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Sunday, June 9, 2013

Disruptions: Celebrities’ Product Plugs on Social Media Draw Scrutiny

In 1982, Bill Cosby appeared on television showing off a snazzy new computer. “Looking for a powerful home computer?” he said as he waved his hands over a Texas Instruments PC that looks archaic now. “This is the one! With 16k memory, it can take you a long way.”

The commercial made it obvious that Mr. Cosby, a prominent comedian and television star, was being paid to promote the boxy device.

Computers have changed significantly in the decades since. And, to the confusion of consumers, celebrity endorsements have, too.

Today, when celebrities and people with large followings on social networks promote a product or service, it’s often impossible to know if it’s an authentic plug or if they were paid to say nice things about it.

Take Miley Cyrus, the 20-year-old pop star who was traveling around America last week promoting her new album. One morning she posted on Twitter: “Thanks @blackjet for the flight to Silicon Valley!” The details of the arrangement between Blackjet, a Silicon Valley start-up that arranges for private jet travel, and Ms. Cyrus are unclear. But Dean Rotchin, chief executive of BlackJet, said “she was given some consideration for her tweet.” Ms. Cyrus did not respond to a request for comment.

Did her 12 million Twitter followers know about the arrangement? It’s unlikely, and that lack of clarity, increasingly common in the social media postings of celebrities, is starting to draw the attention of federal officials.

“In a traditional ad with a celebrity, everyone assumes that they are being paid,” said Mary K. Engle, associate director of the advertising practices division at the Federal Trade Commission. “When it’s not obvious that it is an ad, people should disclose that they are being paid.”

Under F.T.C. guidelines, companies and the celebrities they are sponsoring risk being deceptive by not noting that these endorsements are advertisements, Ms. Engle said. Sometimes, they are breaking federal rules called “Dot Com Disclosures” that require clarity about sponsorships, even on Twitter. People who violate the law can be given warnings or be fined, though the size of the financial penalty isn’t clearly defined.

Some celebrities are unapologetic about promoting their investments anywhere they can. In 2011, Ashton Kutcher was guest editor of an online-only version of Details magazine, where he profiled a dozen companies in which he was an investor or adviser, but did not disclose the investments. At the time, Dan Peres, the editor in chief of Details, said the magazine stood “by how we communicated Ashton’s involvement with some of the companies.” Mr. Kutcher declined to comment.

Mr. Kutcher has also tried to sneak companies in which he invests onto “Two and a Half Men,” the CBS show where he is a lead actor, by placing stickers for the tech outfits Foursquare, Chegg and Flipboard on his character’s laptop. He boasted in an interview at the TechCrunch Disrupt conference that he “pulled it off,” until the network found out and started blurring the back of his laptop during the show.

Mr. Kutcher regularly posts about companies he invests in on Twitter, too. He also uses his Twitter and Facebook heft (he has about 14 million followers on both services) when negotiating with companies he wants to invest in, by noting that he will share the product on these social networks. The F.T.C. declined to comment on any particular instances where celebrities have posted about companies with which they have financial relationships. The agency did say there are “open investigations” into companies that have broken federal rules.

“Like advertorials and infomercials, with Twitter, our view would be that the consumers have a right to know. It gives them that additional information, just like a celebrity endorsing something on TV,” said Andrea C. Levine, director the National Advertising Division, part of the Council of Better Business Bureaus, which reviews advertising claims for accuracy.

“It’s a new day, with a new way, but an old issue,” Ms. Levine said.

In May, Kim Kardashian posted on Twitter: “Pregnancy lips…. @EOS to the rescue! LOL” with a picture attached of her using EOS lip balm. Ms. Kardashian did not respond to a request for comment.

Last month, the actor Michael Ian Black was more forthcoming and told his two million Twitter followers that Dos Equis had paid him thousands of dollars to share an ad for the beer company.

Linda A. Goldstein, a partner and chairwoman of the advertising, marketing and media division at the law firm Manatt, Phelps & Phillips, said that in all of these contexts the advertisers, investors and celebrities had a responsibility to disclose that they have something to gain.

“The message to brands is that you are responsible for the action of your spokespeople, so when you engage them, they should be aware of their obligations,” Ms. Goldstein said. In some cases individuals are breaking the law, she said, and she believes the F.T.C., or another government agency, will eventually bring fines against a celebrity for not disclosing his or her financial relationship.

Although there are no specific rules about the language people must use in an endorsement, Ms. Engle from the F.T.C. suggested using the word “ad” to preface a tweet. “It only takes up two extra characters.”

There is a risk, of course, that today’s celebrities risk angering fans by not disclosing their financial ties. In an interview with InfoWorld magazine in 1982, William Turner, the marketing manager for Texas Instruments’ consumer products group, was asked why he chose Mr. Cosby to represent the company.

“He represents comfort,” Mr. Turner said, “and people trust him.”