Influencers Beware! The Federal Trade Commission is Watching....

By: Nicholas D. Pearson, Associate

A New Market Calls for Expanded Oversight

In recent years, companies have sought to attach their brands, products, or services to popular figures (“Influencers”) with large social media presence to enhance their consumer market. Consequently, a new market has evolved in which Influencers have begun to advertise brands, products, and services on their social media accounts such as Instagram, Facebook, and Twitter in exchange for money or free or discounted products.  This new market has now garnered the attention of the Federal Trade Commission (“FTC”), which seeks to prevent unfair methods of competition including “truth in advertising” in order to protect consumers.[1] In fact, the FTC noted its concerns surrounding the evolving marketplace stating, “The general principles of advertising law apply online, but new issues arise almost as fast as technology develops – most recently, new issues have arisen concerning space-constrained screens and social media platforms…The FTC Act’s prohibition on ‘unfair and deceptive acts or practices’ encompasses online advertising, marketing, and sales.”[2]

The FTC has exercised its’ authority to ensure that Influencers do not mislead their followers via social media platforms through enforcing consumer protection laws including 15 U.S.C. § 52(a)(2) which provides, “It shall be unlawful for any person…to disseminate, or cause to be disseminated, any false advertisement by any means, for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase in or having an effect upon commerce, of food, drugs, devices, services, or cosmetics.”[3] This statue broadly uses the word “any” in three separate instances, so influencers must ensure that they are complying with 15 U.S.C. § 52(a)(2) when endorsing a brand, product, service, or company on their social media platform. On November 5, 2019, the FTC provided guidance to influencers on how to properly comply with “truth in advertising” laws so that they may avoid posting “false advertisements”.[4]

 The Broad Scope Truth in Advertising Laws: When to Disclose

The FTC has stated that Influencers must disclose in their endorsement message when they have a relationship with the brand, product, or service they are seeking to advertise. So, any endorsement requires Influencers to disclose their relationship with the brand, product, or service they are endorsing. “Keep in mind that tags, likes, pins, and similar ways of showing you a brand or product are endorsements.”[5] A relationship is formed if a “material connection” exists between the Influencer and the brand, product, or service they are seeking to endorse.[6] “A material connection to the brand includes a personal, family, or employment relationship or a financial relationship – such as the brand paying you or giving you free or discounted products or services.”[7] It is critical for Influencers to understand the wide umbrella of potential enforceable actions that may be brought by the FTC because both the Influencer and the brand, product, or service being advertised may be held liable. For example, a “material connection” is established when an Influencer advertises their friend’s brand, product, or service on their social media platform for nothing in exchange. All that is needed is to establish a “material connection” is the existence of a “personal relationship” between the Influencer and the brand, product or service. Given the broad applicability of “truth in advertising” laws, Influencers should err on the side of caution and disclose any potential relationships with the brand, product, or service anytime they seek to influence a consumer since that action is likely subject to FTC regulation.

 How to Properly Disclose

If an endorsement is made by an Influencer with a “material connection” to a brand, product, or service then a disclosure must be made. However, ensuring an effective disclosure has been issued is sometimes difficult on social media platforms given limited screen space and countless hyperlinks. Regardless of these hurdles, every disclosure must be clear and conspicuous.[8] First, consider placing the disclosure in close proximity to the triggering claim and in the endorsement message itself.[9] “Disclosures are likely to be missed if they appear only on an ABOUT ME or profile page, at the end of posts or videos, or anywhere that requires a person to click MORE.”[10] Second, consider making the disclosure in both simple and clear language by drafting the disclosure in the same language as the endorsement itself.[11]In the end, it is critical for social media influencers to ask themselves when disclosing whether or not a reasonable consumer would be able to both easily identify and understand the disclosure.

Disclosure is Likely, But Honesty is Necessary 

Influencers must also keep in mind that they may not attempt to falsely influence or mislead consumers. First, Influencers may not talk about an experience with a brand, product, or service they haven’t tried or used.[12] Second, Influencers may not provide a positive endorsement of a brand, product, or service they had a negative experience with.[13] Finally, Influencers may not make claims about a brand, product, or services that would require proof that an influencer does not have.[14] For example, an Influencer may not claim that a cosmetic product intended to treat acne is X% effective if they do not possess any substantive scientific proof to materialize their claim. Put simply, Influencers should be sure to disclose their relationships with brands, products, or services when endorsing them and provide accurate endorsements alike.

We Are Here to Help

The FTC has stated that Influencers must take responsibility for their actions and has begun enforcing “truth in advertising” laws against these individuals. “As an influencer, it’s your responsibility to make these disclosures, to be familiar with the Endorsement Guides, and to comply with laws against deceptive ads. Don’t rely on others to do it for you.”[15] Relying on the advice of those who represent the brand, product, or service you are endorsing will not serve as a defense to an action brought by the FTC. Taylor Law, PLLC is here to help you and provide guidance on when and how to make disclosures. In addition, we are here to help in the transactional social media space and can help you draft and negotiate influencer agreements with brands, products, or services you may be looking to partner with in the future. For more information or questions regarding our social media influencer practice please contact Taylor Law, PLLC.

[1] See Federal Trade Commission, Truth in Advertising, https://www.ftc.gov/news-events/media-resources/truth-advertising.

[2] See Federal Trade Commission, .com Disclosures How to Make Effective Disclosures in Digital Advertising, Mar. 2013, https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312dotcomdisclosures.pdf.

[3] See 15 U.S.C. § 52(a)(2) (2012).

[4] See Federal Trade Commission, Disclosures 101 For Social Media Influencers, Nov. 5, 2019, ftc.gov/system/files/documents/plain-language/1001a-influencer-guide-508_1.pdf.

[5] Id. at 3.

[6] Id. at 2.

[7] Id.

[8] Federal Trade Commission, supra note 2, at i.

[9] Id.

[10] Federal Trade Commission, supra note 4, at 4.

[11] Id.

[12] Id. at 6.

[13] Id.

[14] Id.

[15] Id. at 2.