Like it or not ... Coastal contacts case sets guidelines for 'like-gating' on Facebook.
Social media provides brands with "personal, trusted, and direct" connectivity to consumers (Drury, 2008, p. 277). Through social media, brands are able to target specific consumer demographics about new and existing products, thereby increasing the likelihood of purchase of those products. With more than 1 billion active users ("Facebook Newsroom," 2012), Facebook has become a leader in social media and an important vehicle through which sport marketers connect their brands with consumers. From the London 2012 Olympics alone, brands saw significant growth in fan interaction on Facebook. For example, Coca-Cola experienced a 126% increase in Facebook users, and Visa grew 67% (O'Malley, 2012). One popular method for marketing through Facebook is a process called like-gating. Like-gating encourages consumers to like a company or brand on Facebook, often in exchange for something of value (i.e. a coupon for a free sample) (Aronica, 2011). The result is a vast increase in the number of consumers who have chosen to associate themselves with a brand through Facebook. A recent decision from the Council of Better Business Bureau's (CBBB) National Advertising Division (NAD) in Coastal Contacts, Inc. (2011) (Coastal) determined that Facebook likes are general social endorsements of companies or brands, and like-gating practices may be deceptive in instances where consumers rely on Facebook likes to make purchase decisions. While the facts of the case in Coastal does not involve sport marketers or sport brands, the NAD's decision significantly affects the practice of like-gating, and sport marketers need to understand the ramifications of this decision and how it will impact their Facebook marketing strategies.
What is the NAD?
The NAD is a division of the CBBB's Advertising Self-Regulatory Council (ASRC). The ASRC establishes policies and procedures for self-regulation of the advertising industry and monitors the marketplace to hold advertisers responsible for their product claims and to track emerging trends (ASRC Snapshot, 2012). To accomplish its goals, the ASRC has four divisions and of those four, the NAD handles general claims brought against advertisers. Anyone can file a complaint against an advertiser with the NAD (National Advertisers Review Council, 2011). For instance, consumers, commercial competitors, and even the NAD itself can file a claim. The NAD will decide whether to address the complaint based on factors such as whether the advertisement is national, currently in circulation, involved in pending litigation, and whether it is worth the expenditure of NAD resources. First and foremost, the complaint must involve the truth of the advertisement (National Advertisers Review Council, 2011).
The NAD's process for resolving a dispute resembles a form of alternative dispute resolution in many regards (National Advertisers Review Council, 2011). The process allows the parties to avoid the costs of litigation and typically takes place within 60 days. The NAD even takes an arbiter-like role in that it examines the evidence and issues a determination that is communicated to the parties through a final report. If the NAD finds that the advertisement should be modified or discontinued, the advertiser must inform the NAD as to how it will respond to that determination. If the advertiser refuses to comply with the NAD's decision, the NAD will forward the case to the Federal Trade Commission (FTC) (National Advertisers Review Council, 2011). The FTC is supportive of the NAD and is deferential to its decisions because the NAD's process encourages a more voluntary atmosphere in which advertisers may respond to consumer complaints (ASRC Snapshot, 2012). As a result of the FTC's support, the NAD's decisions have "teeth" (Rea, 2012, p. 167). However, if the advertiser contests the NAD's decision, it has the opportunity to appeal to the National Advertising Review Board, an independent appellate review board for the ASRC (About US-NARB, National Advertiser Review Board, 2012).
The Like-Gating Case
1-800 Contacts, Inc. (Challenger) filed a complaint with the NAD contesting, among other things, Coastal Contacts' (hereinafter "Coastal") like-gating practices and the advertiser's promotional references to the number of likes on its Facebook page (Coastal, 2011). This article will focus only on the portion of the case that concerned the practice of like-gating. The case involved a Facebook campaign in which Coastal advertised that those who liked its Facebook page would receive free glasses. In its initial Facebook advertisement, Coastal failed to include any qualifying terms or conditions (i.e. additional shipping costs and not all styles or lenses were included in the offer), but the advertiser modified its promotion to include a disclosure of limiting terms after the NAD notified the advertiser that the promotion did not comply with FTC and NAD requirements for truth in advertising (Coastal, 2011).
