How can I tell whether something is a material connection?

Ask whether the relationship might affect the weight or credibility of the endorsement, and whether the audience would not reasonably expect it. The regulation lists a business, family, or personal relationship, monetary payment, and free or discounted products as examples. Non-cash benefits count too, such as early access to a product or the possibility of winning a prize.

What must a business do once it has a material connection with an endorser?

The business must make sure the connection is disclosed clearly and conspicuously. Beyond that, the Guides say that good faith and effective guidance, monitoring, and remedial action, while not a safe harbor, should reduce the incidence of deceptive claims.

Does free product count as a material connection if the influencer was never required to post?

Yes. Free or discounted products count regardless of whether the advertiser requires an endorsement in return.

Do I have to disclose payment in an obvious celebrity ad?

Not when the audience would ordinarily expect the payment. In the regulation's example of a film star endorsing a food product in a television commercial, no disclosure is required because such payments likely are ordinarily expected by viewers. The same reasoning applies to a podcast host reading what is obviously a commercial.

Does tagging my brand count as disclosing a connection?

No. FTC staff explain that tagging a brand is an endorsement but not a disclosure, because the person could just be tagging the brand because they like it.

If I disclose the payment, is a paid positive review acceptable?

Not when the payment requires the review to be positive. Such reviews are deceptive even if the payment is disclosed.

Do employees' and relatives' posts need a disclosure?

Yes, employee and relative relationships count, so the connection must be made clear. FTC staff say an ad featuring an endorser who is a relative or employee of the marketer is misleading unless the connection is made clear. The regulation applies the same point to an employee posting about the employer's new product in an online community.

Social ProofTerm

Material connection

Also known as "Unexpected relationship"

Berkeley Robinson, Managing Attorney at Robinson Law Firm PLLC

Author

Berkeley Robinson, Esq.

Managing Attorney, Robinson Law Firm PLLC

Berkeley has served as the go-to counsel for many scaling businesses in a transactional and litigation management capacity. Before becoming an attorney, Berkeley grew sales teams, ran online marketing campaigns, and did everything else an entrepreneur does—and still does today as the founder of two online businesses.

Definition

The government has not defined “Material connection” in a statute or regulation.

Based on our data, a material connection is a connection between an endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement and that is not reasonably expected by the audience. Source: 16 C.F.R. § 255.5 A stipulated order in the FTC's case against Dean Graziosi uses the same two-part test, defining the term as any relationship that might materially affect the weight or credibility of a representation or endorsement and that consumers would not reasonably expect. Source: Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief as to Defendant Dean Graziosi

Key legal rules

The endorsement guides set out the duties below, and the orders show what particular companies were required to do, which can inform your own marketing:

A connection between an endorser and the seller that might materially affect the weight or credibility of the endorsement, and that the audience does not reasonably expect, must be disclosed clearly and conspicuously. Source: 16 C.F.R. § 255.5
Material connections can include a business, family, or personal relationship, monetary payment, and free or discounted products, even products unrelated to the endorsed product and even when the advertiser does not require an endorsement in return. Source: 16 C.F.R. § 255.5
Material connections can also include other benefits to the endorser, such as early access to a product or the possibility of being paid, of winning a prize, or of appearing on television or in other media promotions. Source: 16 C.F.R. § 255.5
A material connection needs to be disclosed when a significant minority of the audience for an endorsement does not understand or expect the connection. Source: 16 C.F.R. § 255.5
A disclosure of a material connection does not require the complete details of the connection, but it must clearly communicate the nature of the connection sufficiently for consumers to evaluate its significance. Source: 16 C.F.R. § 255.5
Some connections may be immaterial because they are too insignificant to affect the weight or credibility given to endorsements. Source: 16 C.F.R. § 255.5
In any communication using an interactive electronic medium, such as social media or the internet, the disclosure should be unavoidable. Source: 16 C.F.R. § 255.0
Advertisers are subject to liability for failing to disclose unexpected material connections between themselves and their endorsers. Source: 16 C.F.R. § 255.1
Endorsers may also be liable for failing to disclose unexpected material connections between themselves and an advertiser, such as when an endorser creates and disseminates endorsements without such disclosures. Source: 16 C.F.R. § 255.1
Advertising agencies, public relations firms, and similar intermediaries may be liable for endorsements that fail to disclose unexpected material connections, whether by disseminating advertisements without necessary disclosures or by hiring and directing endorsers who fail to make them. Source: 16 C.F.R. § 255.1
Paid reviews are deceptive even when the payment is disclosed if their positive nature is required by, rather than merely influenced by, the payment. Source: 16 C.F.R. § 255.2

