United States: FTC Letters To Endorsers Highlight Need For Transparency In Social Media Advertising

Last Updated: May 9 2017
Article by Rochelle D. Alpert and Karen A. Butcher

The Federal Trade Commission sent letters to online influencers and marketers regarding disclosure obligations in social media endorsements.

The Federal Trade Commission (FTC) recently sent more than 90 letters to online influencers highlighting the FTC's continued focus on, and the importance of vigilant compliance with, transparency in social media advertising and product endorsements for influencers and brand owners alike.

The FTC has not previously sent letters to endorsers about their transparency obligations; instead, in the last seven years, the FTC focused on brand owners in enforcing the disclosure obligations under the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising (the FTC Guides).1 For companies that engage celebrities or other influencers to endorse their products and for the celebrities or influencer endorsers, these letters, coupled with other recent FTC enforcement activity, underscore the importance of complying with the FTC Guides. For such companies and influencers, establishing online advertising compliance policies and taking steps to ensure that endorsers are simply and clearly disclosing material connections can protect against FTC scrutiny in this area.

Background

The FTC letters—sent to marketers, celebrities, athletes, and other influencers2—reminded them of the truth-in-advertising standards for endorsements and the FTC Guides applicable to such endorsements. The letters were a result of recent petitions by Public Citizen, a consumer watchdog group, and affiliated organizations regarding the growing trend of insufficient disclosures in online endorsements and related advertising materials. This letter-writing campaign marks the first time the FTC has directly contacted influencers regarding endorsements, rather than the companies whose products and services such influencers were endorsing.

Each letter was personalized and identified at least one specific social media influencer post that did not include a proper endorsement disclosure. The letters went on to remind the recipient of the FTC Guides, which state that any material connection between an endorser and the company whose product is being endorsed must be clearly and conspicuously disclosed. Such material connections include any nonobvious relationship between the endorser and the advertiser, including, for example, that the endorser has been paid, the endorser has received a free product, or the endorser has a family or other relationship with the advertiser. In general, the letters reiterate that a material connection is any connection that "might affect the weight or credibility that consumers give the endorsement."  

While to date none of the letters have resulted in subsequent enforcement actions against any of the influencers or the companies whose products or services were endorsed, they do serve as a clear reminder that the FTC remains active in enforcing the FTC Guides in this age of heightened social media promotion of both goods and services. But, the letters do come on the heels of related FTC enforcement activity in this area. For example, last year the FTC reached a settlement with Lord & Taylor, a large national retailer, in connection with charges that it deceived its customers by compensating fashion influencers with free goods and payments for posts without disclosing that the posts were paid promotions.

Analysis

To avoid FTC scrutiny, companies and influencers should consider adopting, implementing, and regularly monitoring compliance with written policies that require transparency related to all types of endorsements, particularly those that appear online. Such policies should, at minimum, require and ensure that all statements that endorsers make reflect their honest beliefs, and that any material connection between a company and an endorser be disclosed if the connection would not be obvious to the public. As the FTC reminded the recipients of its letters, the FTC Guides require companies (or marketers operating on their behalf) to both advise endorsers of their endorsement disclosure obligations and actually monitor the endorsements to ensure compliance.

Practically, the FTC letters identified three practices that are becoming more and more common in connection with social media endorsements that should be avoided.

  1. Vague Terms: Endorsers should avoid using terms such as "thank you," "#partner," or "#SP" or other vague terms or unclear abbreviations that are unlikely to inform consumers of the nature of the relationship between the endorser and the advertiser. For example, simply stating "thank you" might not make it clear that an endorsed product was provided free of charge to the endorser, or it might not be readily apparent to consumers that "SP" is an abbreviation for "sponsored." In contrast, use of the wording "paid ad" would be a plain disclosure.

  2. Easy-to-miss Disclosures: Endorsers should avoid placing disclosures in places that will not be easily seen by all consumers, regardless of viewing device. For example, when Instagram streams are viewed on mobile devices, users must click "more" to view text beyond the first three lines of a post. In that example, given that many consumers are unlikely to click the "more" button, disclosures in Instagram posts should appear above the "more" button. This FTC concern requires that the social media vehicle be considered for where and how disclosures are made.
  3. Jumble of Hashtags: Endorsers should avoid including disclosures among a string of multiple hashtags at the end of a post, which may be difficult for viewers to read and parse. For example: #BestProductEver #ChangedMyLife #Sponsored #ThankYou #GiveItATry. Again, the medium and actual nature of the post must be considered in complying with these policies and procedures.

Instead, the FTC expects straightforward disclosures such as "sponsored," "paid ad," or "promotion" in locations that are easily seen by all viewers, regardless of device and regardless of social media platform. Alternate wording may be acceptable but only if it is equally clear and viewable in the relevant media.

With this string of letters, the FTC has straightforwardly reiterated—to both influencers and businesses—its focus on the importance of transparency in online advertising.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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