October 17, 2017

October 17, 2017

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October 16, 2017

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#CAUTION: FTC Ramps Up Enforcement of and Education on Social Media Influencer Disclosure Requirements

In 2017, being a “social media influencer” can mean big bucks. Companies are increasingly eager to pay individuals with large social media followings substantial sums to promote products in the hopes of reaching millions of potential customers quickly. And consequently, the Federal Trade Commission (the “FTC”) is paying attention more than ever. If you’re being paid to promote a product on your Instagram account, the FTC wants you to let the world know. . . or else.

This recent increase in social media policing by the FTC follows its 2015 updates to its Guides Concerning Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”). The Endorsement Guidelines apply to both marketers and endorsers, and state that if there is a “material connection” between an endorser and the marketer of a product (i.e., a connection that might affect the weight or credibility that consumers give the endorsement), that connection should be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement.

Earlier this month, in a symbolic action demonstrating the federal government’s increased efforts to combat misleading advertising in social media, the FTC settled its first complaint brought against individual social media influencers. In 2015, the FTC launched an investigation into the activities of Trevor “TmarTn” Martin, Thomas “Syndicate” Cassell, two widely followed online gaming influencers, and their company, CSGOLotto, Inc. (“CSGOLotto”), based on Martin and Cassell’s YouTube videos of themselves gambling with virtual currency on their online multi-player shooter game website while encouraging others to do the same. While the YouTube videos promoted CSGOLotto as a place to win big money quickly, the videos failed to disclose that Martin and Cassell were the company’s respective president and vice president. According to the FTC’s complaint, Martin, Cassell, and their company also had an “influencer program” and paid other gaming influencers between $2,500 and $55,000 to promote the CSGLotto website to their social media followers, and also barred those influencers from any negative reviews of the website. In addition to alleging that Martin and Cassell’s videos failed to disclose their ownership of and senior roles with the company, the FTC additionally alleged that the gaming influencers’ social media posts deceptively failed to adequately disclose that the influencers received compensation to promote the gambling service.

To settle the matter, Martin, Cassell, and CSGOLotto, Inc. entered into an agreement with the FTC (with a proposed order) whereby they are prohibited from misrepresenting that any endorser is an independent user or ordinary consumer of their gaming website, and also requiring clear and conspicuous disclosures of any unexpected material connections with endorsers.

The CSGOLotto settlement is but one of many recent actions the FTC has taken to increase enforcement of and compliance with its Endorsement Guidelines. For example, following up on its April 2017 sending of 90 educational letters to social media influencers and brands, informing them of the FTC’s “material connection” disclosure requirements, the FTC recently sent 21 of those same brands and influencers warning letters citing specific social media posts of concern, and requiring disclosure to the FTC of any material connections to the brands in the identified posts. The recent letters further asked the recipients to report what actions they will take to ensure compliance with the Endorsement Guidelines disclosure requirements.

Additionally, on September 7, the FTC also issued an updated version of its Endorsement Guides “What People are Asking” document, meant to provide guidance on frequently asked questions relating to the Endorsement Guidelines. The revised document includes additional information regarding disclosures of material connections by social media influencers.

This increase in enforcement and educational action by the FTC demonstrates a concerted effort to regulate conduct and protect consumers of a booming new media practice. Whether widespread compliance with the FTC’s requirements becomes the new normal remains to be seen, as thousands of new social influencers appear every day, many unaware of the Endorsement Guidelines. But certain applications such as Instagram are making compliance in disclosing paid posts even a little easier. In June, in response to the FTC’s warning to celebrity users, Instagram announced that it would provide influencers with the option to use a new “paid partnership with” sub-header on sponsored posts and stories to allow those influencers to easily tag the business with whom they have a paid relationship. Instagram also indicated in June that users should expect an official policy and enforcement approach by Instagram in the future regarding sponsored posts.

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Tyler E. Baker, Intellectual Property Attorney, Sheppard Mullin, Law Firm
Associate

Mr. Baker is an associate in the Business Trial Practice Group in the firm's New York office.  His practice encompasses intellectual property matters. Mr. Baker has experience in all areas of the litigation process in business and commercial disputes involving breach of contract claims, fraud claims, trade secrets, trademark and copyright infringement claims, false advertising claims, and art ownership and acquisition claims. He also handles registration and prosecution of client trademarks before the U.S. Patent and Trademark Office (USPTO) and has...

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