Two Georgia-based companies have agreed to settle an ongoing Federal Trade Commission (“FTC”) investigation over their marketing methods for a Zika-specific insect. According to the FTC, Creaxion, an Atlanta-based public relations firm, was hired by insect repellent-maker Fit Organic to promote its products during the 2016 Zika virus outbreak, which coincided with the 2016 Summer Olympics in Brazil. In doing so, Creaxion “partnered with Inside Publications, [the] publisher of Inside Gymnastics magazine, to obtain athlete endorsers and otherwise promote the product.”
The FTC asserted on Tuesday that Creaxion and Inside Publications “allegedly engaged two gold medalists as endorsers, who each received several thousand dollars for their activities.” In furtherance of the marketing campaign, “The athletes posted social media endorsements for the repellent, and Inside Publications reposted the endorsements.”
One of the paid-for posts from gymnast Carly Patterson stated, “Thank you so much @fitorganicusa for the mosquito repellent! I love the smell & love that it's all organic & safe!” Fellow gymnast Jake Dalton stated, “Made it back to the US! Thanks @fitorganicusa for protecting me during my trip in Rio!!”
The problem: Neither the athletes nor Inside Gymnastics disclosed in their social media posts that they had been paid to endorse the product. Moreover, “Inside Gymnastics ran paid ads for the product that were disguised as features or other articles of interest to its readers,” which is also in violation of the FTC’s guidelines, which require that any endorsements that arise from a “material connection,” such as payment, must include clear language disclosing the nature of the relationship.
(Note: the FTC has stated in the past that much like the hashtags #Spon and #Sp, simply saying “Thank you” to a brand does not amount to a proper disclosure).
Still yet, the FTC alleges that Creaxion “reimbursed employees and ‘friends’ for buying and reviewing the [insect repellant] product on Walmart.com” without requiring that they include disclosure language in their reviews on the retailer’s website.
“Based on this conduct, the [FTC] alleges [that Creaxion and Inside Publications] violated the FTC Act by: 1) falsely representing that endorsements reflected the independent opinions and experience of impartial users; 2) failing to disclose material connections between the endorsers and the marketer of the product, specifically that certain endorsers were paid or reimbursed by, or employees of, the PR firm promoting the product; and 3) falsely representing that paid ads were the independent statements and opinions of impartial publications.”
In agreeing to settle the matter and thereby, entering into proposed administrative orders, Creaxion and Inside Publications are required to refrain “from misrepresenting the status of any endorser or reviewer of a product or service, including misrepresenting that the endorser or reviewer is an independent user or ordinary consumer” going forward. They are also “prohibited from making any representation about any endorser of a product or service without clearly and conspicuously disclosing, in the endorsement, any unexpected material connection between the endorser and any respondent or anyone else affiliated with the product or service.”
“Finally, the orders require the respondents, when using endorsers, to take certain steps to ensure they comply with the endorsement provisions of the orders. Such steps include clearly notifying endorsers of their responsibilities, creating a monitoring system to review the endorsements, and terminating endorsers who fail to comply.”
There is not a monetary component of the settlement, and interestingly, the FTC did not name Fit Organic or the individual endorsers – Patterson and Dalton – in the matter. The matter comes on the heels of similar efforts by the FTC, including not one but two rounds of letters sent to brands, influencers, and celebrities, to an effort to educate them about the legal need to disclosure sponsored content, as well as cases involving YouTube influencers enlisted (and paid) by Warner Bros., Lord & Taylor and Nylon Magazine, and Cole Haan.
*The matter is In the Matter of Creaxion Corporation, File No. 1723066.