United States: FTC Updates Endorsement Guide FAQs And Settles First-Ever Action Against Individual "Influencers"

Last Updated: September 12 2017
Article by Terri J. Seligman and Matthew R.D. Vittone

Recent developments demonstrate the FTC's continued interest in social media endorsements.

First, in an effort to provide additional guidance on its endorsement policies, the FTC again updated its Endorsement Guide (the "Guides") frequently asked questions ("FAQs"). The updated FAQs address requirements for disclosing connections between advertisers and social media reviewers, the effectiveness of different hashtags for disclosure purposes, and guidelines for effective disclosures on social media platforms such as Snapchat and Instagram.

At the same time, the FTC also announced that it settled its first-ever complaint against individual social media influencers. In addition, the FTC sent follow-up warning letters to a group of social media influencers for failure to comply with the Guides' requirements. These actions make clear that the FTC's enforcement priorities are focused not only on brands and agencies but individual social media influencers as well.

Below are summaries of the updated FAQs and the recent enforcement actions.

FTC Updates Endorsement Guide FAQs

The FAQs, previously revised in 2015, were updated to include over 20 additional questions and answers covering a range of topics relevant to social media influencers and marketers. Highlights include:

  • Free products, travel or other incentives for reviews. The updated FAQs emphasize the importance of disclosing any compensation, including free or discounted products, travel or accommodation, provided by an advertiser to a reviewer. Even reviews made in exchange for charitable donations should be disclosed. These requirements apply even where the incentive is not contingent on the recipient posting a review. Moreover, if free products are given to some reviewers, the FAQs advise that the advertiser should disclose next to any average or other summary rating that it includes reviewers who were given free products.
  • Details of compensation. Although endorsers must disclose the fact that they were compensated for a review (such as by using a "paid" hashtag), they are not required to detail the amount of the compensation received. Moreover, for the first time, the FTC allowed that negligible compensation that would not affect the weight readers would give the review may not need to be disclosed at all.
  • Tagging brands. The FAQs now explicitly state that tagging a brand in a post is an endorsement of the brand and could require a disclosure if the endorser has a relationship with that brand. For example, if someone posts a picture of herself and tags the brand of the dress she's wearing, if she was given the dress by the brand, she must disclose the relationship.
  • Disclosures on Instagram, Snapchat and other social media platforms. The updated FAQs address questions relating to specific social media platforms including Instagram and Snapchat. Reiterating the FTC's recommendations in its recent letters to influencers, the FAQs confirm that endorsement disclosures in Instagram posts should be present in the picture or within the first three lines of the description (i.e., without the reader having to click "more" to see it). Also, for Instagram and Snapchat Stories, any required disclosure should be superimposed over the video or image in a manner that is noticeable and easy to discern. As a general matter, a disclosure via social media or blog should appear where it easily catches readers' attention and is difficult to miss. Built-in features on social media platforms allowing users to disclose paid endorsements may not be sufficient if the relevant connection is not clearly and conspicuously disclosed. In addition, disclosure on one social media platform does not relieve an endorser of the obligation to also make the relevant disclosure on other social media platforms where he or she posts the sponsored content.
  • Wording of social media disclosures. Using "#ad" or "#sponsored" can constitute a sufficient disclosure of sponsored content, provided that it is readable and noticeable (which does not necessarily mean the disclosure must be placed at the beginning of the post). Simply saying "thank you" to a sponsoring company or brand also may not constitute adequate disclosure without further clarification. The FTC also advises that use of "#ambassador" in a tweet is ambiguous and confusing unless combined with the full name of the sponsoring brand (e.g., "#[BRAND]Ambassador"). Likewise, "#employee" without more may not adequately disclose the material connection between the endorser and the brand. Although a hashtag combining the name of the company and "employee" (e.g., "#[COMPANY]Employee") may suffice depending on context, it is clearer to use the words "my company" or "employer's" in the body of the post.

FTC Settles Complaint against Social Media Influencers

In addition to posting new Endorsement Guide FAQs, the FTC settled its first-ever complaint against individual social media influencers. The complaint was against two social media influencers who co-owned CSGO Lotto, an online service enabling customers to gamble using custom "skins" from the online, multi-player game Counter-Strike as virtual currency. The settlement relates to charges that the influencers, Trevor "TmarTn" Martin and Thomas "Syndicate" Cassell, deceptively endorsed CSGO Lotto without disclosing their ownership interests in the company and paid other influencers to promote CSGO Lotto on social media without requiring any sponsorship disclosures. The proposed order settling the FTC's charges prohibits Martin and Cassell from misrepresenting that any endorser is an independent user or ordinary consumer and requires clear and conspicuous disclosures of any unexpected material connections with endorsers.

Consistent with the updated FAQs, the settlement highlights the importance for influencers to disclose material connections with an advertiser and for advertisers to ensure that any sponsored content is disclosed by individual endorsers. According to FTC Acting Chairman Maureen Ohlhausen, "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."

FTC Issues Instagram Influencer Warning Letters

As we recently reported, the FTC sent over 90 letters to prominent social media influencers earlier this year advising them to clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media. The FTC has now followed up on these letters by issuing sterner warning letters to a group of 21 of the social media influencers previously contacted. The warning letters explain why specific social media posts may not comply with the Guides and include requests that the recipients respond to the FTC.

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