For the sake of space, this page lists only the primary rules related to this term that most businesses should follow. More may apply to your situation, and your unique facts affect how they apply.

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Why these rules exist

Endorsements persuade because audiences take them as independent opinions, so a payment, gift, or tie to the seller that the audience does not know about changes how much weight the recommendation deserves without the audience realizing it. The disclosure duty puts that fact in front of the audience so they can discount the endorsement themselves. As FTC staff put it, knowing about the connection is important information for anyone evaluating the endorsement. Source: FTC Staff, FTC's Endorsement Guides: What People Are Asking (June 2023) The regulation's own example shows the mechanism: even when an outside research group designs and runs a study, the weight consumers place on the results could be materially affected by knowing the advertiser funded it. Source: 16 C.F.R. § 255.5

The Guides also place a practical burden on the party that benefits from the endorsement. Advertisers should provide guidance, monitor, and remedy non-compliance, which keeps one endorser's missed disclosure from repeating across a whole campaign. While this is not a safe harbor, good faith and effective guidance, monitoring, and remedial action should reduce the incidence of deceptive claims. Source: 16 C.F.R. § 255.1

Enforcement examples

In re Twin Star Productions, Inc. (infomercials for diet patch, hair-loss, and impotence products)

In re Twin Star Productions, Inc., Docket C-3307, Complaint and Consent Order (Oct. 1990)

Twin Star sold its products mainly through television advertisements made to simulate independent investigative news programs, talk shows, or regular television programs. Source: In re Twin Star Productions, Inc., Docket C-3307, Complaint (Oct. 1990) The complaint alleged that the endorsements in those advertisements came from people who were not independent of the companies marketing the products. Source: In re Twin Star Productions, Inc., Docket C-3307, Complaint (Oct. 1990)

Outcome. The consent order barred failing to disclose, clearly and prominently, a material connection, where one exists, between an endorser and the respondents. Source: In re Twin Star Productions, Inc., Docket C-3307, Order (Oct. 1990) The order defined the term as a relationship that might materially affect the weight or credibility of the endorsement and that consumers would not reasonably expect, and it also required Twin Star to pay $1,000,000 in three installments. Source: In re Twin Star Productions, Inc., Docket C-3307, Order (Oct. 1990)

In re Holly A. Bacon, d/b/a Cleansing Time Pro (cancer-cure testimonials)

In the Matter of Holly A. Bacon, Doing Business as Cleansing Time Pro, Complaint (Oct. 22, 2008)

The complaint alleged that the company disseminated testimonials from consumers who purportedly were treated or cured of cancer, and that one of those consumers was the company's own sole owner, Holly A. Bacon. Source: In the Matter of Holly A. Bacon, Doing Business as Cleansing Time Pro, Complaint (Oct. 22, 2008)

Outcome. The complaint alleged that this fact would materially affect the weight and credibility consumers gave the endorsement, so the failure to disclose it was a deceptive practice. Source: In the Matter of Holly A. Bacon, Doing Business as Cleansing Time Pro, Complaint (Oct. 22, 2008)

In re Legacy Learning Systems, Inc. (online instructional courses sold through affiliates)

Legacy Learning Systems, Inc., Analysis of Agreement Containing Consent Order To Aid Public Comment (FR Doc. 2011–6491, filed Mar. 18, 2011)

