The concept comes from the FTC's Endorsement Guides (16 CFR Part 255): if a connection between endorser and advertiser might change the weight or credibility a consumer gives the message, that connection is material and must be disclosed. The bar is low — a free sample counts, as does a chance to win a prize, a discount code that pays commission, or cashback for posting.
What "clear and conspicuous" means. Hard to miss and easy to understand: "#ad" or "paid partnership" up front, not buried in a wall of hashtags, in the same language as the post, and on-screen — not only in the caption — for video formats like TikTok.
The hard line: paying for sentiment. Since the FTC's Rule on Consumer Reviews and Testimonials took effect in October 2024, businesses cannot offer incentives conditioned on a review or post expressing a particular sentiment, positive or negative — even with disclosure. You can pay for content; you cannot pay for praise.
Beyond the US. The EU's Unfair Commercial Practices Directive and the UK's consumer-protection rules and ASA codes impose parallel duties, and TikTok's branded-content toggle exists to operationalize them in-app.
Why it matters for brands
In rewarded-UGC models — pay-per-view content, social cashback — every participant has a material connection by definition. Bake disclosure into the posting workflow and never condition rewards on positivity: liability for missing disclosures falls on the brand as well as the creator.