set up their social network pages properly so that the technology limiting access to alcohol ads is functioning.

The 21st Amendment to the U.S. Constitution grants states a degree of unique authority over alcohol beverages that does not apply to most other consumer products.  In advertising, that authority has been somewhat eroded by the First Amendment’s commercial speech doctrine and other case law, but most states continue to actively regulate the source of funds used to pay for advertising based on older legal concepts designed to protect the independence of retailers from domination by manufacturers.  In the post-Prohibition period, officials feared that large brewers and distillers would dominate local grocery stores, bars and other retailers, most of which were then “mom and pop” operations.

While the retail sector has changed dramatically, many state laws still contain restrictions on advertising or promotional activities by manufacturers that benefit specific retailers.  Recent examples of these trends are found in changes in Texas law effective September 1, 2013 that have significant implications for regional and local advertising via digital media in a large and diverse state.

In response to a 2011 court decision (Authentic Beverages Company, Inc. v. Texas Alcoholic Beverage Commission), the Texas Legislature repealed longstanding advertising restrictions and authorized prearrangement and preannouncement of promotional activities to be held on a retailer’s premises.  Texas law now permits manufacturers and wholesalers to utilize digital media to inform consumers of the identity and location of retailers where their products are available.  Restrictions apply to payments or reimbursements to retailers for the cost of an alcohol beverage ad.  Finally the Texas Legislature repealed a prohibition on advertisements that refer to the alcohol content of beer as well as a requirement to label malt beverages as “beer” or “ale” based on the alcohol content even where that designation (from an industry understanding) was inaccurate.  Those types of archaic restrictions made it difficult to run national or regional digital advertising campaigns without technical violations of Texas law.

While you can now use factual statements about product availability and attributes in digital and other media in Texas, many analogous state restrictions remain on the books.

This past year brought examples of federal regulation and oversight of social media.  Both illustrate the general policy concerns of federal agencies that regulate alcohol beverage advertising.

TTB Industry Circular 2013-1, reviews the application of TTB regulations to beer, wine and spirits advertising in social media and other forms of digital advertising.  TTB’s primary concerns are the clear disclosure of the company responsible for an advertisement and prohibiting communication of false and misleading information.   The circular makes clear that TTB’s advertising regulations apply to digital advertising, including user-generated content.  Helpful references are provided to key sections of TTB advertising regulations for beer, wine and spirits.

FTC 2012 Special Order (FTC Matter No. P104518) requested a broad range of information on advertising expenditures and practices from companies in the alcohol beverage industry to make sure that they comply with the Federal Trade Commission Act and voluntary industry advertising codes.  The FTC has broad authority to prohibit and take enforcement action against advertising that is deceptive or unfair.  FTC officials have long maintained that this authority empowers the agency to limit exposure of persons under the legal drinking age to alcohol beverage advertising content in all media.  The Special Order requested information about online and social media activity at pages 4-6 and 9-10, and companies should recognize that advertising content, planning documents and placement information may be requested in similar special orders in the future.