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FTC Sends Out Official Warnings to Over 700 Brands Over the Use of Fake Reviews

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As eCommerce continues to rise, so too do deceptive methods of advertising, including fake reviews, undeclared paid endorsements and other practices that fall foul of federal laws.

And now, the FTC is looking to step up its action on this front, with the Commission this week sending out notices to over 700 businesses, including Facebook, Amazon, and LinkedIn, about their use, or facilitation of false reviews and ads to promote products online.

As explained by the FTC:

The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world. Consequently, the FTC is now using its Penalty Offense Authority to remind advertisers of the law and deter them from breaking it.”

The FTC says that by sending its Notice of Penalty Offenses to these organizations, it’s effectively notifying each of their need to either address these issues, or risk penalties of up to $43,792 per violation.

“The Notice of Penalty Offenses allows the agency to seek civil penalties against a company that engages in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.”

So now that the FTC has sent out these warnings, it has a legal basis to implement penalties in future instances, if so detected.

What the specifics are in each case is unclear, but the FTC does explain that the range of violations highlighted in its notifications include:

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  • Falsely claiming an endorsement by a third party
  • Misrepresenting whether an endorser is an actual, current, or recent user
  • Using an endorsement to make deceptive performance claims
  • Failing to disclose an unexpected material connection with an endorser
  • Misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.
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These violations cover a broad range of practices, which are particularly applicable in social media marketing, and with the use influencers in promotions also on the rise, it’s worth familiarizing yourself with the latest regulations to ensure that you don’t also fall foul of the FTC’s rules.

The FTC has also created an overview guide to its endorsement rules to provide more assistance in this respect.

It’ll be interesting to see whether this new push from the FTC actually leads to more specific legal action on this front, and what that will mean for the marketing sector. And again, with the use of influencer marketing on the rise, you can imagine that many will fail to meet the specific criteria, leading to further concerns.

As such, it is worth reading up on the latest rules.

The FTC has published a full listing of the 700 companies that it’s sent out notices to here.

Socialmediatoday.com

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Twitter Agrees to $150 Million Fine from the FTC Over Past Misuse of Users’ Personal Information

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Elon Musk Launches Hostile Takeover Bid for Twitter

The hits just keep on coming at Twitter HQ.

This week, Twitter has agreed to pay a $150 million settlement to the FTC over a past misuse of user data, which saw information submitted for personal identification confirmation purposes mistakenly then used in Twitter’s ad targeting efforts.

As explained by Twitter:

On May 25, 2022, Twitter reached a settlement with the Federal Trade Commission (FTC) regarding a privacy incident disclosed in 2019 when some email addresses and phone numbers provided for account security purposes may have been inadvertently used for advertising. This issue was addressed as of September 17, 2019, and today we want to reiterate the work we’ll continue to do to protect the privacy and security of the people who use Twitter.”

The issue, as Twitter notes, was made public in 2019, when Twitter disclosed that it had been using information submitted for account security checks within its data targeting process.

Twitter revealed the initial finding in its Q3 2019 results, in which it noted that the correction of this element would have an impact on its overall revenue performance.

As Twitter CFO Ned Segal explained at the time:

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We ask people a series of questions before we put you into a timeline when you’re new to Twitter. Among the questions we ask are if we can use your device settings to figure out the best ads to show you. It turns out there that, that setting wasn’t working as expected, and we were using device settings even if people had asked us not to do so. So when we discovered that, one, we Tweeted about it, which we often do to try to be transparent with people when things aren’t working as expected. And two, we turned off the setting so that it would work as expected. That has a negative impact to revenue because it’s one less input that you’ve got when you are figuring out which ads to show people. So instead of getting a partial quarter impact, you get a full quarter impact in Q4.”

So, essentially, Twitter’s system did not respect user privacy inputs, and that flaw had been in place for six years, between 2013 and 2019.

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Which is a significant privacy breach, hence the $150 million fine from the FTC.

As per the FTC’s announcement:

“Twitter asked users to give their phone numbers and email addresses to protect their accounts. The firm then profited by allowing advertisers to use this data to target specific users. Twitter’s deception violates a 2011 FTC order that explicitly prohibited the company from misrepresenting its privacy and security practices.

While the case itself is not new, and the flaw at the heart of the issue has been resolved, it’s another blow for Twitter, which is in the midst of a cost-cutting push as it works to meet its own, tough revenue and growth targets, while also navigating a hostile takeover push from Elon Musk.

Twitter had factored this fine into its forecasts, so the hit won’t be as significant as it may sound, but even so, $150 million is a lot to take off its books – though it will clear the way for a new era if/when Musk does take over the app.

Which still seems like a ‘when’, despite Musk’s protests about the platform’s fake profile count and other transparency issues.

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Whatever comes next, this does help to clarify Twitter’s ledger, as the FTC fine had been hanging over it for almost three years.

The case also highlights, once again, that even a relatively minor flaw like this can have a big impact when you’re operating at the scale that social platforms do. A small error with a few hundred people is a problem, but when it impacts millions, the extent of that issue is amplified significantly.

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And there may be other flaws yet to be found – though Twitter says that it’s since implemented a range of checks and processes to ensure that it’s no longer misusing any user data.

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