Legacy Learning paid affiliates a commission of 20 to 45 percent of the purchase price for each course sale they directed to its Web site. Source: Legacy Learning Systems, Inc., Analysis of Agreement Containing Consent Order To Aid Public Comment (FR Doc. 2011–6491, filed Mar. 18, 2011) According to the Commission's complaint, the affiliates' endorsements gave readers the impression that they came from ordinary consumers or independent reviewers. Source: Legacy Learning Systems, Inc., Analysis of Agreement Containing Consent Order To Aid Public Comment (FR Doc. 2011–6491, filed Mar. 18, 2011)

Outcome. The proposed order prohibited any representation about a user or endorser unless the respondents disclose, clearly and prominently, a material connection, when one exists, between the endorser and any other party involved in promoting the product. Source: Legacy Learning Systems, Inc., Analysis of Agreement Containing Consent Order To Aid Public Comment (FR Doc. 2011–6491, filed Mar. 18, 2011) It also required the respondents to pay the Commission $250,000. Source: Legacy Learning Systems, Inc., Analysis of Agreement Containing Consent Order To Aid Public Comment (FR Doc. 2011–6491, filed Mar. 18, 2011)

Hyundai Motor America, FTC File No. 112-3110 (blogger gift certificates for Super Bowl ad posts)

Federal Trade Commission Letter Regarding Hyundai Motor America (Nov. 16, 2011)

FTC staff investigated whether bloggers who had been given gift certificates as an incentive to link to Hyundai videos or comment on forthcoming Super Bowl ads were told to disclose that compensation, or were told not to. Source: Federal Trade Commission Letter Regarding Hyundai Motor America, FTC File No. 112-3110 (Nov. 16, 2011)

Outcome. Staff said that a gift to a blogger for posting specific content promoting the advertiser's products was likely to be a material connection that readers would not reasonably expect. Source: Federal Trade Commission Letter Regarding Hyundai Motor America, FTC File No. 112-3110 (Nov. 16, 2011) Staff nonetheless determined not to recommend enforcement action at that time, while noting that advertisers remain legally responsible for those working directly or indirectly for them. Source: Federal Trade Commission Letter Regarding Hyundai Motor America, FTC File No. 112-3110 (Nov. 16, 2011)

Cole Haan, Inc. (Pinterest contest with shopping-spree prize)

Closing Letter to Christie Grymes Thompson, Counsel for Cole Haan, Inc. (Mar. 20, 2014)

Cole Haan ran a Pinterest contest in which contestants pinned Cole Haan shoe images to their own boards, and it promised a $1,000 shopping spree to the contestant with the most creative entry. Source: Closing Letter to Christie Grymes Thompson, Counsel for Cole Haan, Inc. (FTC File No. 142-3041, Mar. 20, 2014)

Outcome. Staff concluded that entry into a contest to receive a significant prize in exchange for endorsing a product through social media was a material connection that viewers would not reasonably expect. Source: Closing Letter to Christie Grymes Thompson, Counsel for Cole Haan, Inc. (FTC File No. 142-3041, Mar. 20, 2014) Even so, staff determined not to recommend enforcement action at that time. Source: Closing Letter to Christie Grymes Thompson, Counsel for Cole Haan, Inc. (FTC File No. 142-3041, Mar. 20, 2014)

Microsoft Corp. and Starcom MediaVest Group (paid YouTube influencers for Xbox One)

Closing Letter to Yaron Dori, counsel for Microsoft Corporation, and Amy R. Mudge, counsel for Starcom Media Vest Group (Aug. 26, 2015)

Machinima did not require the influencers it paid to produce Xbox One game play videos to disclose that they were being compensated, and many of the influencers made no disclosure at all. Source: Closing Letter to Yaron Dori, counsel for Microsoft Corporation, and Amy R. Mudge, counsel for Starcom Media Vest Group (FTC File No. 142-3090, Aug. 26, 2015)

