Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: October 27, 2017
The Firm
201-896-4100 info@sh-law.comSocial media marketing is full of legal traps for New Jersey businesses. The use of well-known actors, musicians and athletes to promote products or services online is particularly problematic if businesses fail to make the proper disclosures. After issuing a series of warning letters, the Federal Trade Commission (FTC) recently brought its first enforcement action against a so-called “social media influencer.”
Under the Federal Trade Commission Act (FTC Act), businesses are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. The FTC defines endorsement as any advertising “that consumers are likely to believe reflects the opinions, beliefs, findings or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.”
In 2015, the FTC updated its endorsement guidance to address the growing importance of social media. The revised “FTC’s Endorsement Guides: What People Are Asking” addresses the use of endorsements on social media platforms, such as YouTube, Facebook, and Twitter. The guides provide that if there is a connection that might affect the weight or credibility that consumers give the endorsement, that “material” connection must be clearly and conspicuously disclosed unless it is already clear from the context of the communication.
Earlier this year, the FTC issued more than 90 letters reminding influencers and marketers that influencers must clearly and conspicuously disclose their relationships to brands when touting products and services using technology like social media. It was the first time that FTC staff took steps to address compliance deficiencies associated with social media influencers.
In September, the FTC brought an enforcement action against Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, two social media influencers who are widely followed in the online gaming community. According to the settlement agreement, the FTC alleged that they deceptively endorsed the online gambling service CSGO Lotto while failing to disclose they jointly owned the company. Martin and Cassell also allegedly paid other well-known influencers thousands of dollars to promote the site on YouTube, Twitch, Twitter, and Facebook, without requiring them to disclose the payments in their social media posts. Under the terms of the settlement, Martin and Cassell must clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service.
“Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts,” FTC Acting Chairman Maureen Ohlhausen said in a press statement. “This action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.”
The FTC also announced that it sent additional warning letters to 21 influencers it had initially contacted in March regarding their Instagram posts. According to the agency, the warning letters cite specific social media posts of concern to FTC staff and explain why such posts may not be in compliance with the FTC Act. For example, some of the letters point out that tagging a brand in an Instagram picture is an endorsement of the brand and requires an appropriate disclosure.
The revised version of The FTC’s Endorsement Guides: What People are Asking includes more than 20 additional questions and answers regarding social media influencers. The additional guidance addresses a variety of topics, including tags in pictures, Instagram and Snap Chat disclosures, obligations of foreign influencers, and disclosure of free travel. For instance, the guidance advises influencers to superimpose disclosures on image-only platforms like Instagram. It also warns that hashtags like #ambassador and #spon are insufficient.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]
Author: Christopher D. Warren
Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]
Author: Dan Brecher
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Author: Bryce S. Robins
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
Author: Dan Brecher
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Author: Bryce S. Robins
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Author: Matthew F. Mimnaugh
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!