May 26, 2020

FTC Takes Hard Line on Social Media Endorsements: Disclose, Disclose, Disclose... (It Matters Given Growing Reliance on Social Media)

The Federal Trade Commission (FTC) has unequivocally signaled this month that compliant endorsements on social media remain a high priority for this US consumer protection agency because endorsements carry weight and affect buying decisions. A social media endorsement can be as simple as liking, tagging or picturing a brand, or a more detailed review or shout out. However, disclosing whether the plug for the brand is potentially incentivized by a payment, free product, or family, employer or other material connection with the brand may not be quite as simple according to the FTC. Details follow, but here’s the takeaway up front: For influencers, that means take care with your disclosures of your relationships with brands in the context of ever evolving social media. For advertisers, that means it may be time to update your social media policy or influencer contract, and continue to monitor that influencers comply with their disclosure obligations.  

What’s New?

Continuing enforcement of its Endorsement Guides, the FTC announced its first settlement with individual influencers (rather than advertisers that work with influencers). Trevor Martin and Thomas Cassell (better known online as “TmarTn” and “Syndicate”) allegedly engaged in deceptive practices by failing to disclose they own and operate the online gambling service “CSGO Lotto” that they widely promoted across social media. In addition, the FTC announced it issued “warning” letters to 21 influencers from among the 90 recipients of  prior “educational” letters from the FTC sent this past spring. According to the new round of letters, the FTC considers some influencers previously contacted still fail to “clearly and conspicuously” disclose their business relationship with the brands or products they promote. The warning letters ask recipients to notify FTC staff by this month’s end whether they do, in fact, have a material connection with the brands/products described in the letters and, if so, how they will clearly disclose such a relationship in the future.  Finally, the FTC updated its “What People Are Asking” guidance on the Endorsement Guides with new examples featuring common social media advertising channels such as Facebook, Instagram, and Snapchat, which are highlighted below.

FTC Issues Updated Endorsement Guidance, Spot Lights Proper Social Media Disclosures

While the refreshed “What People Are Asking” guidance on the Endorsement Guides (or FAQs) are not “new” guidance as far as the need to disclose an influencer’s relationship with a brand, this guidance further clarifies when and how the Endorsement Guides apply across social media. Here are some important learnings:

  • Not all disclosures of an influencer’s relationship with a brand are equal or adequate as far as meeting the required “clear and conspicuous” standard.

    • For example, disclosures for Snapchat and other image-only platforms should be superimposed over images, not reserved off-screen.

    • Disclosure that a post is paid using solely an “#ambassador” hashtag is probably insufficient because it could be ambiguous to consumers what that means. Using “#[brand name]-ambassador”  is probably more understandable, but has to be evaluated within the context of the post overall.

    • Merely thanking the company that paid the influencer (e.g., “Thanks, [brand]”) likely is insufficient because the gratitude could also come from an uncompensated satisfied customer. Providing additional information that indicates some benefit was received by the influencer (e.g., “Thanks, [brand], for the free product”) may be good enough.  

  • Likes, tags, pins and other subtle endorsements are endorsements. The new guidance acknowledges that some social media platforms make it difficult for paid influencers to adequately disclose their material relationships, and notes that advertisers shouldn’t encourage endorsements from paid influencers using such features. However, the guidance notes that whether the FTC would take action against such endorsements would depend on the overall impression of the advertising campaign, including whether the “likes” at issue have a material impact on consumers’ decisions to patronize a brand or buy a product.

  • Influencers should disclose when products are received for free, even when review of the product was not a condition of receipt.

  • Section 5 of the FTC Act, which gives the FTC its endorsement enforcement authority, applies to international influencers promoting products that are sold in the United States, if it is foreseeable that their promotion would be seen by and affect U.S. citizens.

  • Remember there is no one size fits all disclosure for relationships with a brand… How the disclosure is worded, its appearance and placement should be evaluated in the overall context of the advertising message and the particular social media platform as far as meeting the clear and conspicuous disclosure requirement. 

In light of this new guidance and recent FTC activity, both advertisers and influencers should consider reviewing their social media endorsement disclosure practices and contracts with one another. The FTC has a variety of investigative and enforcement powers, and it is not generally considered desirable to become a FTC test case. Even parties that settle with the FTC (neither admitting nor denying fault) may be subject to stiff monetary penalties and long-term monitoring and audit of their advertising practices by the FTC.

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.

TRENDING LEGAL ANALYSIS


About this Author

Nadia Aram, Womble Carlyle, Intellectual Property Attorney, technology licensing lawyer, commercial agreements legal counsel, private securities law
Associate

Nadia advises clients in a variety of business transactions involving the use and commercialization of intellectual property and technology. She has experience drafting and negotiating a broad variety of contracts, including technology licenses, services, consulting and other complex commercial agreements to help clients realize the value of their assets day-to-day, and as part of strategic product and technology acquisitions and divestitures. Nadia also practices in the areas of franchise law, and advertising, sweepstakes & promotions law, including advising clients...

919-755-2119