In the modern digital era, influencer marketing has become a powerful tool for businesses seeking to expand their reach and engage with targeted audiences.

“Influencer marketing” generally involves collaborating with social media influencers to promote products or services in exchange for compensation, freebies, or other benefits. Contrary to popular belief, social media influencers are not always A-list celebrities with millions of followers. Instead, companies often work with everyday people who have specialized or unique followings to endorse their products/services in certain markets via social media platforms.

While influencer marketing offers various business advantages, such as cost-effectiveness and streamlined brand management, business owners and influencers must be mindful of the legal and regulatory requirements governing these relationships.

Disclosures and Transparency

Influencer marketing is primarily regulated by the Federal Trade Commission (FTC) pursuant to its authority under Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce[.]” 15 USC § 45(a)(1). To foster transparency, the FTC published the Disclosures 101 for Social Media Influencers guide (the “Guide”). The Guide offers clear guidance on how and when to properly disclose the relationship between a brand and an influencer.

WHEN TO MAKE A DISCLOSURE

According to the Guide, influencers must disclose their relationship with a brand whenever they have a “material connection.” This encompasses personal, family, employment, or financial relationships. Notably, “financial relationships” extend beyond monetary arrangements and include anything of value received in exchange for endorsing a product, such as free or discounted products. Here are some disclosure tips for influencers and the companies they are promoting to bear in mind:

• The influencer should always disclose the relationship if he or she received free or discounted products (or any other perks) from a brand, even if not explicitly asked to mention the product.
• The influencer should not assume that his or her followers are already aware of their brand relationships.
• Influencers should make the disclosures regardless of whether they believe their evaluations are unbiased.

HOW TO MAKE A DISCLOSURE

The FTC mandates that influencers disclose their material connections with brands clearly and conspicuously. To comply with this requirement, consider the following tips:

• The disclosure should be placed within the endorsement message itself, avoiding the end of posts or other locations that require followers to click “more” to find it (e.g., the influencer’s “about me” section).
• The disclosure should not be buried among hashtags or links.
• Refrain from using vague, confusing, or abbreviated terms like “collab” or “spon.”
• Use simple and clear language, such as “thanks to [X] brand for the free product” or terms like “ad” or “sponsored.”
• For video endorsements, include visual and audio disclosures in the video content itself rather than in the caption or description.
  During live streams, disclose the material connection periodically throughout the stream.

Mitigating Risk for Companies and Influencers

Non-disclosure of material connections can expose brands and influencers to potential FTC violations and false advertising claims. To minimize liability risks in influencer marketing, companies and influencers should:

• Clearly define influencer posting obligations and disclosure requirements within influencer agreements.
• Ensure that all influencer agreements expressly permit the company to remove or modify noncompliant posts as outlined in the agreement.
• Adopt a social media endorsement policy that complies with FTC requirements and relevant advertising laws.
• Establish company guidelines for clear and conspicuous disclosures.
• Thoroughly review influencer content before posting to ensure compliance.
• Develop procedures for handling influencers who fail to comply with the company’s social media endorsement policy.
• Ensure that influencers are contractually obligated to adhere to FTC requirements and applicable advertising laws.
• Advise influencers that their statements must reflect their honest opinions, beliefs, and experiences.