Outcome. Staff said that, as the advertiser, Microsoft bore responsibility for the influencers' failure to disclose. Source: Closing Letter to Yaron Dori, counsel for Microsoft Corporation, and Amy R. Mudge, counsel for Starcom Media Vest Group (FTC File No. 142-3090, Aug. 26, 2015) Staff still declined to recommend enforcement against Microsoft or Starcom at that time, reasoning that the failures appeared to be isolated incidents that occurred despite policies and procedures designed to prevent them. Source: Closing Letter to Yaron Dori, counsel for Microsoft Corporation, and Amy R. Mudge, counsel for Starcom Media Vest Group (FTC File No. 142-3090, Aug. 26, 2015)

FTC v. Teami, LLC (detox teas promoted by paid Instagram influencers)

Teami, LLC: Complaint for Permanent Injunction and Other Equitable Relief (Mar. 6, 2020)

The complaint alleged that, between June and late-October 2018, hundreds of Instagram posts were published by well-known influencers whom the defendants paid more than $500 to endorse Teami products. Source: Teami, LLC: Complaint for Permanent Injunction and Other Equitable Relief (Mar. 6, 2020) In warning letters to influencers sent the same week, FTC staff explained that a hashtag disclosure was not visible to followers in their feeds unless they clicked to expand the post, so it was not clear and conspicuous. Source: Teami LLC: Warning Letters to Instagram Influencers to Prominently Disclose Paid Endorsements (Mar. 5, 2020)

Outcome. The complaint charged that the defendants failed to disclose adequately to consumers that the influencers were paid to endorse Teami products. Source: Teami, LLC: Complaint for Permanent Injunction and Other Equitable Relief (Mar. 6, 2020)

Exposure

The Endorsement Guides are not themselves law, but practices inconsistent with them may result in law enforcement actions alleging Section 5 violations, and those actions can end in orders requiring defendants to pay money that goes back to harmed consumers and to abide by various requirements in the future. Source: FTC, The FTC's Endorsement Guides: What People Are Asking (June 2023) If enforcement becomes necessary, FTC staff have said, the focus usually will be on advertisers or their ad agencies and public relations firms. Source: FTC, The FTC's Endorsement Guides: What People Are Asking (June 2023)

The payments in orders that include a material-connection disclosure rule have varied. In the Cytodyne order, which defines a material connection to include monetary payments and the provision of goods, services, or other benefits to consumer endorsers, the respondents were ordered to pay the Commission $100,000. Source: In the Matter of Cytodyne, LLC, Evergood Products Corp., and Melvin L. Rich, Order The Publishing.com order, which also required disclosure of incentives conditioned on posting favorable reviews, directed the respondents to pay the Commission $1,500,000. Source: In re Publishing.com, LLC, Decision and Order

Court orders can reach further. A proposed stipulated order in the Instant Checkmate matter entered a $5,800,000 civil penalty judgment against the settling defendants jointly and severally. Source: Proposed Stipulated Order For Permanent Injunction, Civil Penalty Judgment, and Other Relief as to Defendants Instant Checkmate, LLC, et al. In the Roomster order, the court entered a $36,260,899.84 judgment as non-penalty equitable monetary relief. Source: Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief Against Roomster Corp., John Shriber, and Roman Zaks The suspended civil penalties in that order could be reinstated if the court found that a defendant misstated its finances or violated listed sections of the order. Source: Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief Against Roomster Corp., John Shriber, and Roman Zaks

A staff closing letter is not a clean bill of health. In the Cole Haan matter, FTC staff stated that declining enforcement was not a determination that a violation may not have occurred, and that the Commission reserved the right to take further action. Source: Closing Letter to Christie Grymes Thompson, Counsel for Cole Haan, Inc. (FTC File No. 142-3041, Mar. 20, 2014)

FAQs

1.255.5. 16 C.F.R. § 255.5
2.Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief as to Defendant Dean Graziosi. Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief as to Defendant Dean Graziosi
3.255.5. 16 C.F.R. § 255.5