A recent ruling against Cole Haan from the Federal Trade Commission puts marketers on notice that pinned content on Pinterest featuring a brand?s product and generated via a contest must be clearly marked as a product endorsement.

The FTC has not previously explicitly addressed whether a pin on Pinterest constitutes an endorsement, but the agency asserted in a recent letter that the brand created a deceptive situation because consumers did not realize others had received an incentive for pinning the brand?s products to Pinterest. While contests built around encouraging consumers to upload content to social media sites have been growing in popularity thanks to how easy it is share photos from a smartphone, the ruling points to one of the potential pitfalls with such a strategy.

?We believe that participants' pins featuring Cole Haan products were endorsements of the Cole Haan products, and the fact that the pins were incentivized by the opportunity to win a $1000 shopping spree would not reasonably be expected by consumers who saw the pins,? said Mary K. Engle, associate director for advertising practices at the FTC in the letter to Cole Haan's attorneys.

?Moreover, we were concerned that Cole Haan did not instruct contestants to label their pins and Pinterest boards to make it clear that they had pinned Cole Haan products as part of a contest,? she said.

?We do not believe that the "#WanderingSole" hashtag adequately communicated the financial Incentive - a material connection - between contestants and Cole Haan.?

User-generated content
The FTC's advertising practices division conducted an investigation into whether Cole Haan's Wandering Sole contest violated an FTC act requiring the disclosure of a material connection between a marketer and an endorser when such relationship is not otherwise apparent.

The contest in question encouraged consumers to create Pinterest boards that included five shoe images from Cole Haan's Pinterest board and five images of the contestants favorite places to wander. By posting the images and using the hashtag #WanderingSole in each pin description, contestants were entered to win a $1,000 shopping spree.

In the letter to a Kelley Drye & Warren attorney, the FTC said it decided against enforcement action in this case because it has not previously addressed whether entry into a contest is a form of material connection or whether a pin on Pinterest can constitute an endorsement.

The FTC also mentioned the contest's limited duration and limited response rate as factors in its decision to not pursue enforcement action.

Better disclosure
The FTC has been increasingly focused on enforcing its endorsement and testimonial guidelines to social media contests, particularly on Pinterest, per William Heberer, partner at Moritt Hock and Hamroff.

However, marketers have not always been clear about how to disclose a material connection between a brand and social content posted by a consumer. The ruling against Cole Haan helps clarify the situation somewhat for marketers.

?While the agency didn?t bring any enforcement action against Cole Haan in this situation, it?s letter has the effect of putting marketers on notice that the FTC believes that these types of contests must include better disclosure of the fact that the consumer is receiving an entry in exchange for their pins about the marketer?s product,? Mr. Heberer said.

?The FTC offered a very clear signal a couple of years ago when it moved ahead with its amendments to the endorsement and testimonial guides,? he said. ?While the obligation to disclose the connection between the contest sponsor and contest entrant is generally understood, marketers are less clear about how that information should be disclosed.

?With this letter, the FTC is providing some insight into its thinking with respect to Pinterest promotions and the manner in which the relationship between the brand and the contest entrant needs to be disclosed.?

Product endorsements
The ruling makes it clear that marketers need to be sure they are always disclosing a material connection if they are compensating consumers in some way for pinning, posting or otherwise endorsing their brand, even on social media sites.

While the number of user-generated content contests on social media is growing, most marketers are already careful about putting the proper disclosures in place, per Mark Pinsent, London-based social and content lead at Metia.

?Anybody who?s run incentivised competitions in social media on behalf of clients has known for a long while that transparency is essential,? Mr. Pinsent said. ?Whether in the U.S., here in the UK or most other markets, the advertising regulators have made it very clear that such contests, whether involving user-generated content or otherwise, represent a form of advertising and brand or product endorsement and should be clearly marked as such.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York