Earlier this month, the Federal Trade Commission published a new endorsement guide aimed at helping social media influencers understand their disclosure obligations under federal advertising law. If you’re at all involved in advertising or influencing, you should read it. (You should also read the FTC’s more detailed guidance from 2017.)
Now this article isn’t meant to be a comprehensive or in-depth discussion of FTC policy, but the general rule of disclosure can be boiled down to: If an influencer has a personal or financial relationship with a brand they’re endorsing, the influencer needs to clearly and conspicuously disclose that relationship in their endorsement in a way that’s hard to miss. When in doubt, disclose.
The new FTC guide provides practical examples of when and how social media influencers should be making those clear and conspicuous disclosures of their relationships with sponsors.
Why does the federal government care about some Instagram posts?
The FTC is the federal agency created to protect consumers from unfair and deceptive business practices (such as misleading marketing). And for years now, the FTC has been grappling with the implications of social media.1 Things were “simpler” before the rise of the internet: advertising was done via print, television, or radio, and it was controlled start-to-finish by companies with the resources to understand and comply with federal requirements.
But the internet created (and continues to create) new ways to advertise. Today, anyone has the potential to become an advertiser—and they can do it from their couch. The issue hasn’t really been whether federal law applies to social media (it does), but rather how to educate the ever-growing numbers of “civilian” influencers so that they’re complying with federal law.
The company is liable for its influencers’ mistakes.
To be clear: if your company uses an influencer to endorse its product, the company will face liability if the influencer doesn’t sufficiently disclose the relationship. Your company could be liable even if it hired a third-party consultant to hire the influencers. But you can mitigate that risk by giving your influencers the necessary guidance and then monitoring them to make sure that they’re following your guidelines.
For example, when Microsoft launched the Xbox One, it hired an advertising company to run its ad campaign, which in turn retained a third party to be the one that actually hired and paid social media influencers to endorse the new console. Yet when those influencers didn’t disclose their financial relationship, the FTC held Microsoft responsible and launched an investigation. Fortunately for Microsoft, it had a “robust” compliance program and took swift action when it learned of the influencers’ failures to disclose, so the FTC didn’t bring an enforcement action (at least not against Microsoft).
Don’t assume that what’s good for Facebook is good for Twitch.
Part of the difficulty in regulating social media advertising is how quickly it evolves. The FTC’s goal is for the consumer to be able to see and understand the disclosure in the context of the endorsement. That means tailoring the disclosure to the medium, and even sometimes to the product.
Here are some examples of why we need to customize disclosures:
- A short disclosure (#ad) could stand out enough in a 280-character Tweet, but would probably be lost in a longer blog post (and thus wouldn’t be sufficiently “conspicuous.”)
- A text disclosure in the caption of a Facebook or Instagram post can usually suffice, but text isn’t enough when the endorsement is made in a YouTube video (especially if the disclosure is buried behind an expanding “read more” link).
- Similarly, a single videorecorded disclosure at the beginning of a YouTube video could be a sufficient disclosure, but that usually isn’t enough of a disclosure for a livestreamer on Twitch.
- Videogame streamers present a unique issue: if you give a streamer a free copy of your video game to promote for a few weeks, do they have to continue making disclosures if they continue to stream your game on their own time? (Probably!)
If your company wants to protect its influencer investment, you need to stay informed.
At the end of the day, if you’re using social media influencers to advertise or endorse your product, you need to make sure that the influencers are following federal law. If they’re not, it’ll be your company in the FTC’s crosshairs—and potentially facing millions of dollars in fines.
Fortunately, this risk can be mitigated, but mitigation is a many-step and ongoing process. Advertising law can be tricky to navigate and it’s definitely an area in which it’s better to be safe than sorry. The attorneys at Ryley Carlock & Applewhite are ready to help you understand and comply with these federal and state regulations.
1 For further reading, my colleague Susan Brienza (who’s practiced advertising law for 20+ years) has been tracking and writing on the FTC’s and FDA’s approaches to internet advertising since the FTC’s first major guidance on that topic in 2010.