Influencers, Hashtags and Disclosures: The FTC’s Response and Commercial Considerations

by Patrick Law Group, LLC
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The Federal Trade Commission (“FTC”), after reviewing Instagram posts by celebrities, athletes, and social media influencers, recently issued 90 letters reminding these influencers and marketers about the FTC’s requirements that marketers clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.  In this case, the FTC focused on influencers’ posts on Instagram.

These letters and the FTC’s attention to this issue should not come as a surprise to the letter recipients, given the 2016 Lord & Taylor action the FTC brought.   In 2015, Lord & Taylor developed a multilayered advertising campaign, including a large social media influencer photo bomb push on Instagram.  Although Lord & Taylor ultimately settled the FTC’s charges, Lord & Taylor is now required to ensure that its influencers clearly disclose when they have been compensated in exchange for endorsements.

On April 19, 2017, a little over one year following the Lord & Taylor action, the FTC released guidance entitled, “Influencers, are your #materialconnection#disclosures#clearandconspicuous”, and noted that they have been spending time on Instagram because advertisers, endorsers and consumers are spending a considerable about of time on social media, and the FTC is concerned that some social media influencers may not be aware of the truth-in-advertising standards for endorsements and disclosures.   Consequently, the FTC sent 90 plus letters to social media influencers, to “influence influencers to comply with those established principles in their Instagram posts.”

The FTC noted that consumers generally view Instagram posts on mobile devices and often only view the first three lines of a longer post unless they click the “more” link. The FTC’s letters emphasized that social media influencers should disclose any material connection above the “more” button when endorsing something on Instagram. 

According to the FTC’s well established Endorsement Guides governing endorsements and testimonials, if there is a material connection between an endorser and an advertiser, that connection must be clearly and conspicuously disclosed unless it is patently clear from the context of the communication that there is a material connection.  For example, if the connection may affect the credibility or weight a consumer gives a product endorsement, such as a business or family relationship, a payment, or the gift of a free product, then the connection is material and therefore, needs to be disclosed.

Disclosure responsibility works both ways and the FTC’s Endorsement Guides applies to both marketers and influencers.  This means that both the influencer and the marketer are responsible for disclosing their relationship, however, ultimately, the marketer has a greater obligation to educate the influencer and monitor what the influencer is doing on their behalf.

The FTC’s April comments are reminiscent of the FTC’s Enforcement Policy Statement addressing “Native” advertising and deceptively formatted advertisements and the FTC’s “Native Advertising: A Guide for Business”, which provided examples of when disclosures are necessary to prevent deception and guidance on how to make clear and prominent disclosures within the format of native ads.

While the FTC’s letters to influencers did not address any native advertising, the FTC did provide the following advice on making effective disclosures on Instagram:

  1. Keep your disclosures unambiguous.  The FTC suggests making your disclosures very clear and avoiding vague terms like, “#partner,” or “#sp”.  These disclosures are unlikely to explain that there is a material connection between the influencer and the brand.  One should avoid unfamiliar abbreviations or cryptic words that are subject to several interpretations. Further, the FTC recommends that the parties ask themselves, “In the context of this post, how can I make the connection clear?”
  2. Make your disclosures hard to miss.  When posting, the influencers and marketer’s goal should be to post in a way that makes the disclosures easy to spot.  All disclosures should be placed above the “more” button.
  3. Avoid hard to read hashtags. Avoid placing a disclosure in a string of hashtags because consumers are unlikely to read it.

The FTC has essentially put marketers and influencers on notice that they will be surveilling deceptive disclosures in social media posts, so it is critical that in-house counsel and their outside counsel educate their clients and include protective legal requirements such as tightly drafted obligations of the parties, warranties directly tied to the FTC’s guidance, indemnification obligations referencing those warranties and proper exclusions from waiver of consequential damages, if a limitation of liability is included.  Counsel who represent brands engaging influencers should consider the following:

  1. Educate the marketers and the influencers on what to disclose and how to disclose a material connection.  Consider drafting “Influencer” or “Digital Advertising” playbooks for your clients as a tool in educating both the business and legal teams.
  2. Ensure that agreements clearly state each parties’ responsibilities.  Describe who is responsible for reviewing and approving all social media posts.
  3. Clearly state in the agreement that all posts must disclose the material connection and commercial arrangement by including such terms as “Sponsored Content” or “#sponsored” in the post.  Consider creating a list of approved hashtags (but not a string of hashtags) to use to disclose the material connection.
  4. Include a review and acceptance mechanism to ensure that the disclosures are not hard to miss and that disclosures are not buried in a string of hashtags.
  5. Include warranties that the content or post will comply in all respects with the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.

Clearly, the FTC’s view of how to avoid consumer deception will continue to evolve just as the forms of advertising and digital media advance, yet, regardless of this evolution the FTC will continue to reinforce tried and true advertising principles.  Consequently, educating influencers and marketers, negotiating strong commercial terms, and including a robust acceptance procedure remain the cornerstone of protection in the digital arena.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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