Posted: January 3, 2018 | Tips
THE FTC IS WATCHING YOUR USE OF SOCIAL MEDIA AND MAY ENFORCE COMPLIANCE WITH ENDORSEMENT AND DISCLOSURE GUIDELINES.
If your company’s brand uses social media “influencers,” did you know that the Federal Trade Commission (“FTC”) pays close attention to influencer-based marketing and is paying attention to whether you comply with its “guidelines”?1
The FTC recently disclosed letters sent to brands and influencers that offer a valuable window into various kinds of “disclosures” the FTC regards as compliant and non-compliant. If you didn’t know about the FTC guidelines, or even if you think you know everything you need to know, there is new information in these revelations.
Why should brand owners care? Because if a brand advertiser has a “material connection” to someone who makes statements about the brand or its products/services (a random, unsolicited endorsement is not the brand’s responsibility), the FTC considers the statement to be “sponsored” by the advertiser, i.e. an “endorsement,” and therefore an advertisement subject to truth-in-advertising laws and the published Guides.2 The FTC Guidelines impose liability on both the endorser and advertiser for any false, misleading, disparaging, or unsubstantiated statements made in the course of the endorsement. The advertiser is also liable for the influencer/endorser’s failure to disclose material connections between the influencer and brand.3
Background to Social Media Influencer Endorsements
First, let’s look at the background about “influencer” endorsements.
Businesses that display their products in retail stores can negotiate to have their products prominently placed in a store window or front aisle. But to make their online presence stand out, they have to be more creative. Often they turn to “social media influencers” to sell products or drive traffic to their sites. An explicit product endorsement, a subtle comment, or just a well-placed image of a well-known influencer with an enormous following (e.g. Selena Gomez reportedly has 123 million followers and Kylie Jenner has 96 million), can exert powerful influence on the public to visit a site or purchase a product or service.
In 2009, the FTC published written “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”4 The guidelines were in part a response to consumer group complaints about the need for disclosures by social media influencers and required influencers to provide disclosures with their posts. The guidelines also apply to brand owners who coordinate or facilitate influencer endorsements, express or implied, informally or pursuant to formal agreement.
When the guidelines were generally ignored, on April 19, 2017 the FTC announced that it really meant it and issued a press release announcing:
We’ve been spending some time on Instagram lately. Why? Because advertisers, endorsers and consumers are spending time there, too. What we saw raised concerns about whether some influencers are aware of the truth-in-advertising standards about endorsements and disclosures. So the FTC staff sent some 90+ letters to celebrities, athletes and other influencers – as well as to the marketers of brands the influencers endorsed. Our goal is to influence influencers to comply with those established principles in their Instagram posts.
The FTC’s Recent Letters Clarify When Disclosure is Required, Format, and Details of Disclosures
The letters reminded influencers and brands that “if there is a ‘material connection’ between an endorser and the marketer of a product – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection would be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement.”
What is a “material connection?”
- The FTC stated, it could “consist of a business or family relationship, monetary payment, or the provision of free products from the endorser.”
- Moreover, a “material connection” requiring disclosure can exist in seemingly unlikely situations including the mere existence of a “personal relationship” with a brand or its owner. The agency also mentioned specific Instagram messages with influencers and brands. For example, the FTC sent a letter to Victoria Beckham, citing her personal relationship with Dr. Harold Lancer of Lancer Skincare as a “material connection,” requiring disclosure for comments about the brand. This was true even without a business connection, formal agreement, payment for the product, or receipt of consideration for the endorsement.
It is the public’s interest in truth-in-advertising that is the concern of the FTC and that interest is implicated even in informal, casual posts.
What kind of disclosure content is adequate and what is inadequate?
The FTC’s recent letters also pointed out the inadequacy of many typical “disclosures” by influencers. Certain inadequacies cited in the letters re-occur and can be isolated:
- Mere expressions of gratitude. Disclosures that merely express gratitude to a brand do not comply, according to the FTC, because such disclosures fail to explain adequately the influencer’s relationship to the brand. As an example, Emily Ratojkowski posted: thanks@nipandfab. This expression of gratitude was typical of many influencer “disclosures.” This expression of gratitude to the brand inferred certain things, but none of them were explicit. The statement was made in the context of a relationship that was not disclosed, and so the statement of gratitude to the brand failed to inform the public of a “material connection.”
