By: Steve Masur
Influencers, social media stars who are sought after by the biggest technology, fashion, beauty, and luxury brands because of their army of followers, are gaining a new following – FTC regulators.
These social media stars engage their followers with picture perfect Instagram feeds of their daily lives, cute pets, top of the line fashion, and elaborate vacations including numerous sponsored product and brand mentions — often choosing to leave out any indicia that companies have paid them in cash, goods, or services for said Instagram posts. Financial rewards in any form, including free products and paid-for vacations, can run afoul of certain truth in advertising rules in place to prevent deceptive marketing. Proper disclosures must be made in order to comply. Authorities not only in the United States, but in places like the United Kingdom, and France have heightened their vigilance on social media in an effort to locate influencers who engage in deceptive marketing practices. (Source: Dalton, M. (2018). Social-Media Stars Are Turning Heads—of Regulators. [online] WSJ. [Accessed 14 Feb. 2018]
In today’s society where our iPhones are permanently attached to our hands, consumers are constantly scrolling through Instagram feeds, Twitter timelines, and Facebook statuses. The days of flipping through magazines to keep up with the latest trends and cutting-edge products have become almost obsolete. To capitalize on this “social media generation”, brands have jumped on the social media bandwagon and have started to intensify efforts to create partnerships with influencers. Brands usually lure influencers in by wooing them with free clothes, technology products, luxurious vacations, and cash.
In return, brands are asking influencers to promote the brand to their followers by posting photos of clothing, beauty products, hotels, etc. In the case of some influencers their followers number in the hundreds of millions (that’s a lot of publicity!). Brands no longer have to spend millions of dollars on 2 page spreads in the pages of Esquire. Now brands can easily reach consumers with the latest Adidas sneakers, fitness fads, and trending vacation destinations on their Instagram feed. Some brands and influencers have also entered into “affiliate marketing services,” which essentially is a contract which allows influencers to gain a commission based on the percentage of sales that are driven from their personal blogs and social media posts to companies e-commerce businesses. (Source: Dalton, M. (2018). Social-Media Stars Are Turning Heads—of Regulators. [online] WSJ. [Accessed 14 Feb. 2018]
In April and September of 2017 the Federal Trade Commission (FTC) sent out warning letters to over one hundred social media influencers and celebrities warning them that a number of their social media posts had run afoul of FTC deceptive marketing rules. (Source: Anon, (2018). [online] [Accessed 14 Feb. 2018].) Many influencers stated that they were unaware that their social media posts risked violating deceptive marketing advertising regulations. (Source: Dalton, M. (2018). Social-Media Stars Are Turning Heads—of Regulators. [online] WSJ. [Accessed 14 Feb. 2018]) The FTC says that any material connection between a brand and an influencer must be disclosed, “material connections could consist of a business or family relationship, receipt of payment, free products or services or other incentives to promote a brand.” Even the act of “tagging” a brand in a social media post is an endorsement of the brand according to the FTC, and further disclosures as to any partnership the influencer has with the brand must be properly disclosed. The letters clarify that a post that simply states “thank you” is not adequate to disclose that this is a paid endorsement. Following these warning letters, the FTC created an FAQ sheet which provides guidance on the proper language that should be used by influencers to disclose brand partnerships and any affiliations (see examples below). (Source: Anon, (2018). [online] [Accessed 14 Feb. 2018].
Illegal Social Media Ad Campaigns
Now that traditional advertising campaigns have forgone the pages of magazines and ended up on our social media feeds, brands and influencers must be more conscious than ever of the risks posed when proper disclosures are not made to the public on sponsored posts. Even celebrity designers are at risk of getting into hot water with the FTC. Kanye West caused frenzy on social media in early February when a number of photos with the hashtag #YeezySeason6 started popping up all over our Twitter timelines and Instagram feeds. The hashtag was displayed under photos of different social media influencers dressed in the newest release of West’s fashion line. West chose to forego a traditional fashion week show and use the power of influencers and social media to recreate photos of his wife, Kim Kardashian West, as a new cutting-edge advertising technique. However, there is a good chance that this campaign is actually illegal in the eyes of FTC regulators. (Source: The Fashion Law. (2018). Is Kanye West’s #YeezySeason6 Campaign Illegal? [online] [Accessed 14 Feb. 2018].
