Director, Bureau of Consumer Protection
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Mary K. Engle
Associate Director, Division of Advertising Practices
Bureau of Consumer Protection
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Dear Mr. Smith and Ms. Engle,
This letter is to request that the Federal Trade Commission (FTC) investigate and bring enforcement actions related to undisclosed and inadequately disclosed paid endorsements for Amazon products, particularly, but not only, in connection with Amazon Prime Day.
Last week was Amazon Prime Day – actually a 48-hour period – when America’s dominant online retailer, Amazon, offered discounts for its “prime” subscription members.
Leading up to and through Amazon Prime Day on July 15-16, Americans’ email inboxes were stuffed with recommendations for Amazon Prime Day best buys, their Instagram feed replete with suggestions of what to buy on Amazon, their internet and blog reading lists overflowing with pointers for the best deals. Some substantial portion of this publicity and recommendations for Amazon Prime Day were paid endorsements, but in a great number of cases, the endorsement relationship was either not disclosed to consumers or was communicated with inadequate disclosures.
The failure to disclose paid endorsements violates the FTC’s Enforcement Policy Statement on Deceptively Formatted Advertisements, the Guides Concerning Use of Endorsements and Testimonials in Advertising, and a core principle of fair advertising law in the United States: people have a right to know when they are being advertised to. The Enforcement Policy explains: “The Commission has long held the view that advertising and promotional messages that are not identifiable as advertising to consumers are deceptive if they mislead consumers into believing they are independent, impartial, or not from the sponsoring advertiser itself.” The Endorsement Guides state even more specifically: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed. … clearly and conspicuously ….”
Amazon operates an extensive “associates” or “affiliates” program, by which a “reviewer, stylist, content creator or curator” with a website, app or social network page refers their audience to products on Amazon in exchange for a commission on follow-on sales. The associates program is, by design, very easy to enter, requiring only simple approval by Amazon. The exact number of Amazon associates seems to be known only by Amazon but reasonable estimates range from 100,000 to 1 million worldwide.
When Amazon associates post reviews or other information about products available on Amazon, they are functioning as endorsers who are paid for the endorsement through sales commission rather than a flat fee. The endorsement relationship is of material interest to consumers, precisely for the reasons identified in the FTC’s Endorsement Guidelines: Absent an affirmative disclosure, consumers are unaware of the financial interest of the associate in promoting items for sale through the Amazon platform. When consumers consider an associate’s recommendation for a “best buy,” it is of material interest to them if the associate has a monetary interest in ensuring that the consumer does, in fact, buy. Indeed, the entire purpose of the recommendation may be to generate sales, a situation entirely lost on consumers who believe they are reading independent reviews or recommendation lists, not promotional material from a commissions-based salesperson.
Amazon does instruct associates that they must disclose their relationship to Amazon, though at least on the associates website this instruction is not particularly prominent. The bottom of the webpage describing the application review process includes a “useful reminders” section that associates should “Please also keep in mind that under the Operating Agreement you need to identify yourself as an Amazon Associate with the language provided here.” That link takes associates to the “Associates Program Operating Agreement,” the form contract between Amazon and its associates, which, it is fair to surmise, most associates do not study carefully. Section 5 of that agreement, “Identifying Yourself as an Associate,” states: “You must clearly state the following, or any substantially similar statement previously allowed under this Agreement, on your Site or any other location where Amazon may authorize your display or other use of Program Content: ‘As an Amazon Associate I earn from qualifying purchases.’”
Significantly, we do not believe the Amazon-required language is an adequate disclosure of the endorsement relationship. The language is too obscure to communicate the endorsement relationship. A more effective disclosure would state, for example: “This is a paid endorsement. I receive commissions on sales if you click on links in this story or use the code included in the review.”
But even appropriate disclosure language fails to meet the standards of the law and adequately inform consumers if a) it is not prominently displayed; or b) it is not used at all.
In our review of Amazon Prime Day promotions, we found both of those situations to be prevalent.
We have compiled a collection of Amazon Prime Day recommendations, including 15 web-published articles that include no disclosure, four web-published articles that contain non-prominent disclosures, and 53 Instagram postings that include no disclosure and 22 with inadequate disclosures. This compilation is attached to this letter. We acknowledge that in cases where there is no disclosure, it is possible that the review is genuinely independent, that there is no associate relationship, and that therefore no disclosure was needed.
Our survey of Amazon Prime Day recommendations was just a survey. There are almost certainly orders of magnitude more recommendations than we identified and reviewed; very likely, there are also orders of magnitude more inadequate or wholly absent disclosures. The number of times consumers were exposed to deceptive advertisement/endorsements just around Amazon Prime Day may be startlingly high.
We urge you to further investigate the examples we highlight and to seek additional information from Amazon about its practices related to the associates program.
Upon a conclusion that the associates we identified in fact failed to disclose their paid endorsement relationship with Amazon or did so inadequately, we urge you to communicate with them about their responsibilities under the Endorsement Guidelines and other relevant law, rules and guidelines.
More aggressive enforcement action is needed for Amazon. We urge you to pursue enforcement action and seek a consent decree so that Amazon: 1) requires more clear and understandable disclosures for its associates program; 2) establishes clear, Endorsement Guidelines-compliant standards for the required prominence of disclosures; 3) monitors compliance with the program and works with associates to ensure prominent and universal endorsement disclosures; and 4) is subject to penalties if widespread failures to ensure adequate disclosures persist.
Thank you for your attention to this matter. We would be pleased to meet with you at your convenience or provide additional information as needed.