1-800 Contacts, Inc., however, argued that the initial promotion was false and misleading for its failure to disclose the offer's limitations (Coastal, 2011). The Challenger asserted the fraudulent promotion induced consumers into liking the brand in order to obtain free glasses. Furthermore, in each instance in which someone liked Coastal on Facebook based on the promotion, every single one of that person's Facebook friends was also shown both the endorsement and the promotion. As a result, the promotion allowed Coastal to increase its brand awareness and use the endorsements of those who liked their brand to improve its brand image. The Challenger did not, however, oppose the practice of like-gating in all instances, but instead limited its complaint to the use of fraudulent or deceptive promotions to increase the number of likes that Coastal has on its Facebook page. The Challenger asserted that Coastal should remove the likes, which were induced by the promotion, and if Coastal could not make that determination, then it should remove all of its likes on Facebook (Coastal, 2011).
Coastal defended by arguing that its failure to properly disclose information in the original promotion did not amount to fraud (Coastal, 2011). As for its like-gating practices, Coastal claimed that it did not overstate the number of likes that it has, and there was no basis to assume that consumers would not have liked Coastal on Facebook had the terms and conditions been brought to their attention in the original promotion. Further, Coastal stated that there was nothing stopping those who liked Coastal to take back their likes after being informed of the promotion's terms and conditions. Lastly, Coastal argued that even if likes served as a form of endorsement, Coastal had not paid any of its Facebook endorsers and therefore did not violate FTC Endorsement Guidelines (Coastal, 2011), which require endorsers to disclose any compensation received for their endorsement (16 C.F.R. Part 255.5, 2013).
In its decision, the NAD found that everyone who participated in Coastal's promotion received the benefit of the promotion, even in the absence of adequate disclosure of limitations (Coastal, 2011). Most importantly, the NAD found that the display of the total number of likes on a Facebook page is a general social endorsement. This finding meant that FTC Endorsement Guidelines applied to Facebook likes which were obtained in exchange for something. The NAD, however, found that Coastal had not engaged in any practices that would have falsified the number of likes on its page (i.e. had employees like its brand or used artificial means to create likes). Further, the NAD recognized that those dissatisfied with the terms of the original promotion were free to take back their like. Accordingly, the NAD determined that Coastal, in fact, had the general social endorsement that the likes conveyed, and there was no likelihood that consumers would be misled by Coastal's number of Facebook likes. Thus, there was no need for Coastal to remove likes from its Facebook page. The NAD cautioned, however, that if consumers had not received the glasses or had Coastal presented the number of Facebook likes in a false or misleading manner, the claim may not have withstood NAD scrutiny, and Coastal would have had to remove the number of likes from its page.
Implications for Sport Marketers
The NAD's decision in Coastal has generated tremendous attention from marketers (Davis, 2011; Delo, 2011). Although the case did not involve a sport product, the reach of the decision extends to sport brands that engage in like-gating practices. For example, in 2012, Germany based football club FC Bayern Munchen announced on its website that it was going to sign a spectacular new player; fans were directed to listen to the club's live announcement on its Facebook page. Prior to gaining access to the broadcast, fans were required to like the club's Facebook page. However, instead of an anticipated spectacular player signing, fans were provided a video of the club's general manager congratulating the Facebook user on being the new signee for the team (Murphy, 2012). Although the like-gating practice increased the number of likes on the club's Facebook page, it also resulted in thousands of outraged fans who felt misled by the promotion. If such a promotion had occurred in the United States, the club would have found itself under scrutiny by the FTC and the NAD.
The most important aspect that sport marketers must take from Coastal is that the NAD now recognizes the number of Facebook likes as a general social endorsement. This finding extends the application of FTC and NAD regulations to likes and like-gating practices. Accordingly, sport marketers should treat Facebook promotions as they do other forms of advertising and review like-gated promotions for compliance with applicable advertising guidelines, including the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising (Guides) (Moorman, 2006). The Guides promote two overriding principles: (1) online endorsements must be truthful and not misleading, and (2) brands must disclose to consumers any "material connection" the endorser has to the brand that would influence consumer perception of the endorsement (i.e., compensation provided for endorsement) (Carpenter, 2012).
The NAD applied these principles to the like-gating in Coastal and interpreted the principles to require fidelity in satisfying like-gating offers (i.e., consumers must get the benefit provided by the promotion) and sincerity in generating and promoting the number of likes as endorsements (i.e., no falsification of likes and no likes given in exchange for compensation or employment). As long as consumers are, in fact, receiving the promised benefit, it is unlikely that the NAD would rule the practice to be a violation. In summation, the number of likes must represent genuine social endorsements for the brand. The NAD did, however, stop short of prohibiting like-gating practices in which special offers are provided to those who like a brand.
