On November 4, 2019, the U.S. Federal Trade Commission (“FTC”) issued guidance for social media influencers to help them comply with FTC requirements relating to endorsements and disclosures. We have previously covered FTC action and guidance (including advisory letters) in this area, but the FTC has refined and updated its advice a bit:
On September 7, 2017, the U.S. Federal Trade Commission (FTC) announced that it had entered into a proposed consent agreement with two individuals and their company that allegedly ran an online gaming community website that allowed users to gamble virtual currency. According to the FTC complaint, the two individuals promoted the gaming site and not only failed to disclose their ownership interest in the site or that they were playing with company money, but they also paid other social media influencers between $2,500 and $55,000 to promote the site.
As we had previously written, in the Spring of 2017, the FTC issued 90 letters to social media influencers and the companies they may have endorsed on Instagram. The letters reminded the recipients that the FTC expects any “material connection” between an influencer and the provider/service/company to be conspicuously disclosed. A “material connection” is a “a connection that might affect the weight or credibility that consumers give the endorsement,” which can be a direct payment, free products, an ownership interested in the company, or even a family connection to the company. As part of the FTC’s September 7 announcement, the FTC also stated that it sent warning letters to 21 social media influencers who had received the Spring letters. (The FTC did not disclose the names of the influencers or companies that received the warning letters.) Consequently, the FTC may be bringing additional actions in this area.
Businesses shelling out big bucks for prime advertising space are used to paying close attention to content, for the sake of the bottom line as well as out of respect for consumer law. However, it may not feel as natural and cost-effective to apply the same scrutiny to an Instagram caption. Why invest the business resources when teenagers worldwide can master the art?
The Australian Competition and Consumer Commission (ACCC) has recently issued new social media guidelines for businesses which emphasise the answer repeatedly: as far as the regulator is concerned, businesses have the same responsibilities on social media as they do in all other marketing channels. Consumer protection laws (including, for example, the prohibition on conduct that is misleading or deceptive, or is likely to mislead or deceive), apply to Snapchat stories and ads in national broadsheets alike.
On May 4, 2017, the public received access to the U.S. Federal Trade Commission’s (FTC) advisory letters to approximately 45 companies and 45 celebrities/bloggers relating to potential “endorsements” on Instagram. As a result, we now have some additional guidance on the FTC’s expectations with respect to its Endorsement Guides.
Native advertising—or advertising that appears to match the form and function of the platform upon which it appears—and social media endorsements provide considerable opportunities for companies to strengthen their brands and reach consumers in innovative ways. More and more, “influencers” like Instagram “models,” fashion and lifestyle bloggers, “pinners,” and “vloggers” are joining the ranks of A-list celebrities in receiving substantial sums, or freebies like helicopter rides and luxury cars, to endorse products in their social media posts. Companies stand to gain sizable increases in their brand value and sales by capitalizing on the fame of social media influencers. But they must also be careful to follow the requirements when it comes to native advertising, product placement, and endorsements.