The FTC, Kidfluencers and the Looming Challenge of Child-Proof Disclosures

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By now, most people know that advertising on social media requires certain disclosures so as to avoid the ire of the Federal Trade Commission (FTC), which is tasked with protecting consumers from fraudulent, deceptive and unfair business practices. FTC rules concerning advertising on social media track the basic rules of traditional advertising law. For example, advertising must be truthful and not misleading, advertisers must have evidence to back up their claims (a.k.a., “substantiation”), and advertisements cannot be unfair.

Disclosures that the social media post is an advertisement or endorsement must be made whenever there is a relationship between the brand company and endorser, such as an influencer. Such a relationship can be found even if no money is paid for the endorsement. A relationship requiring disclosures can be found any time the endorser is given anything of value in exchange for his or her endorsement, including something monetary, a free sample of product/service, a gift card or coupon, or even a post to enter into a contest. There has been no articulated minimum threshold for a benefit to meet before disclosure is required, so when in doubt, disclose!

Any required disclosures that a post on social media is a sponsored ad or endorsement must be presented “clearly and conspicuously.” In November 2019, the FTC issued guidelines regarding disclosures specifically tailored to influencers.

In determining whether a disclosure meets this definition of “clear and conspicuous,” some basic factors are considered:

  • placement of the disclosure in the advertisement and its proximity to the claim it is qualifying;
  • prominence of the disclosure (e.g., is the disclosure unavoidable, does the viewer have to take further action like scrolling to see the disclosure, and to what extent are the disclosures distracted from by other elements in the advertisement?);
  • whether the language of the disclosure is understandable to the intended audience (the FTC has found #advertisement, #ad, #sponsored or #contest to be sufficiently clear but not #sp, #spon, #collab, #promotedby or #broughttoyouby); and
  • whether the mode or format of disclosure needs to be modified given the particular social media platform being used (what is clear and conspicuous for an endorsement in a photo on Snapchat or Instagram Stories may not be clear and conspicuous if used with a YouTube video or in a blog).

“Explain It As If Talking to a Child…”
Today, there are many well-known content creators who are themselves children under the age of 13 and whose social media accounts are followed by millions of other children. (Even the unborn, believe it or not, are getting into the influencer game.) Brands clearly recognize the effective strategy of using these kidfluencers to market to and better connect with families and young children and are willing to pay so-called kidfluencers accordingly. One of highest paid kidfluencers is eight-year-old Ryan Kaji, the star of the YouTube channel Ryan ToysReview (rebranded as Ryan’s World in October), which boasts more than 10 million subscribers. He was listed by Forbes as the highest-paid YouTube star, earning $26 million for the period starting from June 1, 2018, through June 1, 2019.

However, with the advent of kidfluencers, the issue of “clear and conspicuous” disclosure has become anything but that. When the target audience is children, there is a question of whether what was previously considered “clear and conspicuous” is sufficient for children. For example, would a five-year-old child understand what #ad or #contest means in the context of the post or the Youtube video he or she just saw? Even if a disclosure is clearly made that the post or video is an advertisement, does a five-year-old even understand what an advertisement is?

While current FTC guidelines do not specifically address the issue, one suspects they will as children become accustomed to using social media at an increasingly younger age. Advocacy groups have been pushing the FTC for the past few years to take such action. Developing such guidelines will raise another question: Are there any discernible levels of clarity between the age groups? It seems logical that what may not be clear and conspicuous to five-to-eight-year-olds may be clear and conspicuous to teens (especially as the younger generations become much savvier with technology).

In fact, at the end of last year, marketing watchdog Truth in Advertising (TINA.org) filed a complaint with the FTC accusing Ryan ToysReview of deceptively promoting “a multitude of products to millions of preschool-aged children, in violation of FTC law.” TINA.org conducted an investigation that concluded preschoolers, in their early stages of development, cannot tell the difference between advertising and organic content, and suggests that for children under five, there is simply no advertising disclosure that is adequate.

As we wait for potential developments in FTC disclosure guidelines pertaining to kidfluencers, kidfluencers and the brands that use them should use best efforts to be as transparent as possible in their marketing efforts targeting children, and this may mean further spelling out when something is an advertisement or endorsement above and beyond what is required by the current FTC guidelines. Judging whether one has a sufficiently comprehensive disclosure policy is no longer merely a matter of whether adults and teens can understand it—now it’s also, “Is this clear enough a five-year-old will understand?”

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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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