Facebook has become an affordable and effective tool for companies to develop brand awareness and improve brand image, two of the primary reasons for endorsement (Shimp, 2009). Thus, obtaining and promoting Facebook likes is an extremely valuable promotional tool for any sport organization. Sport marketers representing companies with less established brand awareness and image may find the cost effectiveness of like-gating promotions particularly valuable. However, the NAD in Coastal has put sport marketers on alert; all like-gating promotions must deliver on their promises and must adhere to FTC and NAD regulations concerning endorsements.
About Us-NARB, National Advertiser Review Board. (2012). Retrieved from http://www.asrcreviews.org/category/narb/about_narb/
Aronica, J. (2011, October 11). 5 examples of "like-gating" to generate Facebook fans. Retrieved from http://blog.hubspot.com/blog/tabid/6307/bid/27514/5-Examples-of-Like-Gating-to-Generate-Facebook-Fans.aspx ASRC Snapshot. (2012). Retrieved from http://www.asrcreviews.org/aboutus/
Carpenter, C. (2012). Don't believe everything you read on Twitter--The Federal Trade Commission's regulation of celebrity endorsements on social media. Available at SSRN 2044974.
Coastal Contacts, Inc., NAD Case #5387. (October 25, 2011).
16 C.F.R. Part 255.5. (2013). Guides concerning use of endorsements and testimonials in advertising--Disclosure of material connections.
Davis, W. (2011, November 11). NAD okays using promotions to solicit Facebook "likes". Online Media Daily. Retrieved from http://www.mediapost.com/publications/article/162243/nad-okays- using-promotions-to-solicit-facebook-li.html?print#axzz2J1Nmfchh
Delo, C. (2011). Ad industry group issues guidelines on Facebook 'like-gating'. Retrieved from http:// http://adage.com/article/digital/advertisings-regulatory-guidelines-facebook-likes/230872/
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Moorman, A. (2006). False advertising and celebrity endorsements: Where's my script? Sport Marketing Quarterly, 15, 111-113.
Murphy, C. (2012). Snatching defeat from the jaws of victory: Bayern's PR own goal. CNN. Retrieved from http://edition.cnn.com/2012/01/26/sport/football/football-bayern-sign ing-facebook/index.html
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O'Malley, G. (2012, August 13). Facebook ups brand, athlete awareness during Olympics. Online Media Daily. Retrieved from http://www.mediapost.com/publications/article/180705/facebook-ups-brand-athlete-awareness-during-olym.html?print
Rea, J. (2012). "Actual results may vary": Toward fiercer national regulation of digitally manipulated cosmetics advertisements. William & Mary Journal of Women and the Law, 19(1), 161-186.
Shimp, T. A. (2009). Integrated marketing communications in advertising and promotion (8th ed.). Mason, OH: Cengage South-Western.
DISCLAIMER: Inquiries regarding this feature may be directed to series co-editors Steve McKelvey at mckelvey@ isenberg.umass.edu and John Grady at firstname.lastname@example.org. McKelvey is an associate professor and graduate program director in the Mark H. McCormack Department of Sport Management at the University of Massachusetts Amherst. Grady is an associate professor in the Department of Sport & Entertainment Management at the University of South Carolina.
The materials in this column have been prepared for informational and educational purposes only, and should in no way be considered legal advice. Readers should not act or reply upon these materials without first consulting an attorney. By providing these materials it is not the intent of the authors or editors to enter into an attorney-client relationship with the reader. This is not a solicitation for business. If you choose to contact the authors or editors through email, please do not provide any confidential information.
Thomas A. Baker III, JD, PhD, is an assistant professor in Sport Management and Policy at the University of Georgia. He primarily conducts research on sport law with emphasis on how commercial laws and regulations influence sport marketing.
Natasha T. Brison, JD, is a clinical assistant professor in the Department of Kinesiology and Health at Georgia State University. Her research interests include sport consumer behavior, athlete endorser effectiveness, and the legal aspects of advertising, marketing, and promotions in sport.
Kevin K. Byon, PhD, is an assistant professor in Sport Management and Policy at the University of Georgia. His research interests involve exploring psychological and environmental variables affecting consumer behavior within sport marketing and sport tourism.
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|Title Annotation:||Sport Marketing and the Law|
|Author:||Baker, Thomas A., III; Brison, Natasha T.; Byon, Kevin K.|
|Publication:||Sport Marketing Quarterly|
|Date:||Jun 1, 2013|
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