The problem with the campaign is that there are no disclosures made under any of the posts. Because no disclosures were made (such as #ad), there is a high likelihood that consumers are unaware that the social media posts are a part of a formal advertising campaign and that the “Instagram models” are actually being compensated in return for posting the images on their social media accounts. This could be misleading to consumers and considered to be a form of deceptive marketing under the Federal Trade Commission Act. (Source: The Fashion Law. (2018). Is Kanye West’s #YeezySeason6 Campaign Illegal? [online] [Accessed 14 Feb. 2018].
The Federal Trade Commission Act allows the FTC to prevent deceptive practices. The Commission has determined that “a representation, omission or practice is deceptive if it is likely to: mislead consumers and affect consumers’ behavior or decisions about the product or service.” (Advertising and Marketing on the Internet: Rules of the Road, Federal Trade Commission (2018)(last visited Mar 6, 2018) In September of 2017, the FTC announced that it came to a settlement in the first case brought against social media influencers for deceptive marketing. The FTC brought suit against two famous YouTubers, Trevor Martin and Thomas Cassell, and their company CSGO Lotto, Inc., for failing to disclose to their followers that they were owners and officers of CSGO Lotto, Inc. when they promoted its online gambling service. Under the FTC laws about truth in advertising, they should have disclosed this to their followers. And they should have done so clearly. (If influencers are paid, they must disclose it, Consumer Information (2018) [last visited Mar 6, 2018] Consumers may feel differently about a certain post or endorsement if they know that an influencer has a financial connection to the brand, and this needs to be openly and clearly disclosed to avoid misrepresentation or deception of any kind.
By this point you are probably asking yourself, ‘how can I be sure that my brand does not run afoul of the FTC regulations?’ Below are a number of frequently asked questions and the FTC’s answers for best practices on social media disclosures.
Source: Federal Trade Commission
Q: Do I need to list the details of everything I get from a company for reviewing a product?
No. If you got $100 or $10,000 you could just say you were “paid.” But, that wouldn’t be good enough, however, if you’re an employee or co-owner.
Q: As an #influencer, I often use #ad to disclose brand affiliation, is that sufficient?
For Twitter #ad is sufficient as long as it’s easily noticed. But if #ad is mixed in with links, handles or other hashtags, readers may naturally just skip over all that clutter. With multiple links & hashtags, #ad may go unnoticed, best to make it visible in the beginning whenever possible.
Q: I’m an influencer. Whenever I mention/tag a product, do I have to say whether I got it for free or paid for it myself?
No. If you mention a product you paid for yourself or just happen to like, there isn’t an issue. The FTC is only concerned about endorsements made on behalf of a sponsoring advertiser. If an advertiser or someone working for an advertiser pays you or gives you something of value to mention a product.
Q: I’m well-known as a spokesperson for a product. Do I have to disclose I’m being paid each time I tweet about it?
If your followers know that you’re paid to endorse that product, no disclosure is needed, but if a significant portion of your followers don’t know that, the relationship should be disclosed. Determining whether followers are aware of a relationship could be tricky in many cases, so we recommend disclosure.
Q: If a U.S. influencer travels abroad for a U.S. brand, which laws do influencer’s posts need to follow – U.S., abroad or both?
U.S. law applies when it’s reasonably foreseeable that posts will affect U.S. consumers, which it would be. Foreign law might also apply.
Q: How does the FTC view non-U.S. influencers with a significant number of American followers?
U.S. law applies when it’s reasonably foreseeable that posts will affect U.S. consumers. So, if posting about products sold in U.S., they should disclose.
Q: Regarding built-in disclosures: Is the “includes paid promotion” mark on [YouTube] videos insufficient? The “Paid” tag on Facebook?
Don’t assume that disclosures built into platforms are sufficient. It depends on whether the tool clearly and conspicuously discloses the connection. FTC staff doesn’t think that the built-in YouTube and Facebook tools suffice. The same applies to the built-in Instagram tool.
Source: (The Fashion Law. (2018). MUST READ: The Federal Trade Commission Answers Common Influencer-Specific Questions. [online] [Accessed 14 Feb. 2018].)
For more on the FTC’s Endorsement Guidelines visit, https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking