Could The Use Of a Social Media Influencer Draw the Ire of the FTC?

October 27, 2017
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Following A Series Of Warning Letters, the FTC Recently Brought Its First Enforcement Action Against A Social Media Influencer

Social 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.”

Could the Use Of a Social Media Influencer Draw the Ire of the FTC?

Photo courtesy of Neon Brand (Unsplash.com)

FTC Act Applies to Social Media Promotion

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.

FTC Targets Influencers

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.