#TheFTCisWatchingYou: Influencers, Hashtags and Disclosures 2017 Year End Review

by Patrick Law Group, LLC
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Influencer marketing, hashtags and proper disclosures were the hot button topic for the Federal Trade Commission (the “FTC”) in 2017, so let’s take a look at just how the FTC has influenced Social Media Influencer Marketing in 2017.

First, following up on the more than 90 educational letters FTC staff sent to social media influencers and brands in April, the staff then sent warning letters to 21 of the influencers previously contacted. The earlier educational letters informed the influencers that if they are endorsing a brand and have a “material connection” to the marketer, this connection must be clearly and conspicuously disclosed, unless the connection is already clear from the context of the endorsement.

The warning letters cited specific social media posts of concern to FTC staff and provided details on why the influencers may not be in compliance with the FTC Act as explained in the FTC’s Endorsement Guides. For example, some of the letters noted that tagging a brand in an Instagram picture is an endorsement of the brand and does actually require an appropriate disclosure.

Second, the FTC then issued an updated version of The FTC’s Endorsement Guides (the “Guides”): “What People are Asking”, a staff guidance document that answers frequently asked questions. Previously revised in 2015, the newly updated Guides includes more than 20 additional questions and answers addressing specific questions social media influencers and marketers may have about whether and how to disclose material connections in their posts. For example, the Guides includes additional information depicting Instagram tags and how to meet FTC standards for disclosure on Snapchat or Instagram Stories.

 The FTC suggests:

(1) #ambassador is not likely to be acceptable, while #[BRAND]Ambassador may be, assuming the brand name is one consumers would recognize; and

(2) #consultant is not permissible, while #[BRAND]Consultant may very well be allowable. While the FTC Staff seems to like the brand name in the disclosure, and we know they like #ad, they do not appear to support #[brand]ad using all lowercase letters, as readers’ might not discern that the disclosure clearly indicates the post is an ad for a brand.

In conjunction with the with 21 warning letters sent and the updated Guides, on September 7, 2017, the FTC announced its complaint against social media influencers, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell.  According to FTC Acting Chairman Maureen Ohlhausen, “Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts…this action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.”

The complaint alleged that in late 2015, CSGOLotto, Inc., Martin, the company’s president and Cassell, the company’s vice-president, operated and advertised the csglotto.com website, which enabled consumers to gamble virtually. As further alleged in the complaint, Martin and Cassell each posted YouTube videos of themselves gambling on their website and encouraging others to use the service. Martin’s videos had titles such as, “HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting)” and “$24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway.”

Cassell posted videos with titles such as “INSANE KNIFE BETS! (CS:GO Betting),” and “ALL OR NOTHING! (CS:GO Betting).” In all, Cassell’s videos promoting the CSGO Lotto website were viewed more than 5.7 million times. Martin and Cassell also allegedly promoted the site on Twitter without adequately disclosing their connection to CSGO Lotto.

According to the FTC’s complaint, Martin, Cassell, and CSGO Lotto also had an “influencer program” and paid other gaming influencers between $2,500 and $55,000 to promote the CSGO Lotto website to their social media circles, while prohibiting them from saying anything negative about the site.  Specifically, the complaint stated that Martin, Cassell, and CSGO Lotto misrepresented that videos of themselves and other influencers gambling on the CSGO Lotto website and their social media posts about the website reflected the independent opinions of impartial users of the service. The complaint charged that, in truth, Martin and Cassell are owners and officers of the company operating the CSGO Lotto website and the other influencers were paid to promote the website and were prohibited from challenging its reputation.

The FTC ultimately approved the final consent order On November 28, 2017, settling its first ever case against individual social media influencers, and the order prohibits Martin, Cassell, and CSGOLotto, Inc. from misrepresenting that any endorser is an independent user or ordinary consumer of a product or service. The order also requires clear and conspicuous disclosures of any unexpected material connections with endorsers. 

It is important to point out that the FTC, in this case, charged two specific social media influencers and their company but has yet to charge an independent social media influencer for failing to disclose a material connection to a separate company.  However, social media platforms have already responded to the FTC’s scrutiny this year.  For example, earlier this year, Instagram unveiled a new disclosure tool to a select group of influencers.  The tool was designed to streamline compliance with FTC disclosure requirements and bring more transparency to the platform.  Previously, influencers were responsible for how and where to disclose the sponsored nature of their posts.  Instagram’s new tool, however, removes this discretion by providing one clear, conspicuous and standardized form of disclosure.  Instagram described its new tool as a “first step” and promised to take additional actions in the area of sponsored posts. 

Clearly, the FTC’s view of how to avoid consumer deception will continue to evolve in 2018 just as the forms of advertising and digital media advance; however, regardless of this evolution the FTC is likely to continue to reinforce tried and true advertising principles while leaning on the updated Guides.  Consequently, educating influencers and brands will be paramount, along with providing the technology and practical tools that enable these stakeholders to achieve their goals, while still protecting consumers.

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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