- Vague hashtags. Another group of letters singled out as non-compliant influencers who posted vague or confusing hashtags or buried them at the end of a post. For example, Caroline Manzo, who was paid to endorse the “HelloFresh” brand, was singled out for using the hashtag “#sp.” It was hard to understand for most of the public what “sp” meant, and the confusion was not alleviated by her having added a statement urging the public to try her code “FreshCaroline.” Ashley Benson also received a warning letter for using the “sp” hashtag because it too was hard to understand in context. A better disclosure, but still inadequate, was the hashtag “#ad,” used by Scott Disick for Pearly Whites Australia. One might think identifying the post as an “ad” would suffice, but this one failed because it was positioned at the end rather than the beginning of the post. It was also judged to be an inadequate disclosure of a material connection.
- Abbreviated versions of a brand name. Some letters called out influencers who did mention the brand name, but used such abbreviated versions of the name, where the public probably could not tell what the abbreviation meant. A reference to a brand that is not understandable is not sufficient disclosure.
- Vague titles in hashtags or narratives. A brand ambassador to Biore, Shay Mitchell, used “# [brand name] ambassador” in a post. According to the FTC, such hashtags might be adequate in some contexts, but this one failed to disclose her relationship with the brand despite the fact that in the past, she had used “BioreAmbassador” in posts. The FTC did not explain why “BioreAmbassador” was non-compliant. The agency also did not mention when it may be sufficient. One might speculate that the inadequacy might be cured if the phrase appeared at the beginning rather than the end of the post, and not buried in a clutter of hashtags and emojis. Clearly, greater prominence and clarity is key, according to the FTC. More likely, an explicit description of a relationship is required rather than vague monikers that merely hint at one (i.e., what is a “brand ambassador”?). The FTC letters revealed that the “#partner” hashtag, in isolation, is probably not sufficient in most cases because it is too vague, but it might nonetheless be salvaged as adequate if joined with a brand name – as in “# [brand name] partner.” The FTC also singled out use of “#SponCon” and “#collab,” as being inadequate and too vague.
In summary, the net of the FTC letters can be distilled to the following:
- Disclose all material connections—even if not financial or obvious
- Receipt of free products or any free benefit
- Receipt of any consideration of any kind from the brand
- Friendship with the brand owner
- Any existing business or non-business relationship of any kind with the brand owner
- Disclose even if the endorsement is implied and not express (e.g., name or image associated with brand)
- Make disclosures at the beginning/top of a post, rather than the end or buried in the middle of text
- Make disclosures clear, unambiguous, and easy to see
- Place at the beginning of an Instagram post
- Comprehensible with a meaning that would be clear to most consumers, not just an isolated subset of those in the know or the “coolest”
- Use a stand-alone disclosure that stands out, rather than burying it in a string of emoji’s, hashtags, or links
- Refer to the brand by name in clear terms. Do not abbreviate brand name (unless widely known to nearly every consumer) and do not use an uncommon nickname for the brand name
- A disclosure in a simple narrative or sentence is preferred over a clutter of hashtags
- If the disclosure is by hashtags, make them clear and place at the beginning of the post
- OK to use “#ad” at the beginning
- OK to use “#[brand name] partner” at the top of beginning of the post
- OK to use #sponsored” at the beginning of the post
- NOT OK to use #sp, #thank you [brand]; #collab; #partner”; #[brand name] ambassador”
1 Although the FTC has long asserted power over advertising in digital media under the same standards as traditional media, the FTC Guides now leave no doubt that the FTC intends to regulate advertising in digital media, including those previously thought to be outside the FTC's jurisdiction, e.g., third party bloggers and participants in “word of mouth” advertising.
2 16 C.F.R. pt. 255.5 (2009).
3 Further, the brand must implement procedures to monitor endorsements and to stop continued publication deceptive statements in an endorsement once the statements are discovered. The FTC’s Revised Endorsement Guides: What People Are Asking, at 6, Bureau of Consumer Protection, U.S. Fed’l Trade Comm’n (June 2010).
4 16 CFR Part 255, sections